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Reconciling risk sharing with market discipline: A constructive approach to euro area reform

Author(s): Isabel Schnabel

Date published: Sep 2019

SUERF Policy Note, Issue No 96
by Isabel Schnabel
University of Bonn and German Council of Economic Experts | SUERF Fellow


JEL-codes: E6, F36, F45, G28.
Keywords: Euro area reform, risk sharing, market discipline, sovereign-bank nexus, fiscal stabilization.

Based on the French-German “7 + 7 report”, this policy note argues that reforms in the euro area have to continue to make the euro sustainable. It explains why risk sharing and market discipline are complements rather than substitutes, and presents a broad set of reforms needed to reconcile these two concepts. These include reforms to mitigate the sovereign-bank nexus, to strengthen the credibility of the fiscal framework, and to introduce new instruments for fiscal stabilization.

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SUERF Policy Note, Issue No 96 SUERF Policy Note, Issue No 96

Reconciling risk sharing with market discipline: A constructive approach to euro area reformWeb version: Reconciling risk sharing with market discipline: A constructive approach to euro area reform

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