|
|
The analysis expands on the following points:
Four points follow from the analysis:
1) There is a need to revisit the political and economic underpinning of the eurozone. A monetary union does need some minimal centralisation of powers to work. We need to review what such minima may be. A look back at the exercise the Commission published in the early 1990s, “Stable Money – Sound Finances”, would be a good starting point.
2) The new Excessive Imbalances Procedure correctly shifts the focus from public-sector deficits/debts towards external deficits/debts; but the enforcement/sanctions component is misguided.
3) The problem with the ratings agencies has been that they have downgraded sovereign ratings far too late, not too early. A mechanism is needed to rectify this, and the Excessive Imbalances Procedure could be the right vehicle.
4) The most severe eurozone problems have arisen from the interaction between bank and public-sector debt. There is no really good way to resolve this. Enthusiasm for bail-ins of bond holders is overdone. Bank taxes have numerous disadvantages. There is a case for building up a sizeable eurozone sovereign wealth fund for use in emergencies.