The Euro Area and the Financial Crisis

The financial crisis of 2007–10 has presented a number of key policy challenges for those concerned with the long-term stability of the euro area. It has shown that price stability as provided by the European Central Bank is not enough to guarantee financial stability, and exposed fault lines in governance and deficiencies in the architecture of the financial supervisory and regulatory framework. This book addresses these and other issues, including why the crisis affected some countries more than others, whether the euro is still attractive for new EU states, and what policy changes and structural reforms, both macro and micro, should be undertaken to ensure its future viability. Written by a team of leading academic and central bank economists, the book also includes chapters on the cross-country incidence of the crisis, the Irish crisis and ECB monetary policy during the crisis, and studies on Spain, the Baltics, Slovakia and Slovenia.

List of figures List of tables List of boxes List of contributors 1. Introduction Miroslav Beblavý, David Cobham and Ľudovít Ódor 2. Towards a new architecture for financial stability in Europe Athanasios Orphanides Part I. The Experience of the Crisis: 3. Weathering the financial storm: the importance of fundamentals and flexibility Thorvardur Tjörvi Ólafsson and Thórarinn G. Pétursson 4. The Irish crisis Philip R. Lane 5. The crisis in Spain: origins and developments Angel Gavilán, Pablo Hernández de Cos, Juan F. Jimeno and Juan A. Rojas 6. The financial crisis and the Baltic countries Aurelijus Dabušinskas and Martti Randveer Part II. Accession to the Euro Area: 7. The road to euro adoption: a comparison of Slovakia and Slovenia Biswajit Banerjee, Damjan Kozamernik and Ľudovít Ódor 8. Is the euro really a 'teuro'? The effects of introducing the euro on prices of everyday non-tradables in Slovakia Miroslav Beblavý 9. The euro's contribution to economic stability in Central, Eastern and Southeastern Europe: is euro adoption still attractive? Ewald Nowotny 10. Is the euro still attractive for CEE countries? Zdeněk Tůma and David Vávra Part III. The Future of the Euro Area: 11. Why the current account may matter in a monetary union: lessons from the financial crisis in the euro area Francesco Giavazzi and Luigi Spaventa 12. National fiscal rules within the EU framework Daniele Franco and Stefania Zotteri 13. The road to better resolution: from bail-out to bail-in Thomas F. Huertas 14. Financial stability and monetary policy: lessons from the euro area Laurent Clerc and Benoît Mojon 15. Is there a case for price level targeting? Boris Cournède and Diego Moccero 16. Heterogeneity in the euro area and why it matters for the future of the currency union Wendy Carlin 17. How to regain confidence in the euro area? Vítor Gaspar 18. How to regain confidence in the euro area Stefan Gerlach 19. How to save the euro? Lessons from the US Jacques Mélitz Index.