Conclusion
The proposals in Benassy-Quéré et al. (2018)are welcome and the main message should be heard loud and clear: there is a need to strengthen EMU through parallel risk reduction and risk sharing, complementing each other within a package of reforms. Risk reduction has to continue, but one should avoid changing the goalpost before risk sharing takes place.
In the paper the exact sequencing is however unclear, not all necessary elements are covered, and some proposals create risks. The diagnosis overlooks some key aspects of EMU (internal imbalances, liquidity flows, redenomination risks) and the focus of the proposals on reducing fiscal risks could rather lead to financial distress ultimately requiring more, not fewer, rescues. After all the effort to regain financial stability, there is a need to advance without delay, but with a coherent and well-sequenced package, avoiding unsafe steps in the dark.
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