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Euro crisis or public debt crisis? With a remedy for the latter case

  • Mario Sarcinelli


    (Dexia Crediop)

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    The European crisis did not originate with the Euro but with the excessive public debt of peripheral Eurozone countries. The 'great moderation' that had kept the euro sheltered from the storms proved a boon, because it granted the currency the status of a sound asset, but it was also a bane because it had led euro holders to believe that the euro area had implicitly reached such a degree of cohesion as to make a Greek or Italian government security almost as sound as a German one. If awareness of reality had dawned sooner, interest rates on the peripheral countries' public debt would have been considerably higher and government leaders might have woken up sooner from the dream of governing a country that could outlast any storm thanks to its ample private wealth, despite its massive public debt.

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    Article provided by Economia civile in its journal PSL Quarterly Review.

    Volume (Year): 65 (2012)
    Issue (Month): 262 ()
    Pages: 215-236

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    Handle: RePEc:psl:pslqrr:2012:31
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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," NBER Working Papers 15639, National Bureau of Economic Research, Inc.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
    3. Luigi Marattin & Paolo Paesani & Simone Salotti, 2012. "Assessing the Pre-Crisis Advantages of the EMU for Sovereign Debt Issuers: A Panel VAR Analysis," Rivista di Politica Economica, SIPI Spa, issue 1, pages 7-22, January-M.
    4. Eichengreen, Barry, 1989. "The Capital Levy in Theory and Practice," CEPR Discussion Papers 350, C.E.P.R. Discussion Papers.
    5. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
    6. Fabrizio Balassone & Maura Francese & Angelo Pace, 2011. "Public Debt and Economic Growth in Italy," Quaderni di storia economica (Economic History Working Papers) 11, Bank of Italy, Economic Research and International Relations Area.
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