Crisis Developments in the Euro Area

Margit Rácz
Research Director, Hungarian Academy of Sciences, Institute for World Economics
Published in: Public Finance Quarterly 2011/1 (p. 94-107.)

SUMMARY: This paper will discuss the 2010 euro area crisis and its management. The crisis started with the Greek debt crisis and ended with the Irish one. In this process even the existence of the Euro itself was put into question. Therefore, in this paper I will try to present the economic performance of the Member States. The success of all debt management efforts depends on economic growth. It is a serious problem of this crisis that unemployment rates are on the rise for the long term in every EMU Member State as compared to previously registered levels. If the unfavourable effects of growth are coupled with high unemployment then every fiscal indicator can only be improved at a serious cost to society. Presumably fiscal solidarity and the forms and content of the European semester presented so far will be insufficient to maintain the stability of the euro area, if the debt crisis proves to be prolonged. Integration as a whole will be rattled, if the lasting community instruments of long-term stability are not created in 2011.
KEYWORDS: crisis, euro area, EMU member states, crisis management, stability

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