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Europe's Crisis, Europe's Future

Europe's Crisis, Europe's Future

Kemal Derviş
Jacques Mistral
Copyright Date: 2014
Pages: 144
  • Book Info
    Europe's Crisis, Europe's Future
    Book Description:

    The eurozone crisis started in Greece in 2009-10, spread into Ireland and Portugal, and, from there, quickly spread to the larger economies of Spain and Italy. By the autumn of 2011, it threatened the entire global financial system. InEurope's Crisis, Europe's Future, an international group of economic analysts provides an insightful view of the crisis.

    How did mismanagement of a crisis in a marginal economy spark such a wildfire? After all, Greece is responsible for only 2% of the eurozone's total GDP, yet the crisis in Athens threatened to grow into a worldwide contagion.

    Individual chapters describe

    • the onset, evolution, and ramifications of the euro crisis from the perspective of three countries especially hard hit-Greece, Italy, and Spain;

    • the concerns, priorities, and impacts in continental leaders France and Germany;

    • the effects and lessons in key policy contexts-national and international finance and social policies.

    A concluding chapter by Kemal Dervi discusses the possibility of a renewed vision for the European Union in the 2020s, one that would accommodate the needs of greater political integration in the eurozone within a larger European Union where some countries, such as the United Kingdom, will keep their national currencies.


    Introduction: Kemal Dervi and Jacques Mistral (Brookings)

    Country Perspectives1. Greece, by Theodore Pelagidis and Michael Mitsopoulos (Brookings)

    2. Spain, by Angel Pascual-Ramsay (Brookings and ESADE Business School)

    3. Italy, by Domenico Lombardi (Centre for International Governance Innovation) and Luigi Paganetto (University of Rome)

    4. France, by Jacques Mistral

    5. Germany, by Friedrich Heinemann (Center for European Economic Research) Cross-Cutting Issues

    6. The Financial Sector, by Douglas Elliott (Brookings)

    7. Social Policies, by Jacques Mistral

    Conclusion, by Kemal Dervi

    eISBN: 978-0-8157-2555-8
    Subjects: Political Science, Business, Economics

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-x)

    There is strong hope that 2014 will be a year of renewed growth in the eurozone, even in the countries that were in deep crisis for several years. The resumption of growth would of course be good news but will not resolve the tremendous pressures generated by high unemployment and social difficulties that remain widespread, even beyond Southern Europe. The year 2014 will also see elections to the European Parliament, with the prospect that euro-skeptic parties will find new support. The election campaigns will likely include a more vigorous debate about the future of Europe, which should be viewed as...

  4. Acknowledgments
    (pp. xi-xii)
  5. 1 Europe’s Crisis, Europe’s Future: An Overview
    (pp. 1-18)

    The economic crisis that started in Greece in late 2009 quickly spread to Ireland and Portugal and then to Spain and Italy. After becoming a major eurozone crisis, it eventually came to threaten the global system in the autumn of 2011. And like the subprime crisis in 2008, no one had predicted it.

    There had been, of course, many warnings in the 1990s, before the euro was launched, about forming a monetary union without a sufficient political union. But the first ten years of the euro seemed quite successful. The warnings and criticisms died down quickly. Interest rates inside the...

  6. Part I. Country Perspectives

    • 2 Greece: Tax Anything That Moves!
      (pp. 21-44)

      Open markets with clear and properly enforced rules support competition and the growth of productivity. Recent works, such as that of Cacciatore, Duval, and Fiori (2012), now indicate that product market reforms can also create growth with minimal downside, especially in depressed economies. Their results seem to confirm the more intuitive suggestion made by Mitsopoulos and Pelagidis (2012) that product market reforms in Greece should have taken precedence over labor market reforms, especially since there is strong evidence that Greece has much to gain from such reforms.²

      Furthermore, available research suggests that, for heavily indebted countries, fiscal consolidation through large...

    • 3 Spain: A New Quest for Growth
      (pp. 45-63)

      Over the past six years, Spain has suffered a severe economic, social, and institutional crisis. A country that for over a decade showed impressive growth figures and came to be seen as a poster child for eurozone growth suddenly found itself mired in an economic recession of unprecedented proportions in its recent history. At the time of this writing in early 2014, the economy seems to be improving, having undergone some key adjustments and with growth and employment showing encouraging signs. Yet as we will see, the crisis in Spain is more structural than cyclical, and much remains to be...

    • 4 Italy: Strategies for Moving from Crisis to Growth
      (pp. 64-92)

      The current economic crisis in Italy stems from a period of stagnating growth and little progress in total factor productivity that began, it should be stressed, a decade before the global financial crisis of 2008. The governor of the Bank of Italy (2013) stated that the country “failed to respond to the extraordinary geopolitical, technological, and demographic trends of the last quarter-century” (p. 10). This is evident from the exceptional growth in other major advanced economies in the late 1990s and early part of the 2000s, growth that was absent in Italy.

      From 1991 to 2013 the economies of the...

    • 5 France: Part of the Solution or Part of the Problem?
      (pp. 93-109)

      On November 17, 2012,The Economistpublished a special issue on France. On the cover, baguettes wearing berets were collected in a bucket, like sticks of dynamite, with fuses; the story described France as a “time bomb ticking at the core of the Eurozone.” It got a big reaction. “Another British treachery” was the most objective reaction heard in Paris; Minister Arnaud Montebourg used much harsher words. Surprisingly, and contrary to expectations in the City, the story did not result in any trouble on the debt markets. On November 12, the meaningful aspect of French economic policy was to be...

    • 6 Germany: Constraints in the Crisis
      (pp. 110-130)

      Whether German politicians and voters like it or not, their country today carries a particular responsibility for the future of Europe. Since a deep and self-intensifying crisis of confidence shattered the euro area in the year 2010, the overall good state of the German economy has become one of the important assets in the European aspiration for new credibility. It is inevitable and completely natural that this constellation results in conflicting views and interests. On the one hand, the countries in crisis want solidarity and support from Germany and the smaller stable countries, such as Finland and the Netherlands; on...

  7. Part II. Cross-Cutting Issues

    • 7 The Financial Sector: Key Issues for the European Banking Union
      (pp. 133-147)

      European leaders have committed to the creation of a “banking union,” in which there will be an integration of (1) bank regulation, (2) bank supervision, (3) deposit guaranties, (4) and dealing with troubled banks (known as “resolution”). Geographically, the banking union will encompass the euro area with the addition, on a voluntary basis, of most of the other members of the European Union (EU).

      The advent of a banking union is positive for two major reasons. Most immediately, it helps solve the euro crisis by weakening the link between debt-burdened governments and troubled banks, where each side has added to...

    • 8 Building a Stronger Union: Social Policies in Europe and the Management of the Debt Crisis
      (pp. 148-175)

      The European integration project has been built on a broad concept of convergence, common regulation of markets and promotion of competition, shared prosperity, and a common standard of democracy. This multidimensional convergence has progressed quite well since the Rome Treaty in 1957, followed by the Single European Act in 1986–87, the creation of the European Union in 1992, the introduction of the single currency in 1999–2002, and, most recently, the “Eastern enlargement” in 2004.

      For the first time since the late 1950s, however, this process of economic convergence has been seriously challenged by the worldwide financial crisis and...

    • 9 Visions for Europe: Democratic Legitimacy and EU Institutions
      (pp. 176-187)

      The Europe that emerged from the catastrophic first half of the twentieth century was like a dream come true. It embodied a transformative vision, it opened the way for decades of peace and prosperity; it first imagined, and then created, strong institutions. For a long time it had democratic legitimacy, not because the nature of the decisionmaking mechanisms as such augmented democracy, but because the broad vision at the top was broadly in line with the aspirations and the understanding of the citizens.

      The perceived decline in “democratic legitimacy” of the European institutions is due to a growing gap between...

  8. Appendix: Economic Data for Select European Economies, 2000–14
    (pp. 188-200)
  9. Contributors
    (pp. 201-202)
  10. Index
    (pp. 203-212)
  11. Back Matter
    (pp. 213-213)