Walking the Highwire: Rebalancing the European Economy in Crisis

Foreword
Preface
Acknowledgements
Contents
List of Figures
List of Boxes
Part I Setting the Scene
1 Introduction
	Understanding the Construction of the Highwire
	Facing the Crisis III-Prepared
	The Impossible Triangle
	The Silent Transformation of the ECB: From BuBa to Fed
	The Real Issue: How to Manage Macroeconomic Imbalances?
	In Search of First-Best Solutions and Reforming the Eurozone
2 A Peripheral Finn in the Capital of Europe
	An Accidental Firefighter
	The Nordic Spirit and Talkative Finns
	Combining Western Values and European Bridge-Building
	School, Spare Parts and Small-Town Life
	Football: A Lifetime Affair
	Studying Social Sciences, Engaging in Politics and Policy-Making
	In Search of the Liberal Centre in Finland and in Europe
	A Personal Stress Test
Part II Managing the Crisis
3 Fire Brigade to Athens
	The Greek Tragedy: Lost Competitiveness and Statistical Fraud
	A Moving Train Heading for a Collision
	First Mission to Berlin
	Fire Brigade on a Reconnaissance Mission to Athens
	Greece Drifts Towards an EU-IMF Stabilization Programme
	Early Bird Meeting in Washington: The Deal Is Sealed
	Contrasting Sentiments in Berlin and Athens
4 Big Bazooka by Night
	A European Stability Fund Made Out of Three Components
	White Clouds in Pori Prior to the Next Downpour
5 Deauville Doomsday and Voldemort in Ireland
	Ireland’s Gauntlet Run
	Banking Crisis Caused by the “Celtic Tiger” Running Wild
	Banks’ Stress Tests Became a Lost Opportunity
	Ireland’s Banking Mess Undermines the Confidence of the Markets
	The Deauville Double Deal—A Real Double Whammy!
	Ireland’s Dead-End and the Mission to Dublin
	No Voldemort in Dublin
	Brian Lenihan: Personal Courage and Public Service
6 Comprehensive Crisis Response
	Spicy and Humid Dinner in Justus Lipsius
	Gathering Storms Towards the End of 2010
	The CCR with Slow Motion
	Making the ESM a More Effective Bazooka
	Sequencing Fails—The Wrong Marching Order
	Portugal’s Turn Before the Second Round in Greece
	The Greek Debt Restructuring: Act One
7 Summertime Blues in Italy
	The “Secret” Meeting in Luxemburg
	Haircuts and Barbers
	The Eurozone Summit of 21 July: Steps Forward, but Too Late
	The ECB Moves to Expand Its Bond-Buying in the Secondary Markets
	Meet the Press in Brussels
	Lessons About the Moral Hazard and Limits of Conditionality
	A Recession That Could Have Been Avoided
8 The Hour of Obama—And Don Camillo
	From the Stormy Summer to a Turbulent Autumn 2011
	Obama’s Hour to Lead the Eurogroup
	Cometh Monti’s Hour
	Spain Emerges to the Crisis Scene from the Shadow of Italy
	Pilgrimage in Don Camillo and Peppone’s Village
9 Flexing the Six-Pack
	Broad Support in the Parliament, Franco-German Resistance in the Council
	Vice-President in Charge of the Euro
	The European Semester—No Holiday
	Erhard’s Bold Liberal Reforms
10 Gasp of Air Before the Plunge
	Progress Before Backlash in Greece
	The Ultimate Rock-Bottom: Snap Elections and Bank Runs, While Grexit Looms
	Mid-June: Greek Elections and the G20 Summit in Los Cabos
	No Government, No Implementation—Facing Un-governability
Part III Turning the Tide
11 “Whatever It Takes” and the Banking Union
	The Capital Boost That Didn’t Bark—EIB Reinforced
	Towards the Banking Union
	The Spanish Rescue
	Draghi’s Speech Brings a Truce to the Markets
	Stabilization in 2012—And Return to Recovery and Growth?
	Full Steam Ahead: Blueprint for a Deep and Genuine EMU in November 2012
12 Recovery Arrives by Stealth
	Staying the Course of Austerity—No, of Reform!
	G7 Calls for Better Policy Coordination and the EU Banking Union
	“The Best Joke of G7”
	EXIT Yes—But No Grexit!
	The Irish Homework, the Spanish Recovery and Return to Growth
	Two-Pack Gives New Tools of Economic Governance
	The Spectre of Deflation Emerges from 2013 Onwards
13 Basta!: Austerians vs. Spendanigans
	Round One: Multipliers in Tokyo
	Round Two: Accidents Happen Even in the Best Papers
	Round Three: Debating in the European Parliament
	Staying the Course of Reform and Sustained Growth
	Schäuble Bashes the “Candidate”: “Nonsense!”
14 The Great Rebalancing: France and Germany
	The Macroeconomic Imbalance Procedure Enters the Scene
	Rebalancing: A Slow Process of Restoring Competitiveness
	France as a Source of Initiative—And Imbalance
	A Moscow Deal with Moscovici
	The German Question Returns Through the Persistent Surplus
	Is a Win-Win German–French Economic Strategy Plausible?
	“Wachstum durch Wandel”
	The Responsibility of Germany and France for the Eurozone
	Tietmeyer’s Legacy on the Economic and Political Union
15 Baltic States Set Sail Against the Wind
	Estonia’s Road to Freedom—And Europe
	The Baltic Enlargement of the Eurozone in 2011–15
	Latvia Comes Back from the Brink and Joins the Euro
	Lithuania’s Turn to Join the Euro in 2015
	Just One—Or None?
16 Aftershocks That Didn’t Explode—And the Brexit Bomb
	Cyprus: Crisis in the Oversized Banking Sector
	From Russia with (Not Much) Love
	What Are the Essential Lessons Learnt from the Cyprus Crisis?
	Slovenia’s Economic Turnaround in 2012–13
	Game, Set and Match—The Rise and Fall of Game Theory in Greece
	Still the “Troika”—Or Rather a European Monetary Fund?
	Brexit: Collateral Damage or a Flanking Explosion?
Part IV Learning the Lessons
17 The Jury Is Out: Fiscal Multiplier vs. Financial Accelerator
	Bernanke’s Financial Accelerator Theory as an Explanation
	Links to Fiscal Policy and Financial Repair
	Conclusion
18 Misadventures of Dismal Science
	Theory of Optimum Currency Area and Asymmetric Shocks
	Macroeconomic Imbalances Were Brushed Aside
	Proactive Correction of Imbalances
	Theory of Efficient Financial Markets: Science or Religion?
	The “Minsky Moment” Arrived Out of the Blue
	Thinking Outside the Box: Modern Monetary Theory and the Blanchard Debate
	Keynes’ Third Way and the Limits of the Market
19 Lessons of the Crisis for Eurozone Reform
Part V Looking Back, Looking Forward
20 Epilogue
Name Index
Subject Index