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The hazard of second best

By Mohamed A. El-Erian NEWPORT BEACH: The international community risks settling for second best on two key issues to be discussed this month at global meetings in Washington, DC: the lingering (if currently somewhat dormant) European debt crisis, and the selection of the World Bank’s next president. It is not too late to change course, but …


Europe firewall boost throws spotlight on IMF

By Tamim Elyan / Reuters COPENHAGEN: With a decision to expand its anti-crisis “firewall”, the eurozone has thrown the ball firmly back into the court of other economic powerhouses who pledged more cash for the IMF if Europe stumped up first. After providing loans to help debt-wracked countries such as Greece, Christine Lagarde, head of the …


The Greek tragedy, act II

By Luigi Zingales CHICAGO: A Greek tragedy is typically composed of three acts. The first sets the scene. It is only with the second that the plot reaches its climax. For current-day Greece, the imposition of “voluntary” losses on the country’s private creditors represents just the end of the beginning. The real tragedy has still to …


Captured Europe

By Daron Acemoğlu WASHINGTON, DC: Europe’s policy elite — the people who call the shots at the national and eurozone level — are in serious trouble. They have mismanaged their way into a deep crisis, betraying all of the lofty promises of unity and prosperity issued when the euro was created. The currency union may survive, …


The bailout bias

By Leszek Balcerowicz WARSAW: The seemingly never-ending debate over the eurozone’s fiscal problems has focused excessively on official bailouts, in particular the proposed purchase of government bonds on a massive scale by the European Central Bank. Indeed, we are warned almost daily — by the International Monetary Fund and others — that if bailout efforts are …


Europe’s trust deficit

By Barry Eichengreen BERKELEY: There is no shortage of talk nowadays about Europe’s deficits and the need to correct them. Critics point to governments’ gaping budget deficits. They cite the southern European countries’ chronic external deficits. They highlight the eurozone’s institutional deficits — a single currency and a central bank but none of the other elements …


A devaluation option for Southern Europe

By Emmanuel Farhi, Gita Gopinath and Oleg Itskhoki CAMBRIDGE: This year is likely to mark a make-or-break ordeal for the euro. The eurozone’s survival demands a credible solution to its long-running sovereign-debt crisis, which in turn requires addressing the two macroeconomic imbalances — external and fiscal — which are at the heart of that crisis. The …


Alexander Hamilton’s Eurozone tour

By Harold James PRINCETON: Europe’s debt crisis has piqued Europeans’ interest in American precedents for federal finance. For many, Alexander Hamilton has become a contemporary hero. Perhaps one day his face should appear on the €10 banknote. Specifically, for European states groaning under unbearable debt burdens, Hamilton’s negotiation in 1790 of the new federal government’s assumption …


Europe’s empty fiscal compact

By Martin Feldstein CAMBRIDGE: The driving force of Europe’s economic policy is the “European project” of political integration. That goal is reflected in the European Union’s current focus on creating a “fiscal compact,” which would constitutionalize member states’ commitment to supposedly inviolable deficit ceilings. Unfortunately, the compact is likely to be another example of Europe’s subordination …


The Eurozone’s fork in the road

By Mario I. Blejer and Eduardo Levy Yeyati BUENOS AIRES: Many observers have recently declared that the eurozone debt crisis is practically resolved, or at least on hold for a few years. The falling yields at the Italian government’s last bond auctions in 2011 suggested a significant reduction in the perceived sovereign-default risk. Since Italian bonds …


Tobin trouble

By Mark Roe CAMBRIDGE: European leaders are seriously considering a Tobin tax, which would put a small levy on financial transactions, thereby dampening trading. But will the tax do as much as its proponents hope? The popularity of the tax (named for the late Nobel laureate economist James Tobin, for whom its aim was to …


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