Reforming the Euro-Zone: The Problem of the Euro-Med
38 Pages Posted: 31 Oct 2010
Date Written: July 1, 2010
The recent problems of the Euro arose in the context of the sustainability of the Public Debt in the Euro-Med countries and Ireland, in the aftermath of the Great Recession and the associated financial crisis. This paper discusses the problems of the Euro-Med and how they can affect the Euro. It concludes that these problems are different from country to country and there are various degrees of liquidity, debt sustainability and competitiveness of these economies. A major conclusion is that markets have underpriced sovereign risk in Euro countries. The other is that markets have focused on Public Debt, but banking crisis can occur linked to different bubbles of indebtedness like real estate. It also contributes to the discussion of policies to solve the problem of competitiveness when devaluation is not an option. Finally, it analysis the policies that have been recently proposed for the Euro-system and proposes an approach focused on reforming the fundamentals.
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