In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however,...

This paper describes four key drivers behind the adjustment difficulties in the periphery of the eurozone: • The adjustment will be particularly difficult for Greece and Portugal, as two relatively closed economies with low savings rates. Both of these countries combine high external debt...

As EU leaders muddle through the eurozone crisis, the debate about its root causes continues. CEPS Director Daniel Gros argues in this Policy Brief that the debate is important if we are to understand how to prevent future crises. In his view, external debt is the key to the turmoil in European...

The system for financing the EU today is on its last legs. Indeed, with the EU budget being predominantly financed by national contributions, member states attach great importance to what they get in return, which in the end affects the European principle of solidarity and makes every budgetary...

It is widely assumed in Germany, and elsewhere, that German citizens have turned against the centrepiece of the process of deeper European integration: the euro. The German Allensbach Institute, which conducts public opinion poll research, showed that levels of trust in the euro started to...

Different economic and financial structures require different crisis responses. Different crises also require different tools and resources. The first ‘stage’ of the financial crisis (2007-09) was similar on both sides of the Atlantic, and the response was also quite similar. The second...

In this analytical policy brief, CEPS Director Daniel Gros explores whether there is a fundamental difference between a formal sovereign default with a haircut and debt monetisation, which reduces the purchasing power for investors by the same amount. He argues that there is indeed a difference...

Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the...

The external shocks emphasised by the standard Optimum Currency Area approach (i.e. shocks to exports) have surpris ingly little influence on employment and unemployment in most member countries of the European Union (EU) whether or not exchange rates are fixed. Short-run exchange-rate...

There is general agreement that banking supervision and resolution have to be organised at the same level. It is often argued, however, that there is no need to tackle deposit insurance because it is too politically sensitive. This note proposes to apply the principles of subsidiarity and...