The Eurozone crisis started as a sudden stop to cross-border capital inflows. This chapter suggests that countries with current-account surpluses did not endure lasting financial stress. The balance of payments crisis then became a public debt crisis, where the public debt which mattered was that owed to foreigners. Overall, the crisis proved much more difficult to deal with given the predominance of bank financing, thinly capitalised banks, the absence of a common mechanism to deal with failing banks, and the absence of a common lender of last resort.
Daniel Gros, Monday, September 7, 2015
Giancarlo Corsetti, Monday, September 7, 2015
At the birth of the euro, the fiscal, financial, and monetary institutions in Europe were not sufficiently developed. This chapter describes these inefficiencies and the role they played in the Eurozone crisis. Instability in the Eurozone grew out of a disruptive deadlock between national governments forced to address and correct fundamental weaknesses in their national economies on their own, and the EZ-level policymaking. The future of the Eurozone therefore rests on developing an institutional framework that can credibly deliver stability at the EZ level.
Thorsten Beck, José-Luis Peydró, Monday, September 7, 2015
The past five years have given European countries useful insights on what works in crisis resolution. The lessons should be viewed as forward-looking contributions to the institutional and policy reform agenda in Europe, especially in the Eurozone. The Eurozone is not doomed, it just needs better economic and financial policies.
Richard Baldwin, Sunday, June 21, 2015
Vox columnists have posted a steady stream of research-based policy analysis and commentary on the Greek Crisis. This column provides a list of all the relevant columns posted since the beginning of 2015.
Michalis Haliassos, Saturday, June 20, 2015
The Greek adjustment programme failed. This column argues that the problem lay in the programme’s design. By focusing on deficit reductions and the wrong type of reform, it failed to build up the only thing that could provide the basis for debt repayment – namely a dynamic, export-oriented productive base. A broader reform agenda that creates hope would be accepted by Greeks and it would make eventual repayment more likely. The need for some patience in reaching the final destination of this journey should no longer be an excuse for not taking the first step.
Carlos Cantú, KeyYong Park, Aaron Tornell, Sunday, April 12, 2015
The wisdom of structural reform during a crisis is a subject of heated debate. This column compares Greece’s experience to that of Mexico during the debt crisis of the 1980s. Mexico did not receive a haircut until seven years into the crisis – after structural reform was already underway. In Mexico that reform was the outcome of an internal conversation – not a diktat from the outside – and it happened during the height of the crisis.
Galina Hale, Maurice Obstfeld, Thursday, May 15, 2014
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.
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.