Gaps in competitiveness, rooted in economic as well as in political factors, characterise postwar European economic history. The eurozone experience showed the emergence of large current account imbalances. The peculiar mixture of financial markets integration and national cycles in wages and...

Without a Lender of Last Resort for government debt, multiple equilibria in bond markets may ensue where default emerges for non-fundamental reasons. The stabilising power of central bank interventions does not build on a real debt depreciation via inflation, but on a swap of bonds and central...