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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. Schmidt
  • Benjamin Weigert
Article
  • 434 Downloads

Abstract

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.

Keywords

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

JEL Classification

E60 E42 H6 G28 

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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

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