How the Euro Crisis Evolved and how to Avoid Another: EMU, Fiscal Policy and Credit Ratings (original) (raw)

The Eurozone in Crisis: Origins and Prospects

T he financial crisis gripping the eurozone countries seems incredibly complex, and although the reasons why their finances have come to grief are quite simple, the solution will not be easy. For the eurozone to resolve its crisis requires the political will to undertake painful measures, with serious distributional effects. As long as certain groups seek to avoid those costs, resolution of the crisis will be elusive.

European Economics and Politics in the Midst of the Crisis

2013

The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein.

Crisis in the Eurozone

Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. v Contents List of Illustrations vi Acknowledgements vii European Integration Timeline viii Chronology of Eurozone Crisis xiii Glossary of Terms xxi 1 The Eurozone as a Flawed Currency Area 1 Part I The Economics of Monetary Integration 2 The Development of Microfoundations of Macroeconomics 23 3 Contemporary Macroeconomic Thought and Its Discontents 40 4 Theoretical Considerations of a Single Currency 55

The future of the European Economic and Monetary Union: European monetary and fiscal policies

Empirica, 2016

The main theme of the conference was ''The Future of the European Economic and Monetary Union-European Monetary and Fiscal Policies''. 55 papers dealing with macroeconomic policies in the European Union, especially the Euro Area, as well as other fields of economics were presented and discussed. Among the highlights were invited plenary papers by Mike Wickens (University of York), Seppo Honkapohja (Bank of Finland) and Ansgar Belke (University of Duisburg-Essen); and a plenary discussion on ''The Future of the Euro'' with Ansgar Belke, Peter Gauper (Raiffeisen Landesbank Kärnten), Thomas Gehrig (University of Vienna), Ewald Nowotny (Oesterreichische Nationalbank) and Willi Semmler (New School for Social Research, New York) as invited speakers. The present special issue of Empirica-Journal of European Economics contains the invited papers and a selection of papers from the conference devoted to the main topic of the conference. They were selected from a larger number of submissions following the usual refereeing process of the journal. At the time of the conference, economic policy makers in the Euro Area were fully occupied with the ''Greek tragedy'' of exploding sovereign debt amidst a deep recession with record unemployment and negative growth. Several contributions to the conference and to this issue deal with that crisis, which not only affected Greece but the entire Euro Area. Although in the meantime the Greek crisis was mitigated, it cannot be regarded as having been solved. The crisis has several aspects,

The recent economic crisis and its Europe wide consequences

International Economics and Economic Policy, 2012

This special issue includes a number of selected papers that have been presented in the 13th annual INFER (International Network for Economic Research) conference held at the University of East London on the 12th and 13th of September, 2011. The selected papers have in common that they take into account the recent economic crisis, but analyse it from different perspectives. For example, they cover different topics on the debate on economic policy in a globalized and highly integrated world; they address issues concerning the difficulties of small countries competing in highly integrated markets in the EU where fewer macroeconomic policies are available to deal with asymmetric shocks; and they address the issue of the convergence process and in a non-optimal currency area. They also cover the links between the EU countries and the small open economies of the Baltic zone and how these links affect the economic performance of the individual countries. Moreover, the existence of political business cycles in the OECD countries can impose some limitations on the independence of central banks in election periods and may lead to inappropriate monetary policies aiming to obtain political gains. All these issues are discussed taking into account the recent economic crisis and the consequences on the national policies to be taken.

Economic conditions of the Economic and Monetary Union crisis

As everything indicates the global financial and economic crisis which transpired in 2007, with the collapse of the mortgage market in the United States, is slowly going into history after several long years which were difficult for states and societies. The effects of the crisis, compared to the Great Depression in the 20ties and 30ties of the 20th century, will be felt for a long time in different parts of the world. The discussion about the causes of the crisis will be held in the future engaging new generations of scientists, politicians and focusing the attention of sensation seeking media of those times. For Europeans and the European Union the global financial and economic crisis was a small earthquake which not only deepened the existing socio-economic problems, but also highlighted in a bright way their causes, turning public attention to numerous pathologies in the area of both national and the Community finance and economy which had been previously ignored by leaders of European countries and the European Union.

AN EVOLVING EURO AREA POLICY MIX, Quarterly Report on the Euro Area, Vol. 23, No. 2/3, chapter V

Quarterly Report on the Euro Area, 2024

In the first 25 years of the euro, the common currency proved itself to be resilient to a variety of large economic shocks. These shocks have led to changes in the functioning of the euro area and a broader reconsideration of how to make the responses of national fiscal policies and ECB monetary policy more effective. In the wake of the 9/11 terrorist attack in 2001, the euro area economy recovered rather quickly thanks to a supportive policy mix. The global financial crisis (GFC) that hit the euro area in 2008-09 was followed by the euro sovereign debt crisis, which tested the functioning of the euro area and gave rise to significant policy responses. Despite the demonstration of institutional solidarity, the euro area’s institutional shortcomings and a lack of sufficient fiscal buffers in some highly indebted Member States, due to an inappropriate fiscal policy stance in the years before the GFC, were not conducive to an appropriate policy mix: fiscal policy at this time was pro-cyclically restrictive even in countries with fiscal space, and monetary policy support was delayed. The lessons learnt from that crisis, and a broader rethink in academic and policy circles about the benefits of activist fiscal policies in the case of large economic shocks, led to a highly successful response to the COVID-19 crisis, with EU institutions stepping up promptly and introducing innovative common tools, complementing an overall supportive fiscalmonetary policy mix in the euro area. The policy response to the energy crisis and inflation surge in 2022 was also broadly effective, with the ECB rapidly increasing policy interest rates to keep inflation expectations anchored, while governments put fiscal support measures in place to protect households and firms from the impact of higher energy prices. The challenge for the future is now to reduce the high levels of public debt accumulated in some euro area countries, while making decisive progress on the green and digital transitions. The new EU fiscal framework will help enhance the macroeconomic stabilisation role of fiscal policy, while focusing on debt sustainability and growth-enhancing policies.

Crisis in the eurozone: causes, dilemmas and solutions

This book discusses how the global financial crisis induced the ‘Great Recession’ and triggered problems within the eurozone regarding sovereign debt. The authors argue that the failure of the eurozone to meet any convergence criteria, together with unjustified emphasis placed upon unproven rules and institutions derived from contemporary neoliberal macroeconomic thinking, was an accident waiting to happen. Additionally, a series of potential remedies is proposed, ranging from a critical evaluation of solutions that the EU has already instigated (moral suasion and financial relief measures) together with a series of alternative propositions (fiscal federalism and a ‘European Clearing Union’). Moreover, the analysis is extended to the collapse of the eurozone and to options for national economic self-governance.