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The euro crisis: ten roots, but fewer solutions

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  • Zsolt Darvas

Abstract

This Policy contribution was published in 'The Aftermath of the Global Crisis in the European Union' in May 2013. Many factors have contributed to the euro crisis. Some have been addressed by policymakers, even if belatedly, and European Union member states have been willing to improve the functioning of the euro area by agreeing to relinquish national sovereignty in some important areas. However, the most pressing issue threatening the integrity, even the existence, of the euro, has not been addressed: the deepening economic contraction in southern euro-area member states. The common interest lies in preserving the integrity of the euro area and in offering these countries improved prospects. Domestic structural reform and appropriate fiscal consolidation, wage increases and slower fiscal consolidation in economically stronger euro-area countries, a weaker euro exchange rate, debt restructuring and an investment programme should be part of the arsenal. In the medium term, more institutional change will be necessary to complement the planned overhaul of the euro area institutional framework. This will include the deployment of a euro-area economic stabilising tool, managing the overall fiscal stance of the euro area, some form of Eurobonds and measures to make euro-area level decision making bodies more effective and democratically legitimate.

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Paper provided by Bruegel in its series Policy Contributions with number 755.

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Date of creation: Oct 2012
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Handle: RePEc:bre:polcon:755

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  1. Zsolt Darvas, 2011. "Debt Restructuring in the Euro Area: a Necessary but Manageable Evil?," Working Papers 1104, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  2. Zsolt Darvas, 2010. "Fiscal federalism in crisis: lessons for Europe from the US," Policy Contributions 420, Bruegel.
  3. Michael D. Bordo & Agnieszka Markiewicz & Lars Jonung, 2011. "A Fiscal Union for the Euro: Some Lessons from History," NBER Working Papers 17380, National Bureau of Economic Research, Inc.
  4. Carlo Altomonte & Tommaso Aquilante & Gianmarco Ottaviano, . "The triggers of competitiveness: The EFIGE cross-country report," Blueprints, Bruegel, number 738, December.
  5. André Sapir & Jean Pisani-Ferry & Zsolt Darvas, 2011. "A comprehensive approach to the euro-area debt crisis," Policy Briefs 491, Bruegel.
  6. Zsolt Darvas, 2010. "The case for reforming euro area entry criteria," Society and Economy, Akadémiai Kiadó, Hungary, vol. 32(2), pages 195-219, December.
  7. Benedicta Marzinotto & Guntram B. Wolff & Mark Hallerberg, 2011. "How effective and legitimate is the European semester? Increasing role of the European parliament," Working Papers 612, Bruegel.
  8. Zsolt Darvas, 2011. "The Ten Roots of the Euro Crisis," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(4), pages 03-04, December.
  9. Jean Pisani-Ferry & Silvia Merler, 2012. "The simple macroeconomics of North and South in EMU," Working Papers 740, Bruegel.
  10. Silvia Merler & Jean Pisani-Ferry, 2012. "Who's afraid of sovereign bonds?," Policy Contributions 695, Bruegel.
  11. Alan Ahearne & Juan Delgado & Jakob von Weizsäcker, 2008. "A tail of two countries," Policy Briefs 6, Bruegel.
  12. Zsolt Darvas, 2012. "The ECB’s magic wand," Intereconomics: Review of European Economic Policy, Springer, vol. 47(5), pages 266-267, September.
  13. Zsolt Darvas, 2012. "Intra-euro rebalancing is inevitable but insufficient," Policy Contributions 747, Bruegel.
  14. Benedicta Marzinotto & André Sapir, 2012. "Fiscal rules: Timing is everything," Policy Briefs 749, Bruegel.
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