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The European Sovereign Debt Crisis

  • Philip R. Lane

The origin and propagation of the European sovereign debt crisis can be attributed to the flawed original design of the euro. In particular, there was an incomplete understanding of the fragility of a monetary union under crisis conditions, especially in the absence of banking union and other European-level buffer mechanisms. Moreover, the inherent messiness involved in proposing and implementing incremental multicountry crisis management responses on the fly has been an important destabilizing factor throughout the crisis. After diagnosing the situation, we consider reforms that might improve the resilience of the euro area to future fiscal shocks.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 26 (2012)
Issue (Month): 3 (Summer)
Pages: 49-68

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Handle: RePEc:aea:jecper:v:26:y:2012:i:3:p:49-68
Note: DOI: 10.1257/jep.26.3.49
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  19. Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1539-1560, August.
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