Eurozone Bank Crisis & Federalism

Abstract:     
The laggards of the Eurozone pose a novel economic and legal issue. Whereas the Eurozone sorely needs growth in the PIRGS, neither conventional Keynesian stimulus nor devaluations are likely to be productive. This essay proposes that growth be rekindled by forced over-recapitalization of the laggards’ private banks. This will generate local growth while circumventing inefficient national governments and without starting an inflation spiral or additional bureaucracy. The danger is that the proposal leaves open the possibility that member states can take advantage of their banks which implies the Eurozone needs to revisit its approach to federalism, to help which the paper juxtaposes the development of US bank federalism.

Number of Pages in PDF File: 29

Keywords: Eurozone Crisis, Great Recession, PIRGS Economies, Economic Regulation, Bank Regulation, Bank Supervision, Regulatory Federalism

JEL Classification: E02, E58, Κ23

Accepted Paper Series