The unpleasant legacy of the crisis: public debt and low trend growth in the Eurozone

Nicholas Crafts interviewed by Viv Davies, 21 Jan 2014

Nicholas Crafts talks to Viv Davies about his recent work on the threatening issue of public debt in the Eurozone. Crafts maintains that the implicit fault line in the EZ is evident; several EZ economies face a long period of fiscal consolidation and low growth and that a different sort of central bank might be preferable. They also discuss the challenges and constraints of banking, fiscal and federal union. The interview was recorded in London on 17 January 2014.


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See Also

Crafts, N (2013b), “Saving the Euro: a Pyrrhic Victory?”, CAGE-Chatham House Policy Briefing Paper No. 11.


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Topics: Economic history, Macroeconomic policy
Tags: debt monetisation, ECB, eurozone, financial repression, fiscal consolidation, gold standard, public debt

Why fiscal sustainability matters

Willem Buiter, 10 January 2014



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

A consistent trinity for the Eurozone

Marco Buti, 8 January 2014



While it would be premature to declare victory, owing to sustained policy efforts at all institutional levels, major progress has been made in the past two years that has put Economic and Monetary Union (EMU) on much firmer ground.

Topics: EU policies, Macroeconomic policy
Tags: consistent trinity, eurozone, Eurozone challenges

The ghost of Deauville

Ashoka Mody, 7 January 2014



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



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

The Eurozone: If only it were the 1930s

Nicholas Crafts, 13 December 2013



The 1930s deservedly have a bad name. It is hard to imagine that a decade that included the Great Depression and a major de-globalisation of the world economy, and culminated in WWII could be other than notorious. And yet, compared with struggling Eurozone economies today, the economic situation in Europe in the later 1930s was in many ways more promising.

Topics: Economic history, Macroeconomic policy
Tags: debt monetisation, ECB, eurozone, financial repression, fiscal consolidation, gold standard, public debt

Moving closer? Changing patterns of labour mobility in Europe and the US

Mai Dao, Davide Furceri, Prakash Loungani, 1 December 2013



On 21 September 1992, four famous professors – Olivier Blanchard, Rudi Dornbusch, Stan Fischer, and Paul Krugman – took part in a panel discussion at MIT on the merits of the proposed European currency union.

Topics: Labour markets
Tags: currency union, euro, eurozone, labour mobility

The euro and price convergence: You wanted it … you got it!

Alberto Cavallo, Brent Neiman, Roberto Rigobon, 29 November 2013



Remember some of the objectives of the creation of the euro? A single currency area within Europe would carry with it:

  • Enhanced factor mobility
  • Greater productivity growth
  • Acceleration of financial development; and
  • Improved macroeconomic policies.

Or, at least, that was the hope (Wyplosz 1997).

Topics: Exchange rates, International trade
Tags: euro, eurozone, price convergence, real exchange rates

An early-warning indicator for debt sustainability

Casper van Ewijk, Jasper Lukkezen, Hugo Rojas-Romagosa, 28 November 2013



Insight into the sustainability of public finances is critical to European policymakers and financial markets alike. It informs decisions concerning the need for reform and the determination of the appropriate risk premium on government debt. Furthermore, unsustainable public finances may cause significant spillovers, highlighting the need for international fiscal surveillance.

Topics: EU institutions, Global crisis
Tags: eurozone, sovereign debt crisis

Currency wars and the euro

Jens Nordvig, 25 November 2013



A new battle for the ECB to fight

Last year, the ECB entered an existential battle for the euro. By promising to do ‘whatever it takes’ to safeguard the euro, the ECB managed to calm sovereign debt markets and engineer a much-needed easing of overall credit conditions in the Eurozone.

Topics: EU institutions, Exchange rates, Monetary policy
Tags: Bundesbank, Currency wars, ECB, euro, eurozone, unemployment

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