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The Euro Crisis and Its Aftermath$
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Jean Pisani-Ferry

Print publication date: 2014

Print ISBN-13: 9780199993338

Published to Oxford Scholarship Online: May 2014

DOI: 10.1093/acprof:oso/9780199993338.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 12 May 2021

The Golden Decade

The Golden Decade

(p.57) Chapter 8 The Golden Decade
The Euro Crisis and Its Aftermath

Jean Pisani-Ferry

Oxford University Press

In the 2000s, Spain enjoyed a period of unprecedented economic growth fuelled by a surge in credit. Banks, especially regional saving banks, lent money to nearly anyone, including countless small entrepreneurs, while cheap credit allowed poor households to buy houses they could hardly afford. The picture was broadly the same in Ireland and in both countries, the bursting of the housing bubble had tragic consequences. The boom years led to very unbalanced economies, with the euro playing an important role in the process due to the mechanics of interest rates and the convergence brought on by the monetary union. Also because of the euro, these destabilising processes were not automatically kept in check by economic forces. Although policymakers could not do much about interest rates, there were other ways they could have dealt with these problems head-on. But they failed to act, overlooking the fact that private imbalances could also lead to crises.

Keywords:   Spain, Ireland, economic growth, banks, credit, housing bubble, euro, monetary union, interest rates, loans

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