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Concluding Remarks

In: Dollars, Euros, and Debt

Author

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  • Vito Tanzi

Abstract

In this study we have argued that the difficulties that the EMU countries have been experiencing have had less to do with the use of the common currency, the euro, or even with the characteristics of the European Monetary Union, and a lot to do with the levels to which public spending was pushed over the years combined with limited and inefficient controls on banks and on the financial system. These developments made it easier for countries to finance large public spending until concerns about the sustainability of their fiscal accounts started to affect borrowing costs. For example the purchase by Cypriot banks of Greek government bonds made it easier for Greece to expand its public spending and in turn created problems for Cyprus. In most of the countries of the EMU, but also in other countries including the United States, with the help of foreign loans, public spending had been pushed to levels that, sooner or later, would become unsustainable and lead to potential fiscal crises.

Suggested Citation

  • Vito Tanzi, 2013. "Concluding Remarks," Palgrave Macmillan Books, in: Dollars, Euros, and Debt, chapter 15, pages 167-174, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-34647-6_15
    DOI: 10.1057/9781137346476_15
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