Charles Wyplosz, 12 May 2010

Markets liked the European Stabilisation Mechanism but a closer look shows that the money is announced but not available. When markets realise this, they may do to Portugal and Spain what they did to Greece. Worse still, crucial principles have been sacrificed for the sake of unconvincing announcements. The debt crisis is unlikely to go away and the monetary union will have to be reconstructed to re-establish the principle of collective fiscal discipline.

Michael Burda, Stefan Gerlach, 11 May 2010

This weekend’s plan has been received positively by the markets, but it is too early to call it a success. Future monetary historians may judge it either a brilliant move or the first step on a slippery slope to ruin. The EU needs to set up an independent institution to vet fiscal plans of Eurozone governments and apply a sliding scale of sanctions. If the euro is to survive the current decade, Greece cannot happen again.

Daniel Gros, Thomas Mayer, 11 May 2010

The European Stabilisation Mechanism is a major initiative, but is it enough? This column argues that more is needed. All EU bank supervisors should conduct stress tests to gauge their banks’ exposure to risky sovereign debt; those who fail should be re-capitalised or closed to ring-fence the problem. The ‘Mechanism’ should also be transformed into an institution that manages the Eurozone’s rescue contributions, supervises conditionality, and sets up mechanisms for orderly debt rescheduling should austerity programmes fail.

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