If your familiarity with Alexander Hamilton ends with the musical, you may want to go back to last week’s episode of ‘A Dictionary of Finance’. In it, the first part of our Story of the Euro, Aldo Romani, managerial advisor in the euro division of our capital markets directorate, described his recipe for a common currency: common debt. Without common debt, one could argue, if one state using a single currency starts having difficulty servicing its debt, the currency takes a hit, possibly dragging down hurting the other states.
This is where we pick up this week, again with Aldo and Laurent Maurin, senior economist in the economic studies division at the European Investment Bank. We talk about the sovereign debt crisis, the flaws in the Eurosystem exposed by the crisis, criticisms of the euro, and the measures adopted since to strengthen the euro area. These include:
- The Capital Markets Union: a trove of EU legislation to integrate European capital markets, so as to make the financial system altogether more resilient and allow more opportunities for investors and businesses to find each other.
- The Banking Union: a set of EU legislation to establish common (and more stringent) requirements for banks across the EU, centralized supervision of those rules on some of the more important banks, and other measures.
Both of these are still works in progress, as is the euro in general. And it turns out the crisis has been instrumental in improving the system.
We also ask our guests why some countries still haven’t joined the Eurozone. Tune in, and find out whether they think they will.
We still have about a dozen episodes to go before we wrap up this 60-episode series, so if there are terms or concepts you would like us to explore, give us a shout on Twitter (@EIBMatt or @AllarTankler).