View More View Less
  • 1 The National School of Political and Administrative Studies 6 Povernei Street, sector 1 Bucharest Romania
Restricted access

Purchase article

USD  $25.00

1 year subscription (Individual Only)

USD  $700.00

This paper focuses on the roots of strain in the European Monetary Union (EMU). It argues that there is need for a thorough reform of the EU governance structure in conjunction with radical changes in the regulation and supervision of financial markets. The EMU was sub-optimal from its debut and competitiveness gaps did not diminish against the backdrop of its inadequate policy and institutional design. The euro zone crisis is not related to fiscal negligence only; over-borrowing by the private sector and poor lending by banks, as well as a one-sided monetary policy also explain this debacle. The EMU needs to complement its common monetary policy with solid fiscal/budget underpinnings. Fiscal rules and sanctions are necessary, but not sufficient. A common treasury (a federal budget) is needed in order to help the EMU absorb shocks and forestall confidence crises. A joint system of regulation and supervision of financial markets should operate. Emergency measures have to be comprehensive and acknowledge the necessity of a lender of last resort; they have to combat vicious circles. Structural reforms and EMU level policies are needed to enhance competitiveness in various countries and foster convergence.

  • Amato, Giuliano — Baldwin, Richard — Gros, Daniel — Micossi, Stefano — Padoan, Pier Carlo (2010): A Renewed Political Deal for Sustainable Growth within the Euro Zone and the EU. CEPS Policy Brief, No. 227/7, December.

  • Becker, Torbjorn — Dãianu, Daniel — Darvas, Zsolt — Gligorov, Vladimir — Landesmann, Michael — Petrovic, Pavle — Pisani-Ferry, Jean — Rosati, Dariusz — Sapir, Andre — Weder Di Mauro, Beatrice (2010): Whither Growth in Central and Eastern Europe? Policy Lessons for an Integrated World. Bruegel, Blueprint Series.

    Weder Di Mauro B. , '', in Whither Growth in Central and Eastern Europe? Policy Lessons for an Integrated World , (2010 ) -.

    • Search Google Scholar
  • BiniSmaghi, Lorenzo (2010): ECON Committee Hearing on “Improving the Economic Governance and Stability Framework of the Union, in Particular in the Euro Area”. September.

  • Bofinger, Peter — Feld, Lars P. — Franz, Wolfgang — Schmidt, Christoph M. — Weder di Mauro, Beatrice (2011): A European Redemption Pact. Social Europe Journal, 10 November.

  • Buti, Marco — Larch, Martin (2010): The Commission Proposals for Stronger EU Economic Governance. VoxEU, 14 October.

  • Dabrowski, Marek (2010): Macroeconomic Surveillance within the EU. CASE Network E-briefs, No. 13, November.

  • Daianu, Daniel (2010): The Reform of EU Economic Governance: Are we at a Turning Point? Policy Brief, No. 17, December, Romanian Center for European Policies (CRPE).

  • Darvas, Zsolt — Pisani-Ferry, Jean — Sapir, Andre (2011): A Comprehensive Approach to the Euro Area Debt Crisis. Bruegel Policy Brief, No. 2, February.

  • De Larosiere et al. (2009): Report by Jacques de Larosière on the High Level Group on Financial Supervision in the EU. Brussels, 25 February.

  • Delpla, Jacques — Weiszacker, Jacob von (2010): The Blue Bond Proposal. Bruegel, 10 May.

  • Duillien, Sebastian — Guerot, Ulrike (2012): The Long Shadow of Ordoliberalism: Germany’s Approach to the Euro Crisis. Policy Brief, European Council on Foreign Relations (ECFR), February.

  • Eichengreen, Barry (1992): The Golden Fetters. Oxford: Oxford University Press.

    Eichengreen B. , '', in The Golden Fetters , (1992 ) -.

  • European Commission (2010): A New EU Economic Governance — A Comprehensive Commission Package of Proposals. 29 September.

  • European Council (2010a): National Fiscal Frameworks: Report on the Exchange of Best Practice. Brussels, 7 October.

  • European Council (2010b): Strengthening Economic Governance in the EU. Report of the Task Force to the European Council. Brussels, 21 October.

  • European Fiscal Council (EFC) (2009): Lessons from the Financial Crisis for European Financial Stability Arrangements. EFC High-level Working Group on Cross-border Financial Stability Arrangements, 18 June.

  • Felipe, Jesus — Kumar, Utsav (2011): Do Some Countries in the Euro Zone Need an Internal Devaluation? A Reassessment of what Unit Labor Costs Mean. Voxeu, 31 March.

  • Gianviti, Francois — Krueger, Anne A. — Pisani-Ferry, Jean — Sapir, Andre — Hagen, Jurgen von (2010): A European Mechanism for Sovereign Debt Crisis Resolution: A Proposal. Bruegel, 9 November.

  • Goldstein, Morris — Veron, Nicolas (2011): The European Union should start a Debate on “too Big to Fail”. Voxeu, 14 April.

  • Grauwe, Paul de (2010a): What Kind of Governance for the Euro Zone? CEPS Policy Brief, No. 214/September. Centre for European Policy Studies (CEPS), Brussels.

    Grauwe P. , '', in CEPS Policy Brief , (2010 ) -.

  • Grauwe, Paul de (2010b): AMechanism of Self-destruction of the Euro Zone. CEPS Commentary, 9 November.

  • Gros, Daniel — Mayer, Thomas (2010): Towards a Euro(pean) Monetary Fund. CEPS Policy Brief, No. 202/February.

  • Gros, Daniel — Micossi, Stefano (2008): The Beginning of the Endgame. VoxEu, 20 September.

  • Guerot, Ulrike — Leonard, Mark (2011): The New German Question: How Europe can Get the Germany it Needs. ECFR Policy Brief, 11 April.

  • Haldane, Andrew (2009): Rethinking the Financial Network. Speech at the Financial Student Association in Amsterdam, April. http://www.bankofengland.co.uk/publications/speeches/2009/speech386.pdf

  • IMF, Greece: 2004 Article IV Consultation. Staff Report.

  • Johnson, Simon — Kwak, James (2010): 13 Bankers. The Wall Street Takeover and the Next Financial Meltdown. New York: Pantheon Books.

    Kwak J. , '', in 13 Bankers. The Wall Street Takeover and the Next Financial Meltdown , (2010 ) -.

    • Search Google Scholar
  • Kanter, James (2010): Bondholders and EU Square off over Ireland. International Herald Tribune, 12 November.

  • King, Stephen (2011): The Perils and Pain in our Age of Ever-rising Prices. Financial Times, 19 April.

  • Kirkegaard, Jacob (2012): Brinkmanship in Brussels, Sturm and Drachma for Greece and Europe. Voxeu, 1 March.

  • Koo, Richard (2011): The World in Balance-sheet Recession: Causes, Cure, Politics. Real World Economic Review, 58: 19–38.

    Koo R. , 'The World in Balance-sheet Recession: Causes, Cure, Politics ' (2011 ) 58 Real World Economic Review : 19 -38.

    • Search Google Scholar
  • Krugman, Paul (1993): Geography and Trade. Cambridge, MA: MIT Press.

    Krugman P. , '', in Geography and Trade , (1993 ) -.

  • Lahart, Justin (2007): In Times of Tumult Economist Gains Currency. Wall Street Journal, 18 August.

  • Lamfalussy, Alexander (2000): Financial Crises in Emerging Economies. New Haven: Yale University Press.

    Lamfalussy A. , '', in Financial Crises in Emerging Economies , (2000 ) -.

  • Manasse, Paolo (2010): Stability and Growth Pact: Counterproductive Proposals. Voxeu, 7 October.

  • Mandelbrot, Benoit B. — Hudson, Richard (2004): The Misbehaviour of Markets. A Fractal View of Risk, Ruin and Reward. London: Profile Books.

    Hudson R. , '', in The Misbehaviour of Markets. A Fractal View of Risk, Ruin and Reward , (2004 ) -.

    • Search Google Scholar
  • Merler, Silvia — Pisani-Ferry, Jean (2012): Sudden Stops in the Euro Zone. Bruegel Policy Contribution, No. 6, March.

  • Minsky, Hyman (1986): Stabilizing an Unstable Economy. New York: McGraw-Hill.

    Minsky H. , '', in Stabilizing an Unstable Economy , (1986 ) -.

  • Monti, Mario (2010): A New Strategy for the Single Market. Report to the President of the European Commission, 9 May.

  • Munchau, Wolfgang (2010): Fiscal Union is Crucial for the Euro’s Survival. Financial Times, 15 November.

  • Munchau, Wolfgang (2012): The Bundesbank has no Right at all to be Baffled. Financial Times, 1 March.

  • Mundell, Robert (1961): A Theory of Optimum Currency Area. American Economic Review, 51(4): 657–665.

    Mundell R. , 'A Theory of Optimum Currency Area ' (1961 ) 51 American Economic Review : 657 -665.

    • Search Google Scholar
  • Pisani-Ferry, Jean (2010): Euro-area Governance: What Went Wrong? How to Repair it? Bruegel Policy Contribution, June.

  • Pisani-Ferry, Jean (2011): Le Reveil des Demons (The Rise of Demons). Paris: Fayard.

    Pisani-Ferry J. , '', in Le Reveil des Demons , (2011 ) -.

  • Reinhart, Carmen M. — Rogoff, Kenneth S. (2009): This Time is Different. Eight Centuries of Financial Folly. Princeton: Princeton University Press.

    Rogoff K. S. , '', in This Time is Different. Eight Centuries of Financial Folly , (2009 ) -.

  • Roubini, Nouriel (2010): Irish Woes Should Speed Europe’s Default Plan. Financial Times, 16 November.

  • Sinn, Hans Werner (2011): The ECBs Stealth Bail-Out. Voxeu, 1 June.

  • Stiglitz, Joseph (2010): Risk and Global Economic Architecture: Why Full Financial Integration may be Undesirable. American Economic Review, Papers and Proceedings, 100, May: 388–392.

  • Taleb, Nicholas Nassim (2007): The Black Swan. London: Pinguin Books.

    Taleb N. N. , '', in The Black Swan , (2007 ) -.

  • The Turner Review (2009): A Regulatory Response to the Global Banking Crisis. London: Financial Services Authority (FSA).

    '', in A Regulatory Response to the Global Banking Crisis , (2009 ) -.