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The European Twin Sovereign Debt and Banking Crises

In: Financial Crisis, Bank Behaviour and Credit Crunch

Author

Listed:
  • Beniamino Moro

    (University of Cagliari)

Abstract

Europe currently faces a severe economic and financial Great Crisis. It is often described as a sovereign debt crisis, but in fact, it is really a sequence of interactions between sovereign problems and banking problems that caused a severe economic slowdown. It also caused a fragmentation of euro-area financial markets. The genesis of the crisis focuses on the imbalances in European Monetary Union (EMU) countries balance-of-payments, where the TARGET2 payment system became crucial, reflecting stress in the funding of banking systems in crisis-hit countries. The decisions by European leaders to set up a banking union and the announcement, as well as adoption, of non-standard measures by the European Central Bank (ECB) greatly contributed to restoring confidence in the euro-area financial markets, improving market sentiment and reversing the earlier trend towards market fragmentation. Ultimately, an expansion of the European aggregate demand is necessary to promote growth, and to this aim, the role of Germany is crucial.

Suggested Citation

  • Beniamino Moro, 2016. "The European Twin Sovereign Debt and Banking Crises," Contributions to Economics, in: Stefania P.S. Rossi & Roberto Malavasi (ed.), Financial Crisis, Bank Behaviour and Credit Crunch, edition 1, pages 19-35, Springer.
    • Handle: RePEc:spr:conchp:978-3-319-17413-6_2
    DOI: 10.1007/978-3-319-17413-6_2
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    Cited by:

    1. Lucio Gobbi & Stefano Lucarelli, 2021. "ECB quantitative easing, euro depreciation and supply chains: Industry-level estimates for Germany, Italy and Greece. New prospects for a Minskyan big bank?," PSL Quarterly Review, Economia civile, vol. 74(296), pages 25-50.

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