VOX  CEPR Policy Portal

The EZ Crisis is a long way from finished. The latest VoxEU eBook presents a consensus view of what caused the Crisis and why. It argues that this was a classic ‘sudden stop’ crisis – not a public-debt crisis. Excessive, cross-border lending and borrowing among EZ members in the pre-Crisis years – much of which ended up in non-traded sectors – was why Greece’s deficit deceit in 2009 could trigger such a massive crisis. The ultimate causes were policy failures that allowed the imbalances to get so large, a lack of institutions to absorb shocks at the EZ level, and poor crisis management.