2013-05: Finance at Center Stage: Some Lessons of the Euro Crisis

Finance and financial markets were at the heart of the global economic crisis that began in August 2007. Despite having subsided elsewhere by 2010, the global crisis left an ongoing legacy of turbulence in the euro zone. My argument in this essay is that the euro zone’s continuing turmoil, like that of the world economy in 2007‐09, is rooted in financial vulnerabilities that were not well envisioned in the defenses set up by EMU’s architects. If the euro is to survive, EMU’s institutions must evolve to overcome these vulnerabilities. The necessary changes will have profound effects on the future shape of EMU, effects significant enough to require changes in EU political arrangements alongside more technical financial reforms