Falling short of expectations? Stress-testing the European banking system

Viral Acharya, Sascha Steffen, 17 January 2014

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The Eurozone is mired in a recession. In 2013, the GDP of the 17 Eurozone countries fell by an average of 0.5%, and the outlook for 2014 shows considerable risks across the region. To stabilise the common currency area and its (partly insolvent) financial system, a Eurozone banking union is being established.

Topics: Financial markets
Tags: Asset Quality Review, bank capital, banking, banking union, banks, Eurozone crisis, recapitalisation, stress testing, systemic risk

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

Topics: Financial markets, Global crisis, International finance, Macroeconomic policy
Tags: balance-sheet recession, banking, banking union, banks, capital flows, credit booms, Currency wars, emerging markets, eurozone, Eurozone crisis, financial crisis, fiscal policy, fiscal sustainability, global financial crisis, sovereign debt, sovereign debt restructuring

The ghost of Deauville

Ashoka Mody, 7 January 2014

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The aversion to debt restructuring in the Eurozone has been remarkable, even though public debt ratios in several countries are well above the IMF-identified critical debt overhang threshold of 100% of GDP (IMF 2012). By early 2010, some recognised the urgency of restructuring Greek public debt (Calomiris 2010).

Topics: Financial markets, International finance
Tags: Deauville, eurozone, Eurozone crisis, financial contagion, sovereign debt, sovereign debt restructuring

Joint liability in international lending: A proposal for amending the Treaty of Lisbon

Kaushik Basu, Joseph Stiglitz, 2 January 2014

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The sovereign debt crisis exposed weaknesses in the Eurozone’s financial architecture that may not have been fully anticipated when the founding treaties of the Eurozone were drafted. Key among these weak spots are the provisions of the Treaty of Lisbon which regulate intergovernmental debt obligations and preclude direct financing of sovereigns by the ECB.

Topics: EU institutions, International finance
Tags: eurozone, Eurozone crisis, Lisbon Treaty, Maastricht Treaty, moral hazard, no-bailout clause, sovereign debt

Does policy uncertainty reduce economic activity? Insights and evidence from large trade reforms

Kyle Handley, Nuno Limão, 23 November 2013

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The impact of policy uncertainty on economic activity is an issue traditionally associated with developing countries. Since 2008, however, the spotlight has shifted. Governments’ responses to the Great Recession and the Eurozone crisis have raised considerable uncertainty about the future policies of advanced economies.

Topics: International trade
Tags: China, Eurozone crisis, Great Recession, trade, uncertainty, US, WTO

What’s wrong with Europe?

Isabella Rota Baldini, Paolo Manasse, 4 November 2013

CEPR Policy Insight No.67 is available to download free of charge here.

URL: http://www.cepr.org/active/publications/policy_insights/viewpi.php?pino=67
Topics: EU institutions
Tags: Eurozone crisis, productivity, US

What’s wrong with Europe?

Isabella Rota Baldini, Paolo Manasse, 4 November 2013

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The US and Europe: a tale of two cities

Topics: EU institutions
Tags: Eurozone crisis, productivity, US

A fiscal perspective on EU sovereign credit ratings: Did the credit-rating agencies get them right?

Mike Wickens, Vito Polito, 30 October 2013

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The financial crisis has put EU and US sovereign credit ratings centre-stage in a way not seen before. Previously, it was taken for granted that all Eurozone governments could borrow at more or less the same risk-free rate as Germany, and that Germany, the UK, and the US would be rated triple-A.

Topics: Global crisis, International finance
Tags: credit-rating agencies, Eurozone crisis, sovereign debt

International cooperation and central banks

Harold James, 8 October 2013

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Tackling the aftermath of a major financial crisis, the origins of which lie in ‘global imbalances’ and whose transmission mechanisms are cross-national, seems prima facie to demand more substantial and institutionalised cooperation. However, in the five years since the collapse of Lehman Brothers, visions of what central banks can and should do have changed profoundly.

Topics: Global crisis, International finance
Tags: Central Banks, Eurozone crisis, global crisis, global imbalances, monetary policy, policy coordination

Credit rating agencies and the Eurozone Crisis: What is the value of sovereign ratings?

Norbert Gaillard, 9 September 2013

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The inability of credit rating agencies to anticipate sovereign-debt crises and the tendency to overreact once financial difficulties have piled up are well-known phenomena. Ferri et al. (1999) show that the downgrades by Moody’s and S&P exacerbated the Asian crisis in 1997. Examining the Great Depression, Gaillard (2011) and Flandreau et al.

Topics: Europe's nations and regions, Global crisis
Tags: Eurozone crisis

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