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The euro crisis: ten roots, but fewer solutions

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  • Zsolt Darvas

Abstract

This Policy contribution was published in 'The Aftermath of the Global Crisis in the European Union' in May 2013.Many factors have contributed to the euro crisis. Some have been addressed by policymakers, even if belatedly, and European Union member states have been willing to improve the functioning of the euro area by agreeing to relinquish national sovereignty in some important areas. However, the most pressing issue threatening the integrity, even the existence, of the euro, has not been addressed - the deepening economic contraction in southern euro-area member states.The common interest lies in preserving the integrity of the euro area and in offering these countries improved prospects. Domestic structural reform and appropriate fiscal consolidation, wage increases and slower fiscal consolidation in economically stronger euro-area countries, a weaker euro exchange rate, debt restructuring and an investment programme should be part of the arsenal.In the medium term, more institutional change will be necessary to complement the planned overhaul of the euro area institutional framework. This will include the deployment of a euro-area economic stabilising tool, managing the overall fiscal stance of the euro area, some form of Eurobonds and measures to make euro-area level decision making bodies more effective and democratically legitimate.

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  • Zsolt Darvas, 2012. "The euro crisis: ten roots, but fewer solutions," Policy Contributions 755, Bruegel.
  • Handle: RePEc:bre:polcon:755
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    1. Michael D. Bordo & Lars Jonung & Agnieszka Markiewicz, 2013. "A Fiscal Union for the Euro: Some Lessons from History ," CESifo Economic Studies, CESifo, vol. 59(3), pages 449-488, September.
    2. Zsolt Darvas, 2011. "Debt Restructuring in the Euro Area: a Necessary but Manageable Evil?," Working Papers 1104, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    3. Benedicta Marzinotto & Guntram B. Wolff & Mark Hallerberg, 2011. "How effective and legitimate is the European semester? Increasing role of the European parliament," Working Papers 612, Bruegel.
    4. Ruscher Eric & Wolff Guntram B., 2013. "Corporate Balance Sheet Adjustment: Stylized Facts, Causes and Consequences," Review of Economics, De Gruyter, vol. 64(2), pages 117-138, August.
    5. Jean Pisani-Ferry & Silvia Merler, 2012. "The simple macroeconomics of North and South in EMU," Working Papers 740, Bruegel.
    6. André Sapir, 2011. "A Comprehensive Approach to the Euro-Area Debt Crisis," ULB Institutional Repository 2013/174297, ULB -- Universite Libre de Bruxelles.
    7. Benedicta Marzinotto & André Sapir, 2012. "Fiscal rules: Timing is everything," Policy Briefs 749, Bruegel.
    8. Carlo Altomonte & Tommaso Aquilante & Gianmarco Ottaviano, . "The triggers of competitiveness: The EFIGE cross-country report," Blueprints, Bruegel, number 738, November.
    9. Zsolt Darvas, 2010. "The case for reforming euro area entry criteria," Society and Economy, Akadémiai Kiadó, Hungary, vol. 32(2), pages 195-219, December.
    10. Zsolt Darvas, 2010. "Fiscal Federalism in Crisis: Lessons for Europe from the US," IEHAS Discussion Papers 1021, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    11. Alan Ahearne & Juan Delgado & Jakob von Weizsäcker, 2008. "A tail of two countries," Policy Briefs 6, Bruegel.
    12. Zsolt Darvas, 2011. "The Ten Roots of the Euro Crisis," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(4), pages 03-04, December.
    13. Jean Pisani-Ferry & Guntram B. Wolff, 2012. "The fiscal implications of a banking union," Policy Briefs 748, Bruegel.
    14. Guntram B. Wolff, 2012. "Arithmetic is absolute: euro area adjustment," Policy Contributions 724, Bruegel.
    15. Zsolt Darvas, 2012. "Intra-euro rebalancing is inevitable but insufficient," Policy Contributions 747, Bruegel.
    16. Silvia Merler & Jean Pisani-Ferry, 2012. "Who's afraid of sovereign bonds?," Policy Contributions 695, Bruegel.
    17. Zsolt Darvas, 2012. "The ECB’s magic wand," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 47(5), pages 266-267, September.
    18. André Sapir & Jean Pisani-Ferry & Nicolas Véron & Guntram Wolff, 2012. "What Kind of Banking Union ?," ULB Institutional Repository 2013/174288, ULB -- Universite Libre de Bruxelles.
    19. Alan Ahearne & Guntram B. Wolff, 2012. "The debt challenge in Europe," Working Papers 686, Bruegel.
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