Abstract
Since the sovereign crisis erupted in the autumn of 2009 when the true scale of the Greek fiscal deficit was revealed, the European Union (EU), and especially the euro area, has staggered from crisis to crisis. Major initiatives have, however, been taken to improve economic governance and to put in place a more resilient framework for the euro. This article assesses how the EU has responded to the crisis and offers explanations for why the reform process has been slow and indecisive. It shows that potentially enduring solutions are on the table, but that they have been hard to introduce because of differing national perspectives and disagreements about how the burdens of adjustment should be shared. The article concludes by setting out plausible options and explaining what they entail.
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Notes
The very poor record of macroeconomic forecasting by all the leading organisations during the crisis suggests that these forecasts have to be interpreted with great caution.
These data reflect revisions made since Greece was adjudged to have passed the euro entry criteria
According to the Commission’s autumn 2011 economic forecasts
When Latvia and Hungary came under strong pressure to depreciate their currencies in 2009, a compelling reason to resist was that a high proportion of private borrowing (notably mortgages) was denominated in Swiss francs, yen or euros so that devaluation would have led to private bankruptcies.
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Begg, I. The EU’s response to the global financial crisis and sovereign debt crisis. Asia Eur J 9, 107–124 (2012). https://doi.org/10.1007/s10308-012-0304-8
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DOI: https://doi.org/10.1007/s10308-012-0304-8