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The euro zone crisis
Its dimensions and implications
M R Anand *
GL Gupta
Ranjan Dash
January 2012
* M.R. Anand, Economic Adviser and GL Gupta, Asst Director are with the Dept of Economic Affairs (DEA), Ministry of Finance and
Ranjan Dash is Fellow, ICRIER. Comments may be sent to - anand-pc@nic.in.
Content
Page No.
Foreword
3
Disclaimer and acknowledgements
4
Abstract
4
Introduction
5
The Euro Zone: A background
Creation of the Euro: its Justification
Convergence, cohabitation and divergence
From the global crisis to the Euro zone crisis
5
9
The rescue: creation of the EFSF and the ESM
Some critical dimensions of the EZC
13
A monetary union without a fiscal union
Structural differences
Cross border lending
Decision making in the Euro zone
Implications and Possible directions
16
Implications for the advanced countries:
Euro zone crisis and the EMEs
Possible directions
Concluding observations
19
References
19
Annex tables
20
Endnotes
22
2
Foreword
In the rush to produce urgent policy documents and briefing notes that any
government has to do, it is easy to let matters that may not be quite as urgent to go
unattended. However, the not-so-urgent often includes matters of great importance
for the long-run well-being of the nation and its citizenry. Research papers on topics
of strategic economic policy fall in this category. The Economic Division in the
Department of Economic Affairs, Ministry of Finance, has initiated this Working
Paper series to make available to the Indian policymaker, as well as the academic
and research community interested in the Indian economy, papers that are based on
research done in the Ministry of Finance and address matters that may or may not be
of immediate concern but address topics of importance for India’s sustained and
inclusive development. It is hoped that this series will serve as a forum that gives
shape to new ideas...