Following the financial crisis, the question of how to handle a big bank’s collapse has come to the fore. This Policy Contribution evaluates the obstacles to resolvability that the legal and operational structures of the large euro-area banks could pose to the European Union’s new resolution regime.
This paper evaluates the obstacles to resolvability that the legal and operational structures of the large euro-area banks could present, assuming that it is possible to liquidate smaller and medium-sized banks through a transfer of the relevant activities to other banks.
The sovereign debt crisis shook the Euro to its foundations. It soon became clear that there was no mechanism to allow a tidy insolvency of a state wishing to remain inside the euro area. To face future crises, does the EU need a sovereign insolvency mechanism?
The current European fiscal framework is inefficient. It should be replaced with a system based on rules more suited to the two core objectives: public debt sustainability and fiscal stabilisation. The rules should be more transparent and easier to implement. These reforms would promote greater compliance.
Speech of François Villeroy de Galhau, Governor of Banque de France at Bruegel, Brussels, 22 March 2016.
What can we do to improve Eurozone governance to prevent the next European crisis?
This event will look at shocks and adjustment in the euro area in the light of recent crises and analyse the functioning of a key internal adjustment process in EMU
At the current level of political and societal integration, a large federal budget is unrealistic in the euro area. The authors make three recommendations that would lead national fiscal policies to be more stabilising with respect to the economic cycle, while achieving long-term sustainability. They also recommend a move towards a European unemployment insurance scheme targeted at ‘large’ shocks, and a minimum set of labour-market harmonisation criteria.
Misalignments of real exchange rates continue to be the most visible and painful symptom of asymmetric shocks within the Eurozone. An important factor behind such misalignment is the difference in national wage formation and bargaining systems, especially between core and periphery members. This column argues that all members need to have institutions that ensure wage developments are in line with productivity developments. This would eliminate an important source of asymmetric behaviour and reduce resistance to EZ-wide fiscal mechanisms capable of absorbing asymmetric shocks.
Joining the banking union could provide a stable arrangement for managing financial stability for the UK and other non-Euro countries.
So far, having more than one currency in the EU has not undermined the single market. However, attempts to deepen integration in the banking, labour and capital markets might require governance integration that involves only euro-area countries. Safeguards are needed to protect the interest of the UK and other euro-outs.
Bruegel is pleased to host this panel discussion as part of the global launch of the 2015 Global Go To Think Tank Index, published by the University of Pennsylvania’s Think Tanks and Civil Societies Program.