Skip to main content

Saving Euro created ‘lost decade’ for southern Europe

Saving the Euro has come at a high price, resulting in a ‘lost decade’ for southern Europe, according to an economist at the University of Warwick.

Professor Nicholas Crafts, Director of the Centre for Competitive Advantage in the Global Economy, will be delivering a paper called ‘Saving the Euro: a Pyrrhic Victory?’ at Chatham House on Thursday 28 November.

Professor Crafts claims the survival of the Euro has entailed a lengthy recession and has left an ominous legacy of public debt. However, the fundamental flaws in its original design have not been corrected.

He said: “Fiscal consolidation alone seems inadequate to address the fiscal sustainability problems of highly-indebted economies in the Euro area; financial repression and debt relief will also be needed to address the debt overhang.

“The financial crisis has inflicted significant damage to future growth prospects in the Eurozone, both through the debt legacy it has created and in terms of the impetus it has given to detrimental supply-side policies.”

Professor Crafts also states the design of the European Central Bank is not helpful for spearheading economic recovery in the present circumstances.

He said: “The ECB was designed for a normal economy to promote benign macroeconomic outcomes through a form of inflation targeting. Its independence is prized not least by Germans who formerly put their faith in the Bundesbank. In present circumstances, however, a ‘subservient’ 1950s-style central bank might actually be more conducive to economic recovery.”

Notes to editors

Professor Crafts paper, Saving the Euro: a Pyrrhic Victory?, is part of The CAGE-Chatham House Series, No 11, November 2013. To arrange to speak to Professor Crafts, please call Kelly Parkes-Harrison, Senior Press and Communications Manager,, 02476 150868, 07824 540863.