Europe After the Crisis
Moravcsik, Andrew. When European leaders opted for monetary union in 1992, they wagered that European economies would converge toward one another: The deficit-prone countries of southern Europe would adopt German economic standards — lower price inflation and wage growth, more saving and less spending — and Germany would become a little more like them, by […]
Mrs. Merkel’s Triumph?
Three weeks ago, Stein Ringem, Professor of Sociology at Oxford University, wrote a rather smug op-ed piece in the Financial Times entitled “Time for economists to eat humble pie . . . again,” ridiculing all the economists who had been criticizing Mrs. Merkel for not being more forthcoming in negotiating debt relief for Greece and […]
A tale of two overhangs: The nexus of financial sector and sovereign credit risks
Acharya, Viral, Drechsler, Itamar & Schnabl, Philipp. The deadliest aspect of the Eurozone crisis is the tripwire linking the riskiness of banks and governments. This column provides evidence of the link and explains how it arose. It argues that given the near-chaos-like interaction, the zero risk weights on sovereign bonds should be revisited. Πηγή: Voxeu πλήρες […]
Europe’s Economic Suicide
Krugman, Paul. On Saturday The Times reported on an apparently growing phenomenon in Europe: “suicide by economic crisis,” people taking their own lives in despair over unemployment and business failure. It was a heartbreaking story. But I’m sure I wasn’t the only reader, especially among economists, wondering if the larger story isn’t so much about […]
Fiscal devaluation as a cure for Eurozone ills – Could it work?
De Mooij, Ruud, Keen, Michael. Troubled Eurozone countries face the difficult challenge of regaining competitiveness without devaluing their currency. Could a fiscal devaluation, shifting taxes from employers to consumers, help? This column presents evidence suggesting that it could, but the devil is in the detail. Πηγή: Voxeu πλήρες κείμενο
Sudden stops in the Eurozone
Merler, Silvia, Pisani-Ferry, Jean. Many analysts and observers have put forward that the euro crisis is a balance-of-payments crisis at least as much as a fiscal crisis. This column provides evidence of capital-flow reversals in Greece, Ireland, Portugal, Spain, and Italy. It argues that the fostering of a pan-European banking industry and the creation of a […]
Are banks affected by their holdings of government debt?
Angeloni, Chiara, Wolff, Guntram. The strong relation between sovereign and banking stress is frequently emphasised, especially since the start of the European sovereign debt crisis. This working paper sheds light on the determinants of the link. It studies the stock market performance and the holdings of government debt of the banks stress tested by the […]
How not to be a lender of last resort
De Grauwe, Paul. While acknowledging that the massive amounts of liquidity injected into the eurozone banking system by the ECB were absolutely necessary to save Europe’s banking system, Paul De Grauwe now criticizes these lender-of-last-resort operations as ill-designed, making it likely that the ECB will have to discontinue them in the not so distant future. […]
Captured Europe
Acemoglu, Daron, Johnson, Simon Europe’s policy elite – the people who call the shots at the national and eurozone level – are in serious trouble. They have mismanaged their way into a deep crisis, betraying all of the lofty promises of unity and prosperity issued when the euro was created. The currency union may survive, […]
The Greek Tragedy, Act II
Zingales, Luigi. A Greek tragedy is typically composed of three acts. The first sets the scene. It is only with the second that the plot reaches its climax. For current-day Greece, the imposition of “voluntary” losses on the country’s private creditors represents just the end of the beginning. The real tragedy has still to unfold. […]