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The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis

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  • Corsetti, Giancarlo
  • Eichengreen, Barry
  • Hale, Galina
  • Tallman, Eric

Abstract

Why was recovery from the euro area crisis delayed for a decade? The explanation lies in the absence of credible and timely policies to backstop financial intermediaries and sovereign debt markets. In this paper we add light and color to this analysis, contrasting recent experience with the 1992-3 crisis in the European Monetary System, when national central banks and treasuries more successfully provided this backstop. In the more recent episode, the incomplete development of the euro area constrained the ability of the ECB and other European institutions to do likewise.
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  • Corsetti, Giancarlo & Eichengreen, Barry & Hale, Galina & Tallman, Eric, 2023. "The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis," Department of Economics, Working Paper Series qt8q7803ph, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt8q7803ph
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    2. Ioannou Demosthenes & Pagliari Maria Sole & Stracca Livio, 2020. "The international dimension of a fragile EMU," Working papers 795, Banque de France.
    3. Philip R. Lane, 2021. "The Resilience of the Euro," Journal of Economic Perspectives, American Economic Association, vol. 35(2), pages 3-22, Spring.
    4. Pompeo Della Posta & Roberto Tamborini, 2022. "The existential trilemma of EMU in a model of fiscal target zone," Oxford Open Economics, Oxford University Press, vol. 1, pages 1-16.

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    JEL classification:

    • F0 - International Economics - - General
    • N0 - Economic History - - General

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