The economic and financial crisis that still affects most European countries has raised growing concerns about the endurance of the integration process of the European Union (EU), and especially of the Euro Area (EA). According to the prevailing interpretation, the European crisis was triggered by the Lehman Brothers’ collapse and the resulting world-wide financial turmoil, which led to the ‘flight to safety’ of international investors and eventually hit weakest European economies. This explanation is sustained by both the European Central Bank (ECB) and the majority of other supranational institutions. In fact, the outbreak of the US asset bubble can certainly be regarded as the trigger of the European ‘sovereign debt crisis’. However, it is now widely accepted that it has been the permanent deficit in current account (and financial) balances that fuelled the turmoil of sovereign bond markets of EA ‘periphery’ since late 2009.
Policy Brief – ‘EU Financial integration and the role of the European Central Bank‘