Overcoming the Euro Area Crisis—Reforms and Results
With the Euro Area sovereign debt crisis starting in May 2010, the institutional arrangements of the Euro Area were tested in the extreme. Private and public debt levels in a number of member states reached historically high levels. Asymmetric real shocks and the inability to adjust exchange rates in a monetary union have forced unprecedented pressures into the labour market of several member states. Although being far from a uniform process, in some countries public indebtedness has been exacerbated by the financial crisis and recession, and this in turn has contributed to financial instability. In response to this difficult period, as this paper argues, European and national institutions have accepted these challenges and worked collectively towards appropriate policy responses. In particular, the pressing need to undertake fiscal consolidation in many countries and to avoid future fiscal crises in the Euro Area induced a wide array of national and European reform measures.
KeywordsEuro Area Current Account Deficit Fiscal Consolidation Euro Area Country Single Supervisory Mechanism
We are grateful to our colleagues at the Ministry Reinhard Felke, Robert Völter, and Stefan Freitag for useful comments on an earlier version of this paper.
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