An ongoing German Constitutional Court case threatens to make the Eurozone Crisis much worse. This column argues that a Eurozone breakup could well be self-fulfilling given the absence of large-scale fiscal backstopping. The ECB’s Outright Monetary Transactions (OMT) programme has so far blocked speculation that could lead to such a breakup. A German court ruling against the OMT would destroy the programme’s credibility. The court would be wise to dismiss the case, if it does not want to risk becoming a threat to Eurozone stability and to taxpayers in Germany and beyond.

Central banks on both sides of the Atlantic are pondering ways of unwinding their bloated balance sheets and easing out of extraordinary post-crisis monetary policy interventions. This column discusses the recent Geneva Conference on the World Economy that focused on ‘exit strategies’. Where exactly do central banks exit? And how? This column also introduces a new Vox feature, ‘Vox Views’, which are short video interviews with world-renown economists. The first two of these feature Alan Blinder and Don Kohn.

The EU encourages regional cohesion through transfers for structural changes and development. This column presents new research suggesting that some poorer countries don't benefit as well as we might expect. This is likely to be because of worse technological and institutional absorptive capacity. Structural transfers need reform, and policymakers would do well to focus on recipients’ absorptive capacity.

Europe has been postponing the recapitalisation of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalisation, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.

Spain and Britain have similar debt problems. So why does Spain face far higher sovereign-interest rates? Is this because Eurozone membership makes national economies vulnerable to self-fulfilling debt crises? This column argues that EZ membership does not fully explain this discrepancy. A central bank can provide an effective backstop to national debt both in monetary unions and in countries with their own currency. EZ members are more vulnerable to debt crises to the extent that the ECB cannot count on the joint support of national fiscal authorities.

France has a raft of labour-market regulations that kick in for firms with 50 workers or more. This column uses this threshold to identify the economic effects of size-contingent regulations. Such policies seem to subsidise small firms at the expense of larger firms. But since small firms are on average less productive than large firms, the French economy loses out.

What do macroeconomic shocks do to public and private saving? This column argues that it is only truly dramatic shocks that have a long-lasting effect on saving behaviour. Past crises tend to increase savings among households, but they also lead to decreased public-sector saving. However, the evidence suggests that this decrease in public saving is about a third of the magnitude than the corresponding increase in household saving.

A pernicious aspect of the Eurozone crisis is the ‘doom loop’ linking European banks and governments. This column argues that poor European policy choices in the wake of the 2008 Global Crisis worsened the problem. Rather than being forcefully recapitalised as in the US and UK, many Eurozone banks were left undercapitalised and free to gamble for redemption. In what may be the greatest carry trade ever, they borrowed cheap, first in short-term debt markets and then from the ECB, to invest in high-yield but risky sovereign debt. Substantial bank recapitalisations against sovereign-bond losses is the way forward.