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Title:Quo vadis, euroland? European Monetary Union between crisis and reform PDF Logo
Authors:Hellwig, Martin
Issue Date:2011
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2011,12
Abstract:This lecture discusses the 2010 crisis of the European Monetary Union and draws some lessons for reform. Crisis resolution has been difficult because the sovereign debt crisis of countries like Greece and Portugal has come together with real-estate and banking crises in countries like Ireland and Spain and bank vulnerability in countries like Germany and France. Failure to disentangle and resolve the different crises prevents a satisfactory approach to the long-term reform of governance of sovereign borrowing and banking. Any such reform must find a substitute for the discipline that exchange rate mechanisms impose on sovereign borrowers and their lenders when the currency is national. Any mechanism for imposing discipline on sovereign borrowers and their lenders must be designed so that enforcement is credible even in a crisis. Recommendations for reform include (i) an inclusion of sovereign exposure from too-big-to-fail concerns in banking in monitoring of fiscal stance, (ii) independence of bank supervisors from their respective political authorities, and (iii) a strengthening of the powers of the European Supervisory Authorities over the national supervisors.
Subjects:European Monetary Union
sovereign debt crisis
bank supervision
JEL:G28
F53
F33
F36
Document Type:Working Paper
Appears in Collections:Preprints of the Max Planck Institute for Research on Collective Goods

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