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

Franke, Günter

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

Dateien

Franke_Hostages.pdfGröße: 10.95 MBDownloads: 572

Datum

2011

Open Access-Veröffentlichung

Open Access Green

Sammlungen

Wirtschaftswissenschaften

Publikationstyp

Zeitschriftenartikel

Publikationsstatus

Published

Erschienen in

Financial Markets and Portfolio Management. 2011, 26(1), pp. 61-85. ISSN 1555-4961. Available under: doi: 10.1007/s11408-011-0176-8

Zusammenfassung

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 Insolvency Charter. A viable Union requires such a charter with rules for handling distress. Moreover, politics should determine a mechanism to coordinate politics and capital markets in their monitoring of fiscal and economic policy of member states.

Fachgebiet (DDC)

330 Wirtschaft

Schlagwörter

European Currency Union, European Insolvency Charter, hostages, free lunch, externalization hypothesis

Zitieren

ISO 690

FRANKE, Günter, 2011. Hostages, free lunches and institutional gaps : the case of the European Currency Union. In: Financial Markets and Portfolio Management. 2011, 26(1), pp. 61-85. ISSN 1555-4961. Available under: doi: 10.1007/s11408-011-0176-8

BibTex

@article{Franke2011Hosta-18295,
  year={2011},
  doi={10.1007/s11408-011-0176-8},
  title={Hostages, free lunches and institutional gaps : the case of the European Currency Union},
  number={1},
  volume={26},
  issn={1555-4961},
  journal={Financial Markets and Portfolio Management},
  pages={61--85},
  author={Franke, Günter}
}

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Universitätsbibliographie

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