DP11225 Is there an alternative way to avoid another eurozone crisis to the Five Presidents' Report?

Author(s): Michael R. Wickens
Publication Date: April 2016
Keyword(s): eurozone crisis, financial markets, Fiscal policy, Five Presidents' Report, Monetary policy, pricing risk
JEL(s): E52, E61, E63
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11225

The EU Commission's Five Presidents' Report proposes new rules for the eurozone covering fiscal policy, banking and financial markets designed to avert another eurozone crisis. This paper examines the causes of the current eurozone crisis and discusses whether the Report's proposals are likely to succeed. It is argued that the main causes of the crisis were EMU and the failure of financial markets to price risk correctly. It is claimed that the Report may not solve these problems. Having already lost their monetary policy instrument, the Report's fiscal proposals would remove their fiscal policy instrument too and deprive countries of the means of economic stabilisation. The proposals would also transfer to an undemocratic and unaccountable Commission important national competences.