The current policy debate on spurring growth is sometimes couched as a choice between fiscal stimulus and structural reform. In the context of the euro zone, this gives an incomplete picture. Two other issues are important: financial policies to avert a credit crunch; and collective actions to rebuild confidence. Adding these complicates the picture but helps point the way to a fuller policy response and clearer priorities to address the current mutually reinforcing combination of a growing sovereign debt-banking problem on the one hand and risks of a recession on the other.
Just when we thought the entire world was careening in the direction of currency conglomerations, here’s a new manifestation of what else but a dose of glocalization in the financial sector—a town that’s skipped its national borders to join the European currency, and one that’s retreated from its national borders to create a local one.