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The euro crisis in the mirror of the European Monetary System

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 and to thereby prevent problems in banks and bond markets from feeding on one another. This column adds light and colour 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.