International Tax and Public Finance

, Volume 20, Issue 4, pp 564–595 | Cite as

Weathering the crisis and beyond: perspectives for the Euro area

  • Christoph M. SchmidtEmail author
  • Benjamin Weigert


The Euro area is experiencing a severe and highly complex crisis. It comprises three problem areas: the difficulties of some highly indebted European sovereigns to ascertain funding at palatable cost, the disconcerting fragility of the European banking system and disappointing growth prospects in the Euro area periphery. To make matters even worse, these problems have developed into a systemic crisis of the European Monetary Union (EMU), since observers have apparently developed fundamental doubts over its integrity. To overcome this systemic crisis, it would not be sufficient, if only the stronger Euro area economies provided more solidarity, nor would it be sufficient, if only all of Europe adhered to ironclad budgetary discipline from now on. A European Redemption Pact could be a strong political commitment to the EMU and offer a bridge between the proponents of fiscal discipline and structural reform and those governments advocating more support. This pact would entail two indispensable aspects, the codification of a credible and coherent reform path and a temporary and limited instrument for joint refinancing.


Euro crisis Governance of the Euro area Debt sustainability Financial market regulation European redemption pact 

JEL Classification

E60 E42 H6 G28 


  1. Acharya, V. V., Santos, J., & Yorulmazer, T. (2010). Systemic risk and deposit insurance premiums. Economic Policy Review, 16(1), 89–99. Google Scholar
  2. Aizenman, J., Hutchison, M. M., & Jinjarak, Y. (2011). What is the risk of European sovereign debt defaults? Fiscal space, CDS spreads and market pricing of risk. NBER working paper No. 17407. Google Scholar
  3. Antzoulatos, A. (2011). Greece in 2010: a tragedy without(?) catharsis. International Advances in Economic Research, 17(3), 241–257. CrossRefGoogle Scholar
  4. Aßmann, C., & Boysen-Hogrefe, J. (2012). Determinants of government bond spreads in the euro area: in good times as in bad. Empirica: Journal of European Economics, 39(3), 341–356. CrossRefGoogle Scholar
  5. Bernoth, K., & Erdogan, B. (2012). Sovereign bond yield spreads: a time-varying coefficient approach. Journal of International Money and Finance, 31(3), 639–656. CrossRefGoogle Scholar
  6. Bernoth, K., von Hagen, J., & Schuknecht, L. (2012). Sovereign risk premiums in the European government bond market. Journal of International Money and Finance, 31(5), 975–995. CrossRefGoogle Scholar
  7. Bielsa, J., & Duarte, R. (2011). Size and linkages of the Spanish construction industry: key sector or deformation of the economy? Cambridge Journal of Economics, 35(2), 317–334. CrossRefGoogle Scholar
  8. Blanchard, O. (2007). Adjustment within the euro. The difficult case of Portugal. Portuguese Economic Journal, 6(1), 1–21. CrossRefGoogle Scholar
  9. Blanchard, O., & Giavazzi, F. (2002). Current account deficits in the euro area: the end of the Feldstein-Horioka puzzle? Brookings Papers on Economic Activity, 2002(2), 147–209. CrossRefGoogle Scholar
  10. Buch, C. M., & Weigert, B. (2012). Legacy problems in transition to a banking union. In T. Beck (Ed.), Banking union for Europe—risks and challenges. London: Centre for Economic Policy Research. Google Scholar
  11. Council of the European Union (2012). Spain—memorandum of understanding on financial-sector policy conditionality, 20 July 2012, Brussels. Google Scholar
  12. De Grauwe, P. (2012). The governance of a fragile eurozone. Australian Economic Review, 45(3), 255–268. CrossRefGoogle Scholar
  13. Doluca, H., Hübner, M., Rumpf, D., & Weigert, B. (2012). The European Redemption Pact: implementation and macroeconomic effects. Intereconomics: Review of European Economic Policy, 47(4), 230–239. CrossRefGoogle Scholar
  14. Dötz, N., & Fischer, C. (2010). What can EMU countries’ sovereign bond spreads tell us about market perceptions of default probabilities during the recent financial crisis? Bundesbank Discussion Paper Series 1: Economic Studies No. 2010, 11. Google Scholar
  15. Eichengreen, B. (2010). The breakup of the Euro area. In Europe and the euro, NBER chapters. National Bureau of Economic Research, 11–51. Google Scholar
  16. Eichler, S. (2011). What can currency crisis models tell us about the risk of withdrawal from the EMU? Evidence from ADR data. Journal of Common Market Studies, 49(4), 719–739. CrossRefGoogle Scholar
  17. GCEE—German Council of Economic Experts (2010). Chancen für einen stabilen Aufschwung. Annual report 2010/11, Wiesbaden. Google Scholar
  18. GCEE—German Council of Economic Experts (2011). Assume responsibility for Europe. Annual report 2011/12, Wiesbaden. Google Scholar
  19. GCEE—German Council of Economic Experts (2012a). After the euro area summit: time to implement long-term solutions. Special report, July 2012, Wiesbaden. Google Scholar
  20. GCEE—German Council of Economic Experts (2012b). Stable architecture for Europe—need for action in Germany. Annual report 2012/13, Wiesbaden. Google Scholar
  21. Giannetti, M., & Simonov, A. (2013). On the real effects of bank bailouts: micro evidence from Japan. American Economic Journal: Macroeconomics, 5(1), 135–167. CrossRefGoogle Scholar
  22. Gourinchas, P.-O. (2002). Comments on “Current account deficits in the Euro area: the end of the Feldstein-Horioka puzzle?” by O. Blanchard and F. Giavazzi, Brookings papers on economic activity 2002(2). Google Scholar
  23. Haugh, D., Ollivaud, P., & Turner, D. (2009). What drives sovereign risk premiums?: An analysis of recent evidence from the Euro area. OECD Economics Department working papers 718. Google Scholar
  24. Hoshi, T., & Kashyap, A. K. (2010). Will the U.S. Bank recapitalization succeed? Eight lessons from Japan. Journal of Financial Economics, 97(3), 398–417. CrossRefGoogle Scholar
  25. Klose, J., & Weigert, B. (2012). Determinants of sovereign yield spreads during the Euro-crisis—fundamental factors versus systemic risk. Sachverständigenrat working paper No. 07/2012. Google Scholar
  26. Lane, P. (2011). The Irish crisis. The Institute for International Integration Studies discussion paper series No. 356. Google Scholar
  27. Lane, P. R. (2012). The European sovereign debt crisis. The Journal of Economic Perspectives, 26(3), 49–67. CrossRefGoogle Scholar
  28. Maveyraud-Tricoire, S., & Rous, P. (2009). RIP and the shift toward a monetary union: looking for a “euro effect” by a structural break analysis with panel data. Journal of International Financial Markets, Institutions & Money, 19(2), 336–350. CrossRefGoogle Scholar
  29. Merler, S., & Pisani-Ferry, J. (2012). Sudden stops in the euro area. Review of Economics and Institutions, 3(3). Google Scholar
  30. Pennacchi, G. G. (2009). Deposit insurance. Paper prepared for AEI Conference on Private Markets and Public Insurance Programs. Google Scholar
  31. President of the European Council (2012). Towards a genuine economic and monetary union. Report by the President of the European Council Herman Van Rompuy, 26 June 2012, Brussels. Google Scholar
  32. Shambaugh, J. C. (2012). The euro’s three crises. Brookings Papers on Economic Activity, 2012(1), 157–211. CrossRefGoogle Scholar
  33. Sinn, H.-W., & Wollmershäuser, T. (2012). Target loans, current account balances and capital flows: the ECB’s rescue facility. International Tax and Public Finance, 19(4), 468–508. CrossRefGoogle Scholar
  34. Steinkamp, S., & Westermann, F. (2012). On creditor seniority and sovereign bond prices in Europe. Institute of Empirical Economic Research working papers, 92. Google Scholar

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Rheinisch-Westfälisches Institut für Wirtschaftsforschung RWI, Ruhr-Universität Bochum RUB, Centre for Economic Policy Research CEPR, and German Council of Economic Experts GCEEEssenGermany
  2. 2.Scientific Staff of the German Council of Economic Experts GCEEWiesbadenGermany

Personalised recommendations