The Eurozone Crisis: A Tale of ‘North’ and ‘South’

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The North—South divide on the future of the euro is damaging the EU, says Ansgar Belke. In this article, he suggests a compromise by which the two sides might settle their differences to mutual advantage.

After the European summit of June 2012 decided to break the vicious circle between banks and sovereign states, it seemed that political leaders were at last ready to deal with the threat to the euro. But optimism was soon lost in the cacophony of rival interpretations about what had been agreed. Still, the leaders had identified the critical issue: weak banks and weak sovereign states are like two bad swimmers that are pulling each other under water.

But which one should be saved first? Advocates of the Southern view say we should start with the sovereign states, by throwing them the lifejacket of joint-issued debt. In effect, richer countries would guarantee at least part of the debt of weaker ones.

Representatives of the Northern opinion, especially Germany, reckon instead that it...


  1. Blume, Lawrence E. and Durlauf, Steven N. (ed.), The New Palgrave Dictionary of Economics (online edition). Palgrave Macmillan, 2013.Google Scholar

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