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Policy coordination, conflicting national interests and the European debt crisis

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  • Carlo Panico
  • Francesco Purificato

Abstract

This paper tries to identify the causes of and solutions to the debt crisis, by moving from the content of a previous debate on policy coordination in the euro area and from the available evidence on the existence of conflicting national interests within the governing bodies of the European Central Bank (ECB). It argues that before 2007 the flaws in the institutional organisation of the process of coordination between monetary and fiscal policy affected the cyclical and growth operation of the economies. After then, they have contributed to intensifying the conflicts among national and European authorities. The conflicts have curbed policy reactions, held back the interventions of the ECB, as occurred to the Federal Reserve during the crisis of 1929, and favoured the speculative attacks. The conclusion is that the organisation of the area must be reformed to allow its institutions to effectively pursue the objectives for which they were created, i.e. to protect the citizens from the instability of the international financial markets. As has been done in monetary policy, the reforms must reduce the uncertainty on the actual conduct of national policies and transform the defensive attitudes of the different actors of the process into a positive search for the most effective policy for the whole area Copyright , Oxford University Press.

Suggested Citation

  • Carlo Panico & Francesco Purificato, 2013. "Policy coordination, conflicting national interests and the European debt crisis," Cambridge Journal of Economics, Oxford University Press, vol. 37(3), pages 585-608.
  • Handle: RePEc:oup:cambje:v:37:y:2013:i:3:p:585-608
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    File URL: http://hdl.handle.net/10.1093/cje/bet009
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    Cited by:

    1. C. Petraglia & F. Purificato, 2013. "Single currency and supranational constraints to fiscal policies in the Eurozone during the crisis," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 4, pages 1065-1094.
    2. Robert Joliet & Rabia Nessah, 2016. "Euro White and Euro Yolk: Sovereign Debt Structure Stability in the Eurozone," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(03), pages 1-15, September.
    3. Bernal, Oscar & Gnabo, Jean-Yves & Guilmin, Grégory, 2016. "Economic policy uncertainty and risk spillovers in the Eurozone," Journal of International Money and Finance, Elsevier, vol. 65(C), pages 24-45.
    4. Valerio Filoso, Valerio & Panico, Carlo & Papagni, Erasmo & Francesco, Purificato & Vázquez Suarez, Marta, 2016. "Causes and timing of the European debt crisis: An econometric evaluation," MPRA Paper 75847, University Library of Munich, Germany.
    5. Carlo Panico, Francesco Purificato, Elvira Sapienza, 2015. "Benefici, problemi e prospettive dell’integrazione monetaria in Europa (Benefits, issues and future of monetary integration in Europe)," Moneta e Credito, Economia civile, vol. 68(271), pages 305-339.
    6. Chortareas, Georgios & Mavrodimitrakis, Christos, 2017. "Strategic fiscal policies and leadership in a monetary union," European Journal of Political Economy, Elsevier, vol. 47(C), pages 133-147.
    7. Carlo Panico & Francesco Purificato, 2013. "The Debt Crisis and the European Central Bank’s Role of Lender of Last Resort," Working Papers wp306, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Francesco Purificato & Caterina Astarita, 2015. "TARGET2 Imbalances and the ECB as Lender of Last Resort," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 3(4), pages 1-28, October.
    9. Santiago Capraro & Carlo Panico & Ignacio Perrotini & Francesco Purificato, 2012. "Austerità o politiche coordinate ed espansive? Le difficili scelte delle autorità europee," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2012(108), pages 81-112.
    10. Creutzig, Felix & Goldschmidt, Jan Christoph & Lehmann, Paul & Schmid, Eva & von Blücher, Felix & Breyer, Christian & Fernandez, Blanca & Jakob, Michael & Knopf, Brigitte & Lohrey, Steffen & Susca, Ti, 2014. "Catching two European birds with one renewable stone: Mitigating climate change and Eurozone crisis by an energy transition," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1015-1028.
    11. Astarita, Caterina & Purificato, Francesco, 2013. "TARGET2 imbalances and the need for a lender of last resort," MPRA Paper 51124, University Library of Munich, Germany.
    12. Andreas Andrikopoulos & Aristeidis Samitas & Konstantinos Kougepsakis, 2014. "Volatility transmission across currencies and stock markets: GIIPS in crisis," Applied Financial Economics, Taylor & Francis Journals, vol. 24(19), pages 1261-1283, October.

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