180 likes | 331 Views
The Eurozone context Is there a proper identification of the crisis’ causes? Lucian Croitoru. Source: Eurostat, US Department of Commerce, WEO Database, Bloomberg. What is the nature of the crisis?. The fiscal malfeasance? The balance of payments crisis?
E N D
The Eurozone context Is there a proper identification of the crisis’ causes? Lucian Croitoru
Source: Eurostat, US Department of Commerce, WEO Database, Bloomberg
What is the nature of the crisis? • The fiscal malfeasance? • The balance of payments crisis? • The decisions should be different, depending the nature of the crisis • The European leaders think of a fiscal nature of the crisis • Based on data, one may think of a balance of payments crisis • If the competitiveness is the real problem, than the solutions are of two folds: • An external adjustment. Specifically, shifts in competitiveness • Looser macropolicies to alow higher inflation and higher credit growth in surplus countries
Red for 2009-2010 Blue for 1997-2007
Greed for 1990-1998 (average, % of GDP) Blue for 1997-2007 (average, % of GDP)
Red for 2009-2010 Blue for 1997-2007
Green for 1990-1998 (average, % of GDP) Blue for 1999-2007 (average, % of GDP)
Blue for 1997-2007 Red for 2009-1010
Blue for LP Red for NCE
Blue for LP Red for NCE
Blue for LP Red for NCE
Conclusions from comparing fiscal deficits, public debt and current account deficits • Cash deficits select well Greece. But fail to select any other country if the 1999-2007 average fiscal deficts is considered • Public debt is also a imprecise measure: it rightly picks up Greece, Italy, Belgium and Portugal. But fails to pick up Estonia, Ireland and Spain, which performed better than Germany before the crisis • The current account deficits picks up Greece, Portugal, Italy, Ireland, Spain.
Key decisions include • No compelling for private bondholders to take losses on euro-zone bail-outs. But voluntary restructuring remains • Some degree of automaticity of sanctions on countries that fail to stay within the limits on budget deficits • Requirements for balanced budget into domestic legislations • Introduction of the ESM in June 2012 • Monthly meetings of European leaders to oversee policy co-ordination