Euro Crisis

Euro Crisis

January 2012
'China's booming economy caused the financial crisis'
Since the 2008 financial crisis, Wall Street has been the perpetual whipping boy for the ensuing recession that has rocked the global economy. In the United States, Manhattan bankers relied too heavily on subprime mortgages, the story goes. In Europe, the debt crisis is often blamed on the fact that eurozone governments maintained outsized debt-to-GDP ratios, thereby breaking the rules laid down in the Stability and Growth Pact they signed when they joined the currency union. According to economist/publicist Heleen Mees (Tilburg University) the sharp fall of interest rates in the early 2000s as well as emerging economies like China are responsible for the financial crisis. Without China’s boom the crisis would not have been this bad.  Read more.

December 2011
Political motives swept economic logic aside
Harald Benink assumes that a few countries will leave the eurozone in exchange for debt relief.

"The history of the euro has been dominated by political motives and, where convenient, economic reality has been ignored," says Harald Benink, Professor of Banking and Finance at Tilburg University. One consequence has been moral hazard, a phenomenon which undermines the disciplinary effect of the financial markets. "Greece was admitted to the eurozone because it was the cradle of European democracy. That is a specious argument."

For a leap forward Europe always needs a crisis
According to Sylvester Eijffinger, the only way to maintain our prosperity is to proceed with European integration.

"The European Union embarked on its common currency project in 1998, long before its member states really had very much in common. "We knew this and there were warnings aplenty," says Sylvester Eijffinger, professor of Financial Economics at Tilburg University. "So the current euro crisis was inevitable. But the same applies to the solution, because there is no alternative to more intense cooperation. The costs will be high, but in ten years' time European integration will have reached a higher level." 

Eurobonds are likely to increase the risk of joint defaults in the Eurozone
As government advisors and central bankers race through the different options to save the euro, Tilburg University Professor Wolf Wagner argues that one such proposal, Eurobonds, will actually increase the risk that several Eurozone countries fail together. It shows using basic arithmetic that these bonds, sometimes labelled ‘stability bonds’, may actually be more likely to harm Eurozone stability.