Category: "eurozone and euro"

Credit Misallocation During the European Financial Crisis


-- this post authored by Fabiano Schivardi, Enrico Sette, and Guido Tabellini

There is a widespread perception that under-capitalised banks can prolong crises by misallocating credit to weaker firms and restraining credit to healthy borrowers. This column explores the extent and consequences of credit misallocation in Italy during and after the Eurozone Crisis. Bank undercapitalisation may have been costly in terms of misallocation of capital and productive efficiency in the medium term due to the higher exit of healthy firms, but it had at best a limited role in aggravating the recession induced by the Eurozone Crisis.

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Brexit - Who Wins and Loses

April 21st, 2017
in eurozone and euro

by Elliott Morss, Morss Global Finance


In all likelihood, Brexit is coming. What will its effects be and what countries will be injured the most? It clearly “depends.” While it is apparent that the UK would like trade linkages to remain the same, numerous Economic Union (EU) members have been piqued by Brexit and want to strip away some of the UK’s trade benefits. At least they do as a starting point for negotiations. Below, the benefits and costs of a breakup are examined.

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Big Mess in Italy

December 4th, 2016
in eurozone and euro

by John Mauldin, Thoughts from the Frontline

“Move to Italy. They know about living in debt: They don’t care.”

– John Lydon

“Italians were eating with a knife and fork when the French were still eating each other.”

– Mario Batali

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Reviewing the IMF’s Role in the Greek Crisis: What Its Independent Evaluation Office Missed

September 22nd, 2016
in eurozone and euro

by Elliott Morss, Morss Global Finance


The Independent Evaluation Office of the IMF (IEO) recently released a critical report on how the IMF handled the crises in Greece, Ireland and Portugal. I have closely followed the role of the IMF in Greece and have identified where things went wrong. It turns out that my list differs quite considerably from that of the IEO. In what follows, I consider my conclusions against those of the IEO. But first, a little background on the IMF’s role in the Greek crisis.

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Can Anything Save the Eurozone?

August 26th, 2016
in eurozone and euro

by Elliott Morss, Morss Global Finance


Ever since I started covering the plight of Greece in 2010, I have believed that the ultimate resolution for Greece and other “weak sister” countries would be to go back to their own currencies. Why? The short answer: depreciation of their own currencies would compensate for productivity differences between them and countries using the Euro. And here, there is an analogy with the US and Japan. To neutralize Japan’s productivity edge in the ‘70s, the dollar has weakened from more than ¥300 to the current 100¥ to the dollar.

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