A failsafe way to end the Eurozone crisis

Charles Wyplosz 26 September 2011

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The annual gathering of finance ministers and central bank governors at the IMF/World Bank meetings in Washington seems to have been an epiphany for Eurozone leaders. Finally, there seems to be agreement that their July 2011 agreement was insufficient (Reuters 2011).

In a previous Vox column, I sketched a way of stopping the public debt crisis that is engulfing the Eurozone (Wyplosz 2011). Here I develop this idea into a coherent proposal that, if adopted, would immediately stop the rot.

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Topics:  Global crisis

Tags:  ECB, moral hazard, Eurozone crisis, EFSF, debt guarantee

The damaged ECB legitimacy

Anne Sibert 15 September 2011

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The ECB’s role has evolved in its decade-long existence. In this note I describe how the choices of the ECB have damaged the institution’s legitimacy. This matters because decreased legitimacy lowers the ECB’s future policy effectiveness and weakens the legitimacy of all other institutions of governance in the EU, including the European Commission, the European Court of Justice, and the European Parliament.

In evaluating the ECB’s performance, I split the last eight years into two parts:

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Topics:  EU policies Europe's nations and regions Global crisis Institutions and economics

Tags:  ECB, transparency, Eurozone crisis

Why a slowdown in Germany could be good for Europe

Francesco Giavazzi, Alberto Alesina 01 September 2011

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Paradoxically, the slowing down of the German economy could be a blessing for the euro – and a boost to the probability that the euro survives the crisis.

Until a few weeks ago, the Eurozone economies seemed to be moving in different directions.

  • Germany was growing at a swift rate with a solid fiscal stance.
  • The southern economies (Greece, Italy, Spain, and Portugal) were – and still are – not growing and in a fiscal mess.

This situation created headaches for the ECB.

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Topics:  EU policies Europe's nations and regions Monetary policy

Tags:  Germany, ECB, Eurozone crisis

The European Central Bank as a lender of last resort

Paul De Grauwe 18 August 2011

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In October 2008 the ECB discovered that there is more to central banking than price stability. This discovery occurred when it was forced to massively increase liquidity to save the banking system. The ECB did not hesitate to serve as lender of last resort to the banking system, despite fears of moral hazard, inflation, and the fiscal implications of its lending.

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Topics:  EU policies

Tags:  ECB, lender of last resort, Eurozone crisis

August 2011: The euro crisis reaches the core

Daniel Gros 11 August 2011

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Canaries were kept in coal mines because they die faster than humans when exposed to dangerous gases. When the birds stopped singing, wise miners knew that it was time to gear up the emergency procedures.

Greece, as it turns out, was the Eurozone’s canary. The canary was resuscitated and a small rescue mechanism was set up to revive a further canary or two – but beyond this the warning was ignored. The miners kept on working. They convinced themselves that this was the canary’s problem.

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Topics:  Global crisis

Tags:  ECB, EFSF, Eurozone Debt Crisis

They still don’t get it

Charles Wyplosz 25 October 2011

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Editor's note: This column updates the column originally posted on 8 August 2011.

 

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Topics:  EU institutions

Tags:  ECB, sovereign default, Eurozone crisis

A balance sheet view on TARGET – and why restrictions on TARGET would have hit Germany first

Clemens Jobst 19 July 2011

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By now most readers of European financial newspapers and blogs will have come across Hans-Werner Sinn’s repeated assertions (see Sinn 2011a and 2011b on this site and his latest here) about Germany’s “stealth bailout” of European peripheral economies and the “ticking time bomb” hidden in the €300 billion claims of the Bundesbank in the Eurozone payment system

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Topics:  EU policies Europe's nations and regions International finance

Tags:  Germany, ECB, Bundesbank, Central Banks, Eurozone crisis, TARGET

ECB Reaction Functions and the Crisis of 2008

Stefan Gerlach, John Lewis,

Date Published

Mon, 07/04/2011

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Should the ECB use core inflation as a signal for medium-term inflation?

Michele Lenza, Lucrezia Reichlin 24 June 2011

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In the last few weeks the press and several blogs have been engaged in a debate on the classic question of whether central banks should rely on headline inflation or core inflation (defined as headline inflation excluding energy and food) to obtain a signal for medium-term inflationary pressures. The debate, this time, was started by a Financial Times article by Lorenzo Bini Smaghi, board member of the ECB (Smaghi 2011).

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Topics:  EU policies Monetary policy

Tags:  ECB, headline inflation, core inflation

The ECB’s three mistakes in the Greek crisis and how to get sovereign debt right in the future

Jeffrey Frankel 16 May 2011

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By now just about everybody agrees that the European bailout of Greece has failed (see for example Darvas et al. 2011). The debt will have to be restructured. As has been evident for well over a year, it is not possible to think of a plausible combination of Greek budget balance, sovereign risk premium, and economic growth rates that imply anything other than an explosive path for the future ratio of debt to GDP.

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Topics:  EU policies Europe's nations and regions

Tags:  ECB, Greece, Fiscal crisis, Eurozone crisis

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