The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis

Authors

Giancarlo Corsetti

Barry Eichengreen

Galina Hale

Eric Tallman

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2019-04 | February 1, 2019

Why was recovery from the euro area crisis delayed for a decade? The explanation lies in the absence of credible and timely policies to backstop financial intermediaries and sovereign debt markets. In this paper we add light and color to this analysis, contrasting recent experience with the 1992-3 crisis in the European Monetary System, when national central banks and treasuries more successfully provided this backstop. In the more recent episode, the incomplete development of the euro area constrained the ability of the ECB and other European institutions to do likewise.

Article Citation

Eichengreen, Barry, Eric Tallman, Galina Hale, and Giancarlo Corsetti. 2019. “The Euro Crisis in the Mirror of the EMS: How Tying Odysseus to the Mast Avoided the Sirens but Led Him to Charybdis,” Federal Reserve Bank of San Francisco Working Paper 2019-04. Available at https://doi.org/10.24148/wp2019-04