The different macroeconomic adjustment dynamics in Spain – a member of a monetary union – and the UK – a stand-alone country – is stark. Paul Krugman popularised this contrast in his New York Times blog with the title “The Pain in Spain” (Krugman 2009, 2011), and commented on my own analysis in De Grauwe (2011).
Revisiting the pain in Spain
Paul De Grauwe, 7 July 2014
Topics: Europe's nations and regions, Global crisis, Macroeconomic policy
Tags: austerity, currency depreciation, ECB, EMU, euro, EZ crisis, fiscal policy, government debt, monetary policy, monetary union, Outright Monetary Transactions, Spain, UK
Lessons from history for the European Financial Crisis
Selin Sayek, Fatma Taskin, 5 July 2014
As of July 2014, we continue to debate whether the European economy is out of the woods. The effectiveness of policies and the prospects of full recovery are under scrutiny.
Orderly debt reduction rather than permanent mutualisation is the way to go
Vesa Vihriälä, Beatrice Weder di Mauro, 2 April 2014
High levels of public debt have been at the centre of the euro crisis. Perceived unsustainability of individual member states’ public debt resulted in high interest rates and the threat of exclusion from the bond market.
The European crisis in the context of historical trilemmas
Michael Bordo, Harold James, 19 October 2013
The European financial crisis has often produced comparisons with the historical problems of the classical gold standard. Many of the key political figures who drove forward European monetary integration admired the discipline and certainty of the gold standard. Both Valéry Giscard d’Estaing and Helmut Schmidt shared this view.
Unemployment, labour-market flexibility and IMF advice: Moving beyond mantras
Olivier Blanchard, Florence Jaumotte, Prakash Loungani, 18 October 2013
Growth in advanced economies is gaining some speed. The IMF projects these economies will grow 2% next year, up from an expected 1.2% this year. The average unemployment rate in advanced economies is expected to inch down from its peak of 8.3% in 2010 to 8% next year. This is progress, but it is clearly not enough. The state of labour markets remains dismal for a number of reasons.
The IMF and the legacy of the euro crisis
Susan Schadler, 15 October 2013
The IMF will live with the legacy of its role in the European debt crisis for years — if not decades.
Cyprus: What are the alternatives?
Thorsten Beck, 22 March 2013
The Cypriot banking system is insolvent; it needs a large capital injection. As in several other peripheral states of the Eurozone, Cyprus cannot resolve the crisis alone. Given an already high debt-to-GDP ratio and an oversized banking system, recapitalising the banks via sovereign debt would produce unsustainable sovereign-debt levels and, ultimately, sovereign default.
Walking back from Cyprus
Mitu Gulati, Lee C. Buchheit , 20 March 2013
On Friday 15 March 2013, European leaders trespassed on consecrated ground. They insisted that Cyprus impose losses – euphemistically dubbed a 'solidarity levy' – on insured depositors with Cypriot banks as a condition to receiving EZ/IMF bailout assistance. Entering Friday’s meeting, the leaders had four options on the table:
Why the rush? Short-term crisis resolution and long-term bank stability
Thorsten Beck, 16 October 2012
The recent crisis has exposed a critical gap in financial safety nets across Europe and many other developed countries, i.e. a deficient if not absent bank resolution framework. This gap in the financial safety net has become even more critical in the case of cross-border banks.
Learning from past crises: Into the safety zone
Caroline Van Rijckeghem, Beatrice Weder di Mauro, 25 September 2012
Since the lost decade of the 1980s a rich literature on financial crises has evolved, including a theoretical literature which emphasised the potential for self-fulfilling expectations within a zone of vulnerability (e.g. Krugman 1996).
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