№228. The Transformational Impact of EMU and the Global Financial Crisis
№228. The Transformational Impact of EMU and the Global Financial Crisis

Author(s): Francesco Paolo Mongelli
Subject(s): Supranational / Global Economy, Governance, Economic policy, Financial Markets
Published by: CEPS Centre for European Policy Studies
Keywords: Transformational Impact of EMU; Global financial crisis; economic governance; EMU; Economic integration;
Summary/Abstract: The headwinds facing the euro area are many and substantial: there is no pretence of denial. While most attention is correctly devoted to the size of rescue packages for some countries and the terms of crisis management and resolution mechanisms, we argue that these challenges must also be met from within the euro area. We are aided by a simple framework illustrating how the benefits the euro can generate depend on the degree of openness, flexibility and income correlation among euro area countries. Sharing the euro has steadily transformed euro area economies that are now deeply interconnected. This is generating largely benign effects that represent the intrinsic value of the euro area: it is a sharedas set. Yet, such integration has provided the ground for the transmission of the sovereign crisis: through financial exposure, trade linkages and cross-country asset ownership.

• Details
• Contents