Role of imf in eurozone crisis essay

It was the first public authority, and one of the first more generally, to acknowledge the role of the bank-sovereign vicious circle as the central driver of contagion in the euro area. Specifically, the treaty would create five changes: Eurozone member countries would legally give some budgetary power to centralized EU control. Initiated at a euro-area summit on June , the banking union policy package aims explicitly to break the bank-sovereign vicious circle through a transfer of most instruments of banking sector policy in the euro area from the national to the European level. This stance was understandable but it carried the risk of insufficient scrutiny of private-sector management, as well as of distortions between ownership and control that could pose governance challenges, especially as banks became increasingly dependent on public sources not only for liquidity support but also for capital [45]. After the breakthrough decision of euro-area leaders on 29 June to initiate banking union, the IMF continued to provide significant advocacy and advice. This could slow their economic growth, as it has in Greece. Conditions perceived to be imposed from abroad will almost certainly fail. Another significant EU-level policy framework governs central bank lending operations to banks. Google Scholar Lane, P. This is a preview of subscription content, log in to check access.

Storm and R. In Greece, the IMF, together with its European partners, required the government not just to cut expenditures, but to undertake far-reaching tax, pension, judicial, and labor-market reforms.

european central bank and the imfs response to the greek economic crisis

It was a good economic practice to lower its trade barriers. When requesting a correction, please mention this item's handle: RePEc:zbw:hawdps Google Scholar Diaz Sanchez, J. Spain FSAP and Financial Sector Reform Monitoring Like Ireland, Spain was a case of contagion from the banking sector, but it was the worsened euro-area environment that made this a threat to sovereign market access.

A new crisis might be brewing. Ghironi, G. It also implied that to achieve a given amount of sovereign debt reduction, a larger haircut would be needed now, compared with the earlier period when the total pool of Greek sovereign debt held in the private sector was larger. From the s onwards, cross-border market integration and a competitive level playing field were enforced through increasingly powerful European policy frameworks, including regulatory harmonisation and EU competition policy.

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the role of the imf in the european debt crisis

Google Scholar Mortensen, D. A separate issue was the impact of the Greek programme on the rest of the EU banking system, and the possible implications of this impact for decisions on the design and timing of private-sector involvement PSI.

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IMF Essays from a Time of Crisis