Europe’s leaders have often not been honest with their electorates concerning what is necessary to put the euro zone on a sustainable path. Instead, they have frequently pretended that partial remedies are sufficient to deal with the problem. It is now high time to come clean by setting out the portfolio of policies that would be necessary to fix the euro zone’s fiscal, financial and growth problems.
Doing so will require reconciling the conflicting interests of the euro zone’s debtor and creditor countries. The debtor countries desperately need support to overcome their deep recessions and high national debt; and creditor countries need assurance that the euro zone will henceforth adopt sustainable institutions and policies to ensure that the euro zone never again falls into the current mess. In order for the euro zone crisis to be overcome, both needs must be met simultaneously. This policy package outlines a comprehensive plan that addresses this challenge.
In particular, the following package of policy measures comprises a set of short-term and long-term policy measures to overcome the crisis. Neither the short-term nor the long-term measures are sufficient on their own. Instead, they need to be implemented in conjunction with one another.