The Eurozone Crisis: Escaping the 'Doom Loop'

Abstract

The paper reviews the origins and complexity of the ongoing Eurozone debt crisis in which bank bad debts and government debts have become intertwined in a ‘Doom Loop’. It reports on a ‘Round Table’(panel) discussion chaired by the author on behalf of the UK’s Money, Macro, Finance Research Group (MMFRG) as part of the Groupement de Recherche Europeen (GdRE) on Money, Banking and Finance annual conference in Nantes, 28-9 June 2012. The panel included Charles Calomiris (University of Columbia), Charles Goodhart (LSE) and Olivier de Bandt (Banques de France). The proposals of the panel for resolving the Spanish debt crisis and for the establishment of a ‘Banking Union’ in the EU to resolve the wider crisis and prevent future crises are then explored further. It concludes that the economists have proposed the solutions and it is now the responsibility of the politicians to action them.