Similarities and Differences of the US and EU Financial Crises

Type: 
Lecture
Audience: 
CEU Community Only
Building: 
Nador u. 9, Faculty Tower
Room: 
309
Thursday, January 12, 2012 - 1:30pm
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Date: 
Thursday, January 12, 2012 - 1:30pm to 3:10pm

The lecture will focus on the common features and the specific differences of the US 2007-8 financial market meltdown and the EU financial crisis of 2011-12. A common feature of the two financial crises is that the deregulated financial market and a highly leveraged private sector created a financial boom which finally led to the bubble and subsequently to the bust. In both cases the banking sector was hit hardest and accelerated the crisis through a credit crunch and credit crisis. Whereas in the US this process was driven by a real estate boom and the issuance of complex securities (as bad assets), in the EU the treasury bonds of the periphery states were playing the role of the bad securities that became a problem for the banking system. In both cases a relatively unregulated banking system became the amplifier of the boom as well as the bust. Though the EU crisis is still evolving it appears to take a similar path as in the US. Whereas in the US the monetary and fiscal policy came to the rescue, this will be much harder to achieve in a less unified EU with limited power of the Central Bank, the heterogenous fiscal policies of the countries and the fragmentation of the banking regulations. But predictions are difficult in particular if it concerns the future. In the case of the EU, a still growing world economy may come to the rescue.