The euro crisis: ten roots, but fewer solutions
Many factors have contributed to the euro crisis. Some have been addressed by policymakers, even if belatedly, and European Union member states have b
This Policy contribution was published in '' 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.
About the authors
Related content
What enlargement could imply for the European Union’s budget
The entry of nine new countries into the EU would impact the EU budget modestly while boosting national revenues for current members
Forecasting the daily exchange rate of the UK pound sterling against the US dollar
The new economic governance framework: implications for monetary policy
