Sovereign debt crisis in Monetary Unions: prevention, prevention and prevention
This paper draws on recent events in the euro area to discuss the serious gaps in the fiscal architecture of the European Economic and Monetary Union. These gaps stem from the lack of a fiscal federation and the incapacity of EU institutions to effectively enforce the set of rules supposed to make up for the absence of a fiscal principal. The failure of preventive instruments made the absence of crisis management and resolution capabilities in the euro area highly problematic, exposing the union to a meaningful risk of breakup. To conclude, we draw the lessons of the euro sovereign debt crisis in terms of improving the euro area?s fiscal architecture and, more broadly the fiscal framework required for the sustainability of other monetary unions without fiscal unions. JEL codes: E61, E62, F55
Volume (Year): XLIX (2010)
Issue (Month): 4 ()
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