Peter Bofinger, 12 February 2016

The Eurozone is more crisis-prone than other major currency areas. This column suggests that due to its hybrid structure, the EZ is likely to remain crisis-prone in the near future. A main challenge is the specific insolvency risk to which the member states are exposed, which in the longer term it can only be eliminated by some form of debt mutualisation. Another challenge is that the EZ suffers from an insufficient coordination of fiscal policies and wage trends.

Vesa Vihriälä, Beatrice Weder di Mauro, 02 April 2014

The EZ debt overhang needs to be fixed. This column argues that making market discipline credible requires an orderly debt restructuring mechanism combined with a strictly regulated temporary mutualisation scheme or a well-designed debt conversion scheme. This combination could reduce the current debt overhang in an orderly fashion and cement strong incentives against over-borrowing in the future.

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