And how Europe policymakers saved EMU from a collapse?

After pointing an article on how India avoided the crisis, let us look at another article. This one looks at how European policymakers  averted what could be a full blown global crisis.

Unlike what most think that Europe policymakers were caught off-guard in early-2010, it was not the case. They actually formed a secret committee after Lehman fallout to prevent a fallout of EMU. They knew upfront of an impending crisis.

Two months after Lehman Brothers collapsed in the fall of 2008, a small group of European leaders set up a secret task force—one so secret that they dubbed it “the group that doesn’t exist.”

Its mission: Devise a plan to head off a default by a country in the 16-nation euro zone.

When Greece ran into trouble a year later, the conclave, whose existence has never before been reported, had yet to agree on a strategy. In a prelude to a cantankerous public debate that would later delay Europe’s response to the euro-zone debt crisis until the eleventh hour, the task force struggled to surmount broad disagreement over whether and how the euro zone should rescue one of its own. It never found the answer.

Hmmm. Further,

A Wall Street Journal investigation, based on dozens of interviews with officials from around the EU, reveals that the divisions that bedeviled the task force pushed the currency union perilously close to collapse. In early May, just hours before Germany and France broke their stalemate and agreed to endorse a trillion-dollar fund to rescue troubled euro-zone members, French Finance Minister Christine Lagarde told her delegation the euro zone was on the verge of breaking apart, according to people familiar with the matter.

 The story points how France and Germany differed on the policy options and delayed the decision till the eleventh hour (read this interesting paper as well).

It is contrasting to how things were managed in India. Indian policymakers  were very quick and reacted to the situation aggressively. They did not leave it to the markets. But it was far more easier in India as it comes under one government. EMU was 16 countries and each one having different agenda. The sad part of this whiole thing is how EMU policymakers  just kept delaying things.

This is another interesting rhyming/repeating of history. Just like we see new research showing France was equally responsible for great depression. So far, US was seen as the main villain.

Even in this crisis US is seen as the main villain. In fact in early part of the crisis EU policymakers rarely chided away from blaming the US for this crisis (not willing to blame US directly they called it transatlantic policies). Now, with articles like these (and these showing how EU policymakers were not fair with stress tests) one can just see how Europe again plays a key role in making this crisis so global and prolonged. Initially one thought as US goes down Europe could be the investment destination. Not anymore. Infact going by eurointelligence reports, things are really bad in Europe.

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