The Euro Prisoner’s Dilemma

Diego Valiante

ECMI Papers from Centre for European Policy Studies

Abstract: The last intergovernmental agreement among 25 countries and the ESM Treaty will set the ground for greater institutional coordination on fiscal policies among euro area member states. None of these decisions, however, will be able to pull the euro area out of this crisis. The eurozone is trapped in a classic prisoner’s dilemma. The break-up of the euro remains unlikely but the exit strategy will continue to be led by a sequence of rational (but sub-optimal) decisions, which will make the process long and painful.

Pages: 2 pages
Date: 2012-02
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