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 - 00:00
Anusha Chari, Peter Blair Henry, Friday, March 6, 2015 - 00:00
Pınar Yeşin, Saturday, February 21, 2015 - 00:00
Michael Burda, Thursday, May 17, 2012 - 00:00
The EZ crisis reveals critical flaws in the Eurozone’s design. This column argues that failing to abolish national central banks left the door open for national interests to interfere with the natural workings of the financial system and Hume’s adjustment mechanism. This flaw – and the omission of a European Banking Authority with real teeth – will come back to haunt Europe in the months and years to come.
Pietro Alessandrini, Andrew Hughes Hallett, Andrea F Presbitero, Michele Fratianni, Wednesday, May 16, 2012 - 00:00
Unsustainable debt along Europe’s periphery is bringing the euro to breaking point. But this column argues that this is not simply the result of fiscal ill-discipline. After 2010, the Eurozone crisis went from a fiscal crisis to a balance-of-payments crisis – with different prescriptions for policy.
Jean Pisani-Ferry, Silvia Merler, Monday, April 2, 2012 - 00:00
Many analysts and observers have put forward that the euro crisis is a balance-of-payments crisis at least as much as a fiscal crisis. This column provides evidence of capital-flow reversals in Greece, Ireland, Portugal, Spain, and Italy. It argues that the fostering of a pan-European banking industry and the creation of a banking union with centralised supervision and access to resources to recapitalise weak financial institutions should feature high on the policy agenda.