The debt crisis has reached the core of the Eurozone.
- Italy and Spain are now directly involved in a serious credibility crisis.
- The creditworthiness of more than one-third of the Eurozone is being challenged.
For the first time, the very survival of the euro is at stake.
EU leaders gathering in Brussels on Thursday face a historical responsibility. It is essential that an agreement be reached on a plan that prevents further escalation of the crisis.
As economists actively involved in the policy debate, we have offered a number of suggestions. The common thrust of these proposals is that the expansion the European Financial Stability Facility (EFSF) is essential; it must be able to make banks strong enough to withstand a default by Greece. The EFSF should also be allowed to operate in secondary bond markets and be given operational flexibility and independence. There are many technical details and many variants of these proposals. The important thing is to acknowledge that leaders are out of time. Deciding to not decide could mark the end of the Eurozone as we know it.
Angelo Baglioni, Università Cattolica del Sacro Cuore, Milan
Richard Baldwin, Graduate Institute, Geneva and CEPR
Samuel Bentolila, CEMFI, Madrid and CEPR
Tito Boeri, Bocconi University and CEPR
Paul De Grauwe, University of Leuven and CEPR
Juan Dolado, Universidad Carlos III de Madrid and CEPR
Luis Garicano, London School of Economics and CEPR
Francesco Giavazzi, Bocconi University and CEPR
Daniel Gros, Centre for European Policy Studies, Brussels
Jean Pisani-Ferry, BRUEGEL and Université Paris-Dauphine
Richard Portes, London Business School and CEPR
Guido Tabellini, Bocconi University and CEPR
Beatrice Weder di Mauro, University of Mainz and CEPR