The eurozone sovereign debt crisis took the central stage when finance ministers and central bankers from the Group of 20 (G20) economies met in Washington last week. They pledged a "strong and coordinated international response" and the euro area is to take "necessary actions" to contain the contagion. However, financial markets continue to be turbulent and the crucial question being asked: "Is there a way out?"
In the October issue of the RIETI Report, Salvatore Zecchini, professor of international economic policy at the University of Rome "Tor Vergata," elaborates on this question. Professor Zecchini, who also chairs the OECD Working Party on SMEs and Entrepreneurship (WPSMEE) and its steering committee, describes the current crisis as the "most challenging test of euro viability" and says that the task of overcoming this challenge is being made "almost intractable by financial overreactions." However, despite many constraints and mounting negative expectations, he says that a way out of the euro malaise does exist and the quality of policymaking is what makes the difference.
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Eurozone's Malaise: Is there a way out?
Salvatore ZECCHINI Professor of International Economic Policy at University of Rome "Tor Vergata" and Chair of the OECD WPSMEE and its Steering Group
More than a decade since the launching of monetary unification in Europe, the euro area is currently facing the most challenging test of euro viability, not to say its survival, having to cope with the consolidation of both a faltering economic recovery from the severest recession since the Great Depression and the distressed public finances of major member economies and small economies as well. This task is made almost intractable by financial markets' overreactions to stubborn budget deficits and hefty sovereign debts.