Authors: Waltraud Schelkle, Heiner Flassbeck, Friederike Spiecker, Ansgar Belke, Christian Dreger, Hannu Piekkola

Editorial: The Euro Area After Another Crisis Summit: Ignore the Elephant in the Room at Your Peril

by Waltraud Schelkle

Forum: The Euro – a Story of Misunderstanding

by Heiner Flassbeck and Friederike Spiecker

From the very beginning of the European Monetary Union the crucial institutions, the European
Commission and the European Central Bank, led by mainstream economic thinking, were not
up to their task of controlling the core of the system effectively. A huge gap in competitiveness
among the member states has arisen due to German wage-dumping policy on the one hand
and, on the other, wage growth in Southern Europe which is above the growth of productivity
plus the infl ation target of 2%. A European-wide coordination of wage policy is the only
promising way to close this gap. However, as wages and competitiveness are not high on the
agenda of the politicians responsible and their advisers, time to save the euro is running out.

Article: Ramifications of Debt Restructuring on the Euro Area

by Ansgar Belke and Christian Dreger

The Example of Large European Economies’ Exposure to GreeceThe Greek government budget situation plays a central role in the debt crisis in the euro area. Strong consolidation measures need to be implemented, with potential adverse effects on the Greek economy and further credit requirements. Debt conversion might therefore become a reasonable alternative. The following paper provides some simulation-based calculations of the expected fi scal costs for the governments in the large European countries, Germany, France, Spain and Italy, arising from different policy options – among them a second Greek rescue package.

Article: Intangible Capital: the Key to Growth in Europe

by Hannu Piekkola

Intangibles and especially organisational capital are an important source of capital deepening
in European countries, albeit with signifi cant cross-country differences. The GDP in the EU27
area is 5.5% higher if certain categories of expenditure, which have until now been considered
as current costs, are classifi ed as investments in intangibles. Intangible capital investment
markedly improves the profi tability of companies, given the productivity-wage gap, and leads
to increasing returns in intangible capital intensive countries.