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Przegląd Europejski – European Studies Quarterly

How to solve the sovereign debt crisis in the euro area?

2017, 2017 (46), No. 4

Justyna Sikora

Szkoła Główna Handlowa w Warszawie

DOI

10.31338/1641-2478pe.4.17.3

Publication date

25.03.2018

Publishing model

open access

License type

CC BY 4.0 Int.

Field

Social sciences

Discipline

international relations, economics and finance, communication and media studies, political science and public administration, management and quality studies, law, sociology

Language of publication

English

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PDF 281 KB

Article

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Number of downloads:22

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Abstract

The sovereign debt crisis in the euro area (EA) highlighted shortcomings of its institutional framework – establishment of a monetary union without a central fiscal policy. Although the economic governance in the EA was substantially reformed in the aftermath of the crisis to address its weaknesses, further reforms including some elements of fiscal union are needed to increase resilience of the Economic and Monetary Union to shocks and prevent emergence of economic and financial distress in the future. Based on the theory of fiscal federalism, the article analyses potential institutional reforms aimed at solving the sovereign debt crisis in the EA and indicates which proposals are desired and possible to implement. The research method used is a descriptive analysis of reforms proposed in the literature. In the article, the following reform proposals were assessed: the Debt Redemption Fund, European bonds, assigning the European Central Bank the role of the lender of last resort and a fiscal union with an EA fiscal capacity.

Keywords:

public debt,euro area,fiscal policy

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