- "It is now clear that the euro-zone membership of Greece, Spain, Portugal and Ireland has saved them from a default: the ECB is buying (or can buy) their debts, the euro-zone countries have collectively decided that there would not be any default (hence the creation of the stabilisation fund); when the interbank market tightens, the ECB finances the banks directly; and even though yield spreads are high, the levels of interest rates paid by these countries remain much lower than if they were outside the euro zone. This fiscal solidarity has created a need for budgetary rules in order to prevent moral hazard."
- "But before concluding that the euro has been beneficial for these countries, we must bear in mind that if they had not been in the euro zone, their monetary policies would have been far more restrictive in the past; and they would not be in a crisis today. As euro membership can give rise to excess private indebtedness and asset price bubbles, which subsequently turn into fiscal deficits by the recessions they lead to, it is even more important to control private debt and asset prices than to control fiscal policies in the euro zone."
Natixis Flash Economics 320 20100622
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