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Sovereign debt crisis in Monetary Unions: prevention, prevention and prevention

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  • Xavier Debrun

Abstract

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

Suggested Citation

  • Xavier Debrun, 2010. "Sovereign debt crisis in Monetary Unions: prevention, prevention and prevention," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 59-69.
  • Handle: RePEc:cai:rpvedb:rpve_494_0059
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    More about this item

    Keywords

    European Monetary Union; sovereign debt; fiscal rules;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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