Major adjustments are awaiting the euro zone

By Bruno Ducoudré, Xavier Timbeau and Sébastien Villemot

Current account imbalances are at the heart of the process that led to the crisis in the euro zone starting in 2009. The initial years of the euro, up to the crisis of 2007-2008, were a period that saw widening imbalances between the countries of the so-called North (or the core) and those of the South (or the periphery) of Europe, as can be seen in Figure …

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Abandoning the euro to save Europe

By Cédric Durand and Sébastien Villemot


Without a European sovereign, no real budget; and without a budget, no viable economic policy. As long as Europe does not emerge from this dilemma, the euro area will remain stuck in the vicious circle of stagnation, resentment and conflicts of responsibility. If fiscal federalism is out of reach, then it is crucial to be able to adjust exchange rates to boost growth and employment by leaving the monetary …

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Balance sheet effects of a euro break-up

By Cédric Durand and Sébastien Villemot


When it was introduced at the turn of the millennium, the euro was widely perceived as a major achievement for Europe. The apparent economic successes, coupled with cross-country convergence of several economic indicators, fueled this sentiment of success. A couple of years later, the picture looks dramatically different. The world financial crisis has revealed imbalances that have led to the sovereign debt crisis and brought the euro area on …

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Does France have a future in the euro area?

Talk at the EReNSEP conference in Paris


This talk tries to give answers to two important questions in the current context: to what extent is the euro an economic and political cost for France? And is an exit or dismantling of the euro possible, or would it rather be a catastrophe?


Let’s start with the first question. For France, the identifiable costs of belonging to the euro area are essentially three: two of an …

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What strategy for internally rebalancing the euro zone?

By Sébastien Villemot and Bruno Ducoudré

The euro zone has made significant efforts to reduce its trade imbalances since the outbreak of the financial crisis. In 2009, only Germany, the Netherlands and Austria had a current account surplus, while all the other countries, in particular France, Italy and Spain, ran current account deficits, resulting in a deficit for the zone as a whole (−0.7% of GDP). Five years later, in 2014, the situation had …

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