Library Header Image
LSE Research Online LSE Library Services

The fragility of the Eurozone: has it disappeared?

De Grauwe, Paul and Ji, Yuemei (2022) The fragility of the Eurozone: has it disappeared? Journal of International Money and Finance, 120. ISSN 0261-5606

[img] Text (Fragility Eurozone-JIMF-Sep-14) - Accepted Version
Repository staff only until 8 November 2023.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (898kB) | Request a copy

Identification Number: 10.1016/j.jimonfin.2021.102546


We revisit the fragility of the Eurozone which arises because the sovereigns in the Eurozone issue debt in a currency (the euro) over which they have no control. This prevents them from giving a guarantee to bond holders that they will always be repaid at maturity. This fragility can trigger self-fulfilling liquidity crises, such as those that erupted during 2010–12. We document how this fragility has evolved over time and how it has been affected by the reforms in the governance of the Eurozone since the sovereign debt crisis of 2010–12. This will allow us to analyze the most recent episode that started with the emergence of the pandemic in 2020. The latter has, up to now, not led to a new debt crisis in the Eurozone, despite the fact that the shock produced by the pandemic was at least as large as the financial crisis of 2007–08. We document how during the pandemic the new governance of the Eurozone prevented this shock from leading to a new sovereign debt crisis. We end with a discussion of the prospects for the future and ask the question of whether the fragility of the Eurozone is a thing of the past.

Item Type: Article
Official URL:
Additional Information: © 2021 Elsevier Ltd
Divisions: European Institute
Subjects: H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
Date Deposited: 02 Nov 2021 13:00
Last Modified: 25 Nov 2022 14:27

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics