Summary of We need a European Monetary Fund, but how should it work?

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We need a European Monetary Fund, but how should it work? summary
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Over time, banking and sovereign debt crises have laid bare the original design flaws in the European Monetary Union (EMU), which sorely needed a blueprint to guide the region through financial tumult. According to this cogent essay by economists André Sapir and Dirk Schoenmaker, a transformation of the European Stability Mechanism – by expanding its responsibilities and reforming its governance – into a European Monetary Fund would help close gaps in the EMU edifice. getAbstract recommends this succinct but innovative text to policy analysts and experts.

In this summary, you will learn

  • Why the European Monetary Union lacked appropriate systems to handle regional financial and fiscal crises,
  • What important gaps remain in ensuring economic stability, and
  • How creating a European Monetary Fund could help deal with future crises. 
 

About the Authors

André Sapir and Dirk Schoenmaker are economists with Bruegel, a European think tank.

 

Summary

The Maastricht Treaty, the foundation for the European Monetary Union (EMU), lacked measures to address bank collapses and sovereign debt failures that could affect the region as a whole. Under the agreement, each member nation would fend for itself in the event it suffered a financial crisis. In this “EMU 1.0,” no provisions addressed liquidity or solvency issues across the group, nor did banks within the region share a process for risk monitoring. 


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