Thanks for sharing.
The foundation of the design of the Euro system is the idea of ‚financial discipline‘. Democratic governments, according to this idea irresponsible by nature, had to be reigned in by rational private lenders active on a newly created international capital market (no, not just the banks, also and often more important our pension funds). Part of this design was a decline of international financial transfers in the EU while a central fiscal authority was absent, too. Again: by design! Financial markets had to do the job, away with these democratic governments!
Something unexpected happened, however. Up to 2008 governments were not reigned in by the FIRE sector, as interest rates in the periphery of the Euro Area declined much more than anticipated by economists while the private sector could, until 2008, borrow at lib and often became severely indebted. Which meant that after the Lehman moment, which made capital flows reverse, governments and the ECB somehow had…
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