Large flows of bank lending from core countries in the Eurozone to the periphery lead to large financial imbalances. This column explains what motivated such financial flows. With the advent of the Eurozone, banks in core countries gained relative advantage in lending to the periphery, making such lending very attractive. They also served as intermediaries for financial flows from outside the Eurozone to the periphery. Now – five years since the start of the euro crisis – Eurozone financial markets remain segmented.
Galina Hale, Maurice Obstfeld, Thursday, May 15, 2014
Pierre Pâris, Charles Wyplosz, Tuesday, August 6, 2013
The Eurozone’s debt crisis is getting worse despite appearances to the contrary. How can we end it? This column presents five major options for reducing crisis countries’ debt. Looking into the details, it seems the only option that is both realistic and effective is for countries to default by selling monetised debt to the ECB. Moral hazard aside, burying the debt seems to be the only way we can end the crisis.
Ziad Daoud, Martin Brookes, Thursday, August 16, 2012
Two-year bond yields in six European countries recently turned negative. What explains the shift? This column presents a model suggesting that a higher chance of extreme economic events – such as a break up of the euro – can be the cause of a number of abnormal patterns in the bond markets.
Alberto Alesina, Francesco Giavazzi, Tuesday, September 13, 2011
As Italy’s Prime Minister Silvio Berlusconi announces a new austerity bill based on tax rises, this column argues that the country’s leaders are in denial – it is as if they are trying to take aspirin to hide the symptoms of pneumonia. The authors predict that, with the current political class in power, Italy will soon enter another recession and, eventually, another crisis.
Tito Boeri, Wednesday, August 17, 2011
Italy is on its third fiscal consolidation package in just six weeks, and none have addressed its credibility crisis. This column argues that Italy’s problems come from its bad politicians, who refuse to learn that structural reforms are necessary. To err is human, but to persevere is diabolical.
Stefano Micossi, Sunday, May 29, 2011
The Eurozone crisis has exposed serious flaws in the single currency’s ability to manage a crisis. This column outlines three ways that Europe’s financial assistance programmes should be changed to rectify this.
Charles Wyplosz, Sunday, December 19, 2010
Lorenzo Bini-Smaghi – Member of the ECB's Executive Board – has produced a brilliant defence of the no-default strategy currently pursued by the Eurozone authorities. This column argues that instead of ruling out highly plausible outcomes, the ECB should explain how it will react if defaults happen. By not making adequate preparations, it may be raising the odds of a very bad scenario.
Nicola Gennaioli, Alberto Martin, Stefano Rossi, Wednesday, November 17, 2010
Recent sovereign defaults in developing countries have put severe strain on the defaulting country’s banking system. This column argues that these events teach us how the development of private financial markets plays a critical role in reducing the risk of government default and thus in supporting public borrowing.
Carmen M Reinhart, Kenneth Rogoff, Wednesday, August 11, 2010
With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.
Fabio Panetta, Giuseppe Grande, Saturday, August 7, 2010
The spectre of sovereign default looming over the world economy represents a major threat to economic stability. This column argues that, even without a fully-fledged debt crisis, the deterioration of public finances in major countries could trigger an increase in long-term interest rates and jeopardise the recovery.
Charles Wyplosz, Tuesday, February 9, 2010
The latest turn in the global financial crisis has ensnared the debt of some European nations. The fact that these nations are members of a monetary union has generated much confused comment. Here one the world’s leading experts on Eurozone monetary and financial matters sets the record straight, debunking 10 myths and setting forth 10 frequently overlooked facts.