Orderly debt reduction rather than permanent mutualisation is the way to go

Vesa Vihriälä, Beatrice Weder di Mauro, 2 April 2014

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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.

Topics: EU institutions, International finance
Tags: debt mutualisation, EZ crisis, EZ debt crisis, EZ debt restructuring mechanism

The European crisis in the context of historical trilemmas

Michael Bordo, Harold James, 19 October 2013

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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.

Topics: International finance
Tags: EZ crisis, trilemmas

Unemployment, labour-market flexibility and IMF advice: Moving beyond mantras

Olivier Blanchard, Florence Jaumotte, Prakash Loungani, 18 October 2013

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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.

Topics: Labour markets, Welfare state and social Europe
Tags: collective bargaining, EZ crisis, IMF, institutions, labour-market flexibility, trust, unemployment, Unemployment insurance

The IMF and the legacy of the euro crisis

Susan Schadler, 15 October 2013

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The IMF will live with the legacy of its role in the European debt crisis for years — if not decades.

Topics: Global governance, International finance
Tags: debt, EZ crisis, IMF

Cyprus: What are the alternatives?

Thorsten Beck, 22 March 2013

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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.

Topics: EU institutions, Macroeconomic policy
Tags: Cyprus, European Recapitalisation Agency, EZ crisis

Walking back from Cyprus

Mitu Gulati, Lee C. Buchheit , 20 March 2013

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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:

Topics: Macroeconomic policy
Tags: bailout, Cyprus, Eurozone crisis, EZ crisis

Why the rush? Short-term crisis resolution and long-term bank stability

Thorsten Beck, 16 October 2012

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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.

Topics: EU institutions, Europe's nations and regions
Tags: banking stability, EZ banking union, EZ crisis

Learning from past crises: Into the safety zone

Caroline Van Rijckeghem, Beatrice Weder di Mauro, 25 September 2012

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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).

Topics: EU policies, International finance
Tags: EZ crisis, sovereign debt crises, sovereign default

On banking union, speak the truth

Charles Wyplosz, 17 September 2012

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The European Commission has produced an interesting proposal on EZ banking union (Commission 2012). Despite its many shortcomings, it is a good start. And now finance ministers have started to deconstruct the proposal. Part of the deconstruction comes from the ministers’ shameful capture by national bank lobbies, but not all. The proposal includes some clumsy features.

Topics: EU institutions
Tags: ECB, EZ banking union, EZ crisis

Italy’s 'this time it’s different' moment: With rejoinder by Giavazzi

Charles Wyplosz, 15 August 2012

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The recent article by Francesco Giavazzi is both depressing and déjà vu all over again.

Topics: EU institutions
Tags: Eurozone crisis, EZ crisis, Italian bailout

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