Miranda Xafa, 17 April 2018

The European Commission launched its Capital Markets Union project in 2015 to help unlock funding for investment through deeper and more integrated capital markets. This column, the first in a two-part series, argues that progress has been slow and that a more ambitious vision is needed to achieve true Capital Markets Union.

Lorenzo Bini Smaghi, 09 April 2018

A team of French and German economists recently proposed on this site a series of reforms to strengthen the euro area's institutional framework. This column, which joins VoxEU's Euro Area Reform debate, argues that while the proposals  form a useful basis for discussion, they are nevertheless subject to important shortcomings.

Isabel Schnabel, Nicolas Véron, 07 April 2018

Many EU-level reports have highlighted a European Deposit Insurance Scheme as a necessary component of banking union, but none of these options has met sufficient consensus among euro area countries. The authors of this column, which joins VoxEU's Euro Area Reform debate, propose to end the deadlock with a design that is institutionally integrated but financed in a way that is differentiated across countries.

Michele Lanotte, Pietro Tommasino, 05 February 2018

Late last year, the Basel Committee decided to maintain the status quo regarding regulation of banks’ sovereign debt holdings. This column summarises the reasons to be cautious of stricter regulation of banks’ sovereign exposures. Theory and experience suggest small net benefits from such a reform, with possible increases in tail risks. The best instrument to tackle the problem is not microprudential regulation, but sounder public finances and the completion of the banking union.

Stefano Micossi, 11 December 2017

Negotiations on the banking union in the Eurozone have been stuck ever since the Italian government assembled a blocking minority opposing further discussions on proposals to reduce legacy risks in banks’ balance sheets. This column argues that completing the banking union should once again be given priority, and that the European deposit insurance scheme could move forward immediately by providing in its early phase that the ESM would offer a liquidity line to national deposit guaranty schemes that had exhausted their funds, with no sharing of losses.

Daniel Gros, 27 November 2017

A key remaining issue for the completion of the Banking Union is the concentrated exposure of banks in many countries to their own sovereign. This column argues that the belief that banks should be allowed to buy large amounts of their own sovereign so they can stabilise the market in a crisis is mistaken for two reasons: banks are only intermediaries, and banks have higher cost of funding. The overall conclusion is that governments should make it more attractive for households (and other real money investors) to hold government debt directly. 

Thorsten Beck, 04 July 2017

The recent resolutions of the Spanish Banco Popular and of two smaller Italian banks – Veneto Vanca and Banca Popolare di Vicenza – can be seen as a first important test for the banking union. This column assesses the progress made over the past three years. It argues that a ‘never bailout’ rule is inefficient, especially if referring to legacy problems; that a crisis should be resolved before a new regulatory framework is put in place; that to avoid national solutions, we need to go to a complete banking union; and finally, that the process will take some time, and new institutions and regulations are only a small step.

Teunis Brosens, 24 May 2017

Much progress has been made in recent years to improve the financial integration of the Eurozone.  This column argues that while banking union promotes stability, markets remain fragmented and consumers aren’t yet fully enjoying the fruits of integration. With Brexit on the horizon, it is up to the remaining EU member states to foster competition and efficiency in financial services by completing the banking union, harmonising national regulation, and accelerating the realisation of a true capital markets union. 

Thomas Philippon, Aude Salord, 22 March 2017

Failed financial firms should not be bailed out by the taxpayers. Europe, unfortunately, has a weak track record of following this principle of good governance and sound economic policy. The banking union, with its new approach to supervision and resolution, is meant to improve this matter. This column introduces a new Geneva Special Report on the World Economy which reviews the resolution side of the banking union. 

Marco Buti, José Leandro, Plamen Nikolov, 25 August 2016

The fragmentation of financial systems along national borders was one of the main handicaps of the Eurozone both prior to and in the initial phase of the crisis,  hindering the shock absorption capacity of individual member states. The EU has taken important steps towards the deeper integration of Eurozone financial markets, but this remains incomplete. This column argues that a fully-fledged financial union can be an efficient economic shock absorber. Compared to the US, there is significant potential in terms of private cross-border risk sharing through the financial channel, more so than through fiscal (i.e. public) means.

Giorgio Barba Navaretti, Giacomo Calzolari, Alberto Pozzolo, 15 July 2016

Eurozone countries are facing a stalemate in the completion of the Banking Union, at the heart of which is the regulation of banks’ sovereign exposures. This column introduces the latest issue of European Economy, which examines the interactions between banks and sovereign risk, the build up of sovereign risk during the crisis, and the policy proposals on the table to severe the loop and, more broadly, to finally complete the Banking Union.

Nicola Borri, Pietro Reichlin, 04 May 2016

Most commentators agree that a European banking union would end the ‘deadly embrace’ between creditors and governments. This column argues that a banking union would be welcome, but that current proposals are dogged with problems. To resolve these, we should stop discussing debt restructuring and instead enhance the borrowing capacity of the European Stability Mechanism. A programme to buy capital in financial institutions unable to raise it directly on the market should also be set up.

Sebnem Kalemli-Ozcan, 12 February 2016

The ongoing Eurozone Crisis has raised many debates on what needs to be done to reduce the frequency and severity of similar future crises. This column discusses the implications of equity versus debt flows in terms of risk sharing during the Crisis, and in terms of slow recovery in the aftermath of the Crisis. The author suggests that to induce a fast recovery in an aftermath of a crisis, the EZ needs a banking union and a broader financial union based on equity ownership. 

Thorsten Beck, 25 April 2016

A lot has been achieved in terms of institution building to turn the Eurozone into a sustainable currency union. The Eurozone Crisis, however, has shown that the Eurozone is still not a properly functioning currency union. This column, first posted 12 February 2016, points to three areas of further reform to achieve such a goal. These include the disentanglement of sovereigns and banks, completion of a banking union, and an institutional convergence for a fully integrated financial system.  

Jean Pisani-Ferry, 10 April 2016

The dramatic episodes in the Eurozone in the past few years called for a number of policy reactions. Yet the response was usually limited to what was deemed indispensable to ensure survival. This column discusses how such half-solutions paved the way for future crises. The author also puts forward a few proposals regarding the Eurozone’s policies. Among them are a European Monetary Fund, an overhaul of surveillance, the completion of banking union, an insolvency procedure for sovereigns, and Eurobonds of some sort. And the sooner such issues are deeply discussed, the faster coherent solutions can be reached.

Agnès Bénassy-Quéré, 08 April 2016

The euro is unique in that it is a currency without a sovereign. Since the crisis, there have been major developments towards making the Eurozone more resilient, including the banking union and the European Stability Mechanism (ESM). This column, originally published 12 February 2016, explores whether further normalisation is required to make the Eurozone function properly. It argues that the Eurozone, unlike existing federations, lacks the ability to deliver counter-cyclical fiscal policies while complying with fiscal discipline. Macroeconomic coordination will thus require rules, a strong and independent European Fiscal Board, and the strengthening of the ESM.

Richard Baldwin, Francesco Giavazzi, 12 February 2016

Important progress has been made in repairing the design faults that the EZ Crisis revealed. This column introduces a new VoxEU eBook which argues that fixing the Eurozone is a job half done. The eBook, which presents 18 chapters by leading economists that hail from a broad range of nations and schools of thought, is surely the most comprehensive collection of solutions that has ever been assembled.

Stefano Micossi, 07 September 2015

The sovereign debt and banking crises of 2010-12 have led to significant changes in the institutions of the Eurozone. The credibility of common policies regarding budgetary discipline and economic convergence remains weak. This chapter proposes that the way forward is to gradually bring common economic policies under the oversight of the European Parliament and to strengthen the role of the Commission. The picture must be completed with getting national parliaments more involved in the European policy process. The present state of the Eurozone could be seen as a sort of political equilibrium, likely to be economically unstable.

Niklas Gadatsch, Tobias Körner, Isabel Schnabel, Benjamin Weigert, 03 June 2015

There is a broad consensus that financial supervision ought to include a macroprudential perspective that focuses on the stability of the entire financial system. This column presents and critically evaluates the newly-created macroprudential framework in the Eurozone, with a particular focus on Germany. It argues that, while based on the right principles, the EU framework grants supervisors a high degree of discretion that entails the risk of limited commitment and excessive fine-tuning. Further, monetary policy should not ignore financial stability considerations and expect macroprudential policy to do the job alone.

Lars Feld, Christoph Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland, 20 February 2015

Claims that ‘austerity has failed’ are popular, especially in the Anglo-Saxon world. This column argues that this narrative is factually wrong and ignores the reasons underlying the Greek crisis. The worst move for Greece would be to return to its old ways. Greece needs to realise that things could actually become much worse than they are now, particularly if membership in the Eurozone cannot be assured. Instead of looking back, Greece needs to continue building a functioning state and a functioning market economy.

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