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Symposium 2013

Solution for Designing a Stable Euroland: The Corporate Perspective

The Challenge

It is obvious by now that the German economy is not immune to the on-going crisis: A severe drop in exports to the rest of the euro zone is hurting manufacturing. At the same time a combination of lar ...

It is obvious by now that the German economy is not immune to the on-going crisis: A severe drop in exports to the rest of the euro zone is hurting manufacturing. At the same time a combination of large-scale immigration and of capital inflows makes Germany look like a beneficiary of the gloom elsewhere. While the negative economic effects have so far been largely offset by rising domestic demand and exports to countries outside Europe, the longer-term consequences of the crisis may be severe: Economically, Germany will have difficulties to strive in a Europe in perma-crisis. Politically, Germany faces adverse reactions for the austerity it imposes on weaker partner countries.

Clean up and stabilize the European banking sector

The process of deleveraging has been too painfully slow in Europe, compared, for example, with the Uninted States. With still great uncertainties about pending write-offs, banks are reluctant to lend, thus hampering the recovery of the real economy and leaving government finances stressed. To overcome this situation, setting up a full-scale banking union is necessary. This should comprise common banking supervision by the European Central Bank and a banking resolution authority - a financial back-stop to recapitalize banks or to wind down non-viable ones in an orderly fashion.

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