At the root of the euro crisis was not only a sovereign debt crisis, but also a balance-of-payments crisis. A multifaceted approach is required to restore the euro area economy back to a sustainable growth path.
The euro area (eurozone) crisis has often been characterized as a sovereign debt crisis. Indeed, it was triggered by a sudden loss of market confidence in the sustainability of Greek government finances. Similar doubts quickly spread to Portugal and Italy.
For some other countries that were subsequently hit by the crisis, however, the root cause lay in persistently above-average price inflation driven by a buildup of private-sector debt, notably in Spain and Ireland where the problem was exacerbated by housing market bubbles.… Seguir leyendo »