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The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis

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Abstract

Why was recovery from the euro area crisis delayed for a decade? The explanation lies in the absence of credible and timely policies to backstop financial intermediaries and sovereign debt markets. In this paper we add light and color to this analysis, contrasting recent experience with the 1992-3 crisis in the European Monetary System, when national central banks and treasuries more successfully provided this backstop. In the more recent episode, the incomplete development of the euro area constrained the ability of the ECB and other European institutions to do likewise.

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  • Giancarlo Corsetti & Barry Eichengreen & Galina Hale & Eric Tallman, 2019. "The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis," Working Paper Series 2019-4, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:2019-04
    DOI: 10.24148/wp2019-04
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    Cited by:

    1. Tudor – Mugurel AURSULESEI, 2023. "The influence of the COVID-19 pandemic crisis on the real convergence of the member states of the European Monetary Union," Junior Scientific Researcher, SC Research Publishing SRL, vol. 9(1-2), pages 1-10, July.
    2. Ioannou Demosthenes & Pagliari Maria Sole & Stracca Livio, 2020. "The international dimension of a fragile EMU," Working papers 795, Banque de France.
    3. Philip R. Lane, 2021. "The Resilience of the Euro," Journal of Economic Perspectives, American Economic Association, vol. 35(2), pages 3-22, Spring.
    4. Pompeo Della Posta & Roberto Tamborini, 2022. "The existential trilemma of EMU in a model of fiscal target zone," Oxford Open Economics, Oxford University Press, vol. 1, pages 1-16.

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    JEL classification:

    • F0 - International Economics - - General
    • N0 - Economic History - - General

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