(Monetary) Policy Options for the Euro Area: A Compendium to the Crisis

  • Sascha BützerEmail author


Nine years after Lehman, the euro area remains mired in stagnation which stands in stark contrast to the economic recovery in the US or the UK. This chapter takes a look at the macroeconomic policies that have led to this outcome within the particular institutional setup of the euro area and discusses feasible ways forward. It argues that procyclical fiscal tightening has exacerbated the crisis and, given constraints to monetary policy and limits to what structural reforms can deliver, increased the likelihood of becoming stuck in an equilibrium characterized by low growth and low inflation which has contributed to rising anti-European sentiment. Since the required change of direction does not seem imminent, the outright creation of broad money would provide an effective tool to salvage stable prices, growth, and employment. If done diligently, such a monetary policy operation would be squarely within the ECB’s remit without compromising its independence or credibility.


EMU governance Euro area Fiscal policy Helicopter money Monetary policy Optimum currency area 

JEL Classification:

E02 E5 E6 F33 F45 F55 



The author Sascha Bützer thanks Frank Heinemann, Gerhard Illing, Benedikt Kolb, Tobias Krahnke, Chris Sims, Livio Stracca, Steffen Strodthoff, and Robert Unger for useful suggestions and fruitful discussions that helped shape this chapter.


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Authors and Affiliations

  1. 1.Seminar for MacroeconomicsLudwig-Maximilians-Universität MünchenMünchenGermany

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