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Chapter 2: The European Balance-of-Payments Problem

Author

Listed:
  • Lars Calmfors
  • Giancarlo Corsetti
  • John Hassler
  • Gilles Saint-Paul
  • Hans-Werner Sinn
  • Jan-Egbert Sturm
  • Ákos Valentinyi
  • Xavier Vives

Abstract

There are differing views on the causes of, and cures for, this crisis. At one end of the spectrum, some ultimately see it as a public debt crisis and advocate the strengthening of political constraints on government borrowing. Others primarily regard it as a confidence crisis, which should be addressed by setting up a very large rescue fund, i.e. by wielding a ‘big bazooka’. They count on the fact that, if the crisis is truly expectation-driven, the resources will never have to be used. This chapter begins by reconsidering these and other views, and later stresses the structural reasons for the crisis, particularly the loss of competitiveness on the part of some euro area countries and the resulting surge in private and public foreign indebtedness. The chapter closes with some policy conclusions and recommendations.

Suggested Citation

  • Lars Calmfors & Giancarlo Corsetti & John Hassler & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Ákos Valentinyi & Xavier Vives, 2012. "Chapter 2: The European Balance-of-Payments Problem," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 57-82, February.
  • Handle: RePEc:ces:eeagre:v::y:2012:i::p:57-82
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    File URL: http://www.cesifo-group.de/DocDL/eeag_report_chap2_2012.pdf
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    References listed on IDEAS

    as
    1. Stefan Homburg, 2012. "Notes on the Target2 Dispute," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 50-54, February.
    2. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 468-508, August.
    3. Gerlinde Sinn & Hans-Werner Sinn, 1994. "Jumpstart: The Economic Unification of Germany," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691728, January.
    4. Buiter,Willem H. & Corsetti,Giancarlo & Pesenti,Paolo A., 2001. "Financial Markets and European Monetary Cooperation," Cambridge Books, Cambridge University Press, number 9780521794404, April.
    5. Harold L. Cole & Timothy J. Kehoe, 2000. "Self-Fulfilling Debt Crises," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 91-116.
    6. Michael Reutter & Hans-Werner Sinn, 2000. "The Minimum Inflation Rate for Euroland," CESifo Working Paper Series 377, CESifo Group Munich.
    7. Aaron Tornell & Frank Westermann, 2012. "Greece: The Sudden Stop That Wasn’t," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 102-103, February.
    8. Hans-Wener Sinn & Teresa Buchen & Timo Wollmershauser, 2011. "Trade Imbalances: Causes, Consequences, and Policy Measures," Book Chapters,in: Jack T. Boorman & André Icard (ed.), Reform of the International Monetary System: The Palais Royal Initiative, chapter 26, pages 321-342 Emerging Markets Forum.
    9. Hans-Werner Sinn & Robert Koll, 2000. "The Euro, Interest Rates and European Economic Growth," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(3), pages 30-31, October.
    10. Hans-Werner Sinn, 2010. "Rescuing Europe," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(SPECIALIS), pages 1-22, August.
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