publication . Research . Article . Preprint . 2011

Hostages, free lunches and institutional gaps : the case of the European Currency Union

Günter Franke;
Open Access English
  • Published: 20 Nov 2011
Abstract
This paper argues that the strong member states of the European Currency Union are hostages of a financially distressed member state so that they are compelled to provide financial support. Moreover, due to the dynamics of the interaction game, a debt relief is a free lunch for the distressed country. This fosters moral hazard of distressed countries. In the absence of capital market control, European politics do not effectively monitor fiscal politics of member states. The lack of a long term strategy of the European Currency Union to deal with distressed states has undermined the credibility of politics. This lack is also explained by a lack of a European Inso...
Subjects
free text keywords: hostages, European Currency Union, European Insolvency Charter, hostages, free lunch, externalization hypothesis, externalization hypothesis, European Insolvency Charter, European Currency Union, free lunch, jel:F53, jel:H60, jel:E62, jel:H30, jel:E 62, F 36, F 53, H 30, H 60, jel:F36, ddc:330

Bindseil, U., W. Modery (2011). Ansteckungsgefahren im Eurogebiet und die

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publication . Research . Article . Preprint . 2011

Hostages, free lunches and institutional gaps : the case of the European Currency Union

Günter Franke;