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Panel addresses tragedy of Euro crisis

Meghan Thomassen | Wednesday, September 19, 2012

The Nanovic Institute for European Studies partnered with the Kellogg Institute on Wednesday to update Notre Dame students and faculty on the worsening Euro crisis at the Hesburgh Center for International Studies.

Anthony Monta, moderator and associate director at the Institute, fielded a question from an attendee who also came to the Euro crisis panel held last November: “How have the views of the panel [on the crisis] changed?”

Robert Fishman, a Nanovic fellow and sociology professor at Notre Dame, said his views remained pessimistic but for somewhat different reasons from last year.

“The Euro crisis has passed into a new phase in which contagion in financial markets has largely resolved … [but] the remedies taken [have produced] problems worse than the initial malady,” he said.

Fishman said the European Central Bank’s recent commitment to purchase large amounts of sovereign debt in the international bond market has led to a vast decrease in Euro zone borrowing costs.

“But now Greece, Italy, Spain and Portugal and much of the Eurozone is now stuck in a severe and worsening recession,” he said. “Spanish unemployment [currently 25.1 percent] is certain to go substantially higher because of the policies adopted to deal with the Euro Crisis.”

He said the crisis was inherently tragic.

“If the European Central Bank had done in 2010 what it recently did, which was to signal its willingness to purchase large amounts of debt in the secondary market, it could have staved off the crisis,” he said.

Jeffrey Bergstrand, a Kellogg fellow and finance professor at Notre Dame, said the Economic and Monetary Union consists of 27 countries, 17 of which are in the Euro zone.

“The union is designed to have free trade among those 27 countries,” he said. “It’s more than a free trade zone; they have a common external tariff, as well.”

Begrstrand said the Euro zone still lacks a fiscal union, which is one of the coalition’s goals.

“[Americans] have a central bank, a Federal Reserve system, but [the Euro zone] doesn’t have a banking union that is a supernational,” he said. “By removing monetary policy joining the Euro zone, then by default, fiscal policy is much more important for stabilization.”

Alexandra Guisinger, a Kellogg fellow and assistant political science professor, said the Euro zone will never see an end to the crisis because the community has been trying to integrate their economies and monetary policies for over 300 years.

“For small countries … it’s going to benefit them to have fixed exchange rates because it will enhance their trade,” Guisinger said.

She said credibility is an obstruction to resolution and recovery.

“Credibility is hard to measure, but it determines whether these crises will occur or not,” she said.