1. GROWTH AND CRISIS IN THE European Policy Response: The Euro
Economics 1490
GROWTH AND CRISIS IN THE
WORLD ECONOMY
with
Professor Dale W. Jorgenson
Lecture 14: October 18, 2016
European Policy Response: The Euro
Harvard University Department of Economics - Fall 2016

2. THE WORLD ECONOMY: GROWTH AND CRISIS
Lecture 14: October 18, 2016
European Policy Response: The Euro
THE WORLD ECONOMY: GROWTH AND CRISIS
Comparing Economies across the World and over Time.
2. The Great Debate over the Financial and Economic Crisis.
3. The European Slowdown and the Crisis in Europe.
4. Asian Economic Miracles: Will They Continue?
5. Sustainability of Economic Growth.
6. World Economic Outlook.

3. Europe and the United States: Convergence and Divergence
Lecture 14: October 18, 2016
European Policy Response: The Euro
Europe and the United States:
Convergence and Divergence
11. U.S. Growth Resurgence and European Slowdown.
12. European Competitiveness.
13. Europe 2020 and the Single Market.
14. European Policy Response: The Euro.
15. European Policy Response: Brexit.

4. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
TWO ECONOMIC CRISES IN EUROPE The U.S. Crisis Was Transmitted Internationally by the Collapse of Inter-Bank Lending.
This Was Followed by the Collapse of Trade in Late and Early 2009.
Bank Bailouts Were Handled by Local Authorities – Governments and Central Banks.
The Sovereign Debt Crisis in Europe Began with the Greek Bailout in May 2010.

5. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
THE SECOND PHASE OF THE CRISIS
Signs of Financial Distress Emerged in Europe in 2011.
European Bank and Sovereign CDS Prices Revealed Possible Solvency Problems
European Central Bank Broadened Its Support of Sovereign Debt
A Second Recession in Europe Has Taken Hold; Growth Prospects for Europe Are Dim

6. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
TIME LINE FOR EUROPEAN SOVEREIGN DEBT CRISIS
Greece   
May 2010-March 2016
245.6 B
Ireland 
November 2010-December 2013
68.2 B
Portugal  
May 2011-May 2014
76.4 B
Cyprus   
December 2011-December 2012
May 2013-March 2016
2.5 B
10.0 B
Spain
July 2012-December 2013 
41.3 B

7. A GLOSSARY OF EUROPEAN INSTITUTIONS
Lecture 14: October 18, 2016
European Policy Response: The Euro
ALPHABET SOUP:
A GLOSSARY OF EUROPEAN INSTITUTIONS
EFSF  
European Financial Stability Facility
May 2010
EFSM
European Financial Stabilization Mechanism
January 2011
ESM  
European Stability Mechanism
(Replaced EFSF and EFSM)
September 2012
EFC
European Fiscal Compact
March 2011

8. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
EUROPEAN SYSTEM OF FINANCIAL SUPERVISORS (ESFS)
ESRB 
European Systemic Risk Board
January 2011
EBA
European Banking Authority
EIOPA 
European Insurance and Occupational Protection Authority
ESMA
European Securities and Markets Authority

9. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
LONDON SPEECH
Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.
Mario Draghi, President of the European Central Bank, London, July 26, 2012.

10. MARIO DRAGHI: BIOGRAPHICAL HIGHLIGHTS
Lecture 14: October 18, 2016
European Policy Response: The Euro
MARIO DRAGHI: BIOGRAPHICAL HIGHLIGHTS
Born: Rome, Italy, 1947.
Ph.D., MIT, 1976.
Professor of Economics, University of Florence,
Fellow, Institute of Politics, Kennedy School of Government, 2001.
Governor, Bank of Italy,
Chairman, Financial Stability Board,
President, European Central Bank, 2011-

11. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
EUROPEAN CENTRAL BANK POLICY
May 2010: Begins Outright Purchases of Government Debt
December 2011: Expanded Long Term Refinancing Operation for Banks
September 2012: Outright Monetary Transactions
: Lowered Policy Rate in Steps to 0.25%

12. EUROPEAN POLICY RESPONSE TO THE SOVEREIGN DEBT CRISIS
Lecture 14: October 18, 2016
European Policy Response: The Euro
EUROPEAN POLICY RESPONSE TO THE SOVEREIGN DEBT CRISIS
European Union Participated in Sovereign Debt Bailouts Through the EFSF and EFSM.
The EFSF and EFSM Were Superseded by the ESM
EFC Strengthened the Stability and Growth Pact
ECB Provided Support for Banks through Conventional And Unconventional Monetary Policy

13. EUROPEAN BANKING UNION
Lecture 14: October 18, 2016
European Policy Response: The Euro
EUROPEAN BANKING UNION
Four Essential Components: Single Supervisor, Single Regulator, Single Resolution Mechanism, Single System of Deposit Insurance
October 2014: ECB Examination of Balance Sheets of 130 European Banks with 85% of EU Deposits
November 2014: ECB Provides Single Supervisory Mechanism (SSM) for 130 Largest Banks.
January 2016: Single Resolution Mechanism by ECB.

14. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

15. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

16. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

17. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

18. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

19. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

20. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

21. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

22. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

23. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

24. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

25. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

26. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

27. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

28. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

29. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro

30. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
THE FINANCIAL CRISIS IN EUROPE
The financial crisis originated in the U.S., but the impact was more severe in Europe
The policy response was more diffuse in Europe
The European recovery was weaker
The sovereign debt crisis emerged in 2010, beginning with the Greek bailout in May

31. THE SECOND PHASE OF THE CRISIS
Lecture 14: October 18, 2016
European Policy Response: The Euro
THE SECOND PHASE OF THE CRISIS
Indications of Renewed Financial Distress in Europe Began to Emerge in 2011.
This Involved Bank Debt and Sovereign Debt, Especially in the Periphery Countries.
The ECB Responded by Providing Financial Support for Sovereign Debt.
Initially This Was Indirect Support through Bank Lending, but Became Direct with the OMTs in 2012

32. European Policy Response: The Euro
Lecture 14: October 18, 2016
European Policy Response: The Euro
RECOVERY IN EUROPE
Recovery from the Second Recession Has Been Slow and Limited So Far to Exports.
Europe Is Developing a New Framework for Financial Regulation.
A Fiscal Union Has Been Discussed, but Little Progress Has Been Made.
Structural Reforms Like a Single Market in Services Appear to Be on Hold.