The Euro Crisis: Where to From Here?

Jeffrey Frankel

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: Germans cannot agree to unlimited bailouts of euro members. On the other hand, if they had insisted on the founding principles (fiscal constraints, "no bailout clause," and low inflation as the sole goal of the ECB), the euro would not have survived the post-2009 crisis. The impact of fiscal austerity has been to raise debt/GDP ratios among periphery countries, not lower them. The eurozone will endure, but through a lost decade of growth. It would help if the ECB further eased monetary policy, which it could do by buying US treasury bonds rather than eurozone bonds. Still needed is a long-run fiscal regime to address the moral hazard problem. Two worthwhile proposals are blue bonds and the delegation of forecasting to independent fiscal agencies.

JEL-codes: F33 F40 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://research.hks.harvard.edu/publications/getFile.aspx?Id=1189

Related works:
Journal Article: The euro crisis: Where to from here? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp15-015

Access Statistics for this paper

More papers in Working Paper Series from Harvard University, John F. Kennedy School of Government Contact information at EDIRC.
Bibliographic data for series maintained by ().