The Euro Zone Needs More Risk Sharing, But Fewer Risks

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French President Emmanuel Macron and German Chancellor Angela Merkel say they want to make the common currency area more resilient and adaptable, but their two countries have traditionally disagreed over how that should be achieved, Bloomberg News reported. Can crack economists from the relevant countries solve the problem for them? They are giving it a shot -- but building a European consensus will be hard. A month ago, a group of 14 French and German economists co-authored a detailed proposal to bridge the policy differences between the two countries. Their main argument is that the euro area needs a combination of market discipline and risk sharing to reduce its vulnerability to financial shocks. Last week, in a sign of how contentious the policy debate will be, a group of Italian economists issued a robust rebuttal. The Italian riposte argues that, far from fostering stability in the euro zone, the Franco-German proposal heightens the risk of financial chaos by asking too much from weaker euro-zone states. Read more.