The Cost of Non-Europe of an incomplete Economic and Monetary Union

12-12-2014

The purpose of this study is to evaluate the robustness of a strong economic and monetary union faced with a new crisis scenario. Based on the results of an empirical statistical model devised to analyse the distinctive features of financial markets, macroeconomic indicators and the accounting data of financial institutions in the 28 countries of the European Union, this study suggests that, with a new sovereign debt crisis on the horizon, better European budgetary cooperation could generate savings of some EUR 85 billion, i.e. 0.65 per cent of the EU's GDP, and a functioning banking union would make it possible to save EUR 222.3 billion, mainly generated by a reduced need to recapitalise the EU's financial institutions.

The purpose of this study is to evaluate the robustness of a strong economic and monetary union faced with a new crisis scenario. Based on the results of an empirical statistical model devised to analyse the distinctive features of financial markets, macroeconomic indicators and the accounting data of financial institutions in the 28 countries of the European Union, this study suggests that, with a new sovereign debt crisis on the horizon, better European budgetary cooperation could generate savings of some EUR 85 billion, i.e. 0.65 per cent of the EU's GDP, and a functioning banking union would make it possible to save EUR 222.3 billion, mainly generated by a reduced need to recapitalise the EU's financial institutions.

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Auteur: Marius-Christian Frunza, docteur en économie et habilité à diriger les recherches, est chercheur sénior au Laboratoire d'excellence sur la régulation financière, Labex ReFi d’heSam Université, et directeur de recherche at Schwarzthal Kapital.