We argue that the various proposals aimed at stabilizing the Eurozone using financial engineering do not eliminate the inherent instability of the sovereign bond markets in a monetary union. During crises, this instability becomes systemic and no amount of financial engineering can stabilize an...

In this paper we test two theories of the determination of the government bond spreads in a monetary union. The first one is based on the efficient market theory. According to this theory, the surging spreads observed from 2010 to the middle of 2012 were the result of deteriorating fundamentals...

The initial introduction of the euro has, against many expectations, been accompanied by a decline in the value of the euro (notably vis-à-vis the dollar and sterling). It has also been introduced at a time of high levels of unemployment within most of the European Union (EU). This paper...

This paper tests the hypothesis that government bond markets in the eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland,...