The Interplay of Economic Reforms and Monetary Policy: The Case of the Eurozone

The world has been struck by a mutating systemic financial crisis that is unprecedented in terms of financial losses and fiscal costs, geographic reach, and speed and synchronization. The crisis from August 2007 to date can be divided into three main phases: the financial turmoil from August 2007 to...

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Published inJournal of common market studies Vol. 50; no. 6; pp. 881 - 898
Main Authors DRUDI, FRANCESCO, DURRÉ, ALAIN, MONGELLI, FRANCESCO PAOLO
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.11.2012
Subjects
Central Banks
Central Europe
Common markets
Debts
Economic Change
Economic Crises
Economic crisis
Economic reform
Euro-currency markets
Europe
European Central Bank
European Union
Eurozone
Financial crisis
Institutions
International finance
Monetary Policy
Monetary systems
Monetary unions
Public debt
Sovereign debt
Studies
Unions
Europe
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Summary:The world has been struck by a mutating systemic financial crisis that is unprecedented in terms of financial losses and fiscal costs, geographic reach, and speed and synchronization. The crisis from August 2007 to date can be divided into three main phases: the financial turmoil from August 2007 to the collapse of Lehman Brothers; the global financial crisis from September 2008 until spring 2010; and the eurozone sovereign debt crisis from spring 2010 to the current period. While each phase has brought significant challenges, the current sovereign debt crisis has been the most critical stage for the eurozone. It has brought unprecedented challenges for the monetary union and triggered extraordinary adjustments in both monetary policy and institutional arrangements at the eurozone level. The purpose of this article is to outline the features of each crisis phase, to describe the actions taken by the European Central Bank (ECB) during each phase and to explain the rationale for such measures. It also discusses the need to strengthen further the economic union in order to guarantee the sustainability of the monetary union of the eurozone. In this respect, it is argued that the recent institutional adjustments made at the European Union level would have been necessary independently of the financial crisis.
Bibliography:istex:099069E28DAC28DCE8E0CE6FA85507D222BF2A49
The authors would like to thank Philippe Moutot, Amy Verdun, Nicola Doyle and two anonymous referees for helpful comments and suggestions. Thanks are also due to Piet Philip Christiansen for research assistance and to Giovanna de Salvo and Silvia Geise for editorial assistance. The authors remain responsible for any errors or omissions. The views expressed are the authors' own and do not necessarily reflect those of the European Central Bank. The article reflects data and developments up to mid 2012.
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ISSN:0021-9886
1468-5965
DOI:10.1111/j.1468-5965.2012.02290.x