Euro Crisis: Causes and Some Solutions

Posted on February 01, 2016 by Tom McDonnell

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The euro crisis may be burning at a low heat but that doesnt mean the euro area is any better designed than it was six months ago. The latest NERI inBrief and accompanying working paper and presentation discuss the causes of the euro crisis. They argue that long-term success and stability for the currency union depends on the implementation of a package of complementary policy reforms. Policies discussed include:

  • The creation of a conditional lender of last resort for sovereigns
  • The construction of a full and genuine banking union
  • The establishment of a small centralised fiscal mechanism funded from some hypothecated Eurozone tax (but not full fiscal federalism)
  • The application of  differentiated inflation targets and better mechanisms to ensure better coordination between countries.

Posted in: Macroeconomics

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