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A European perspective on overindebtedness

Nicolas Veron and Jeromin Zettelmeyer ()

Policy Contributions from Bruegel

Abstract: The euro-area crisis, which nearly destroyed Europe’s Economic and Monetary Union (EMU) in 2011-12, was a result of perverse incentives and inadequate institutions. The perverse incentives included excessive implicit national guarantees of domestic banks, and a lack of clarity on what would happen in case of sovereign debt distress, which was interpreted as an implicit guarantee of euro-area sovereigns by each other. Correspondingly, Europe had no institutions that could credibly...

Date: 2017-09
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