A Comprehensive Approach to the Euro-Area Debt Crisis

Bruegel has issued a new policy brief that carefully quantifies the impact of some approaches to ameliorating debt burdens. You can download it here.

9 replies on “A Comprehensive Approach to the Euro-Area Debt Crisis”


… on this one later – me poor small head etc

Final ‘free-be from EuroIntelligence this morning

Irish Central bank lends its banks €51bn at 3%

Axel Weber ….. etc etc [but creeping EuroBond support increasing silently within pragmatic Germany …

… and about €600 billion of Greek dosh in Swiss banks – Edgar will love this …. (I hear Swawn-ee is in Vienna …)


p.s. could we get a subscription from This Blog? We’re .. er… broke (-;

A useful addition to the debate – and many thanks for bringing it to our attention. The big elephant in the room – which is partly hidden behind the arras – is the amount of EZ bank debt exposure that has been ‘warehoused’ (not to mention the dodgy financial state of many municipal bodies). The Greek and Irish blow-outs have been revealed because they were simply far too large in relation to their national economies to be concealed. If the peripherals were the only problem, I think a solution would have been developed before now. Revealing the scale of the overall problem could lead to a taxpayers’ revolt throughout the EZ.

That’s why I think the instinct of the EU’s Grand Panjandrums (both political and institutional) will be to try and sweat this out – while offering marginal concessions to keep the peripherals afloat.

@ All

There is a free subscription option to individuals or bloggers who refer to the EI site.

Maybe an option and save some money.

I am happy to invest a few Euro if it gives all contributors to this site access to the EI site.

Moderator – is there a mechanism whereby this can be actioned?

@Ordinary man

You want to transfer MORE MONEY to the core !!!!!! – you are truely a selfless individual.

The title was impressive, the conclusion did not quite live up to that.

For me the most important finding is this (from page 12):
‘Nothing short of supra-national bodies in charge of banking supervision and resolution are capable of handling the kind of financial interdependence that now exists in Europe.’

So due to bad banking supervision in one euro-country (yep, that would be Ireland), we now have some justification for a supra-national body. Once there is one, it will be easier to introduce more. I do not like supra-national bodies. But due to circumstances three options seem possible:
1. Irish banking supervision improves to acceptable standard.
2. Ireland is removed from the euro (the EU?)
3. This supra-national body is introduced

Sadly I think the most likely outcome is option number three – the first step towards an european superstate. I hope I am wrong.

Had a quick read-through of another paper from them:

Some quotes:
-Page 7: ‘The third, sometimes euphemistically referred to as ‘regulatory forbearance,’ is
a temporary (sometimes extended) denial by the authorities that the institution is indeed insolvent, if necessary involving the softening or outright exemption of public disclosure requirements (of course, this cannot be considered ‘crisis resolution’ but only a dilatory measure in the hope that the crisis would disappear or become less acute with the passing of time).

Regulatory forbearance – never heard the expression, might be describing a particular country…

-Page 16: ‘Some countries, such as the United Kingdom, host global financial centers; in others, such as Cyprus, Ireland, or Luxembourg, the financial industry is a major contributor to the local economy, while in others still it is not seen as a significant
contributor to national competitiveness.

The financial industry is indeed a contributor to the local economy. On balance, would the Irish financial industry have given a positive or negative contribution to the local economy?

& a quote from page 10:
‘priority was initially given to the necessary overhaul of the European Union’s supervisory architecture. This is an innovative policy endeavour that will result in 2011 in the establishment of three supranational European supervisory authorities, with respective mandates over banks (European Banking Authority – EBA), securities and markets (European Securities and Markets Authority – ESMA) and insurance (European Insurance and Occupational Pensions Authority – EIOPA), as well as a European Systemic Risk Board to oversee macroprudential issues. The corresponding legislation,
based on a report published in February 2009 (Larosière, 2009), was finalised in September 2010.’

I haven’t heard much about these new authorities. Will they assist or supercede local authorities?

Comments are closed.