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Friday, April 8, 2016

Peter Bofinger : "Two views of the EZ Crisis"

Two views of the EZ Crisis: Government failure vs market failure | VOX, CEPR’s Policy Portal

Diagnosing the EZ Crisis is a critical first step towards developing a consensus on how the monetary union should be fixed. This column contrasts views that place the blame mostly on markets with those that place the onus on governments. The fixes necessary for the survival of the euro are – correspondingly – more ‘market discipline’ or ‘political discipline’ exerted at the European level. Neither is very attractive, but it should be clear that ‘market discipline’ is not a mechanism run by atomistic players. Global wealth is highly concentrated, so market discipline means, de facto, a regime of plutocracy.

See also Causes of the Eurozone Crisis: A nuanced view

Hindsight is a wonderful thing. In the midst of a crisis, it is of course very hard to understand causality. This column uses the benefit of hindsight to present a nuanced view of the causes of the Eurozone Crisis as seen by members of the German Council of Economic Experts. To prevent the same crisis happening again, the Maastricht Treaty needs to be revitalised to enhance the future stability of the Eurozone and relieve the ECB of its role as crisis manager. 

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