The article first published in on 06/05/2017. At the time Italy joined the European Monetary Union (EMU) in 1999 on its way to full-fledged membership in the eurozone in January 2002, economists debated whether this never-tried-before experiment will succeed or not. One of the most compelling debates at the time was between two giants of monetary thought, Robert Mundell and Milton Friedman. Mundell, who is occasionally referred to as the ‘father of the euro’, for having laid out the theoretical foundations of a common currency, was optimistic, Friedman, the opposite.   Friedman is now dead while Mundell is 85, but the events in Italy may be bringing us closer to a resolution of the argument. So it is worth remembering the key points made by the two luminaries. Mundell, of course, pointed out the


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  It is commendable that membership in the Eurozone has become an immediate task for this government – including joining the interim ERM2. But the decision-makers at the top fail to look critically at key system features of the Bulgarian banking system. They prefer to focus on the technical criteria without assessing the level and depth of the challenges ahead before the convergence of the Bulgarian banking system into the Euro area.   Against this backdrop of events around the CCB crisis, how serious and credible is the institutional capacity in the central bank to tackle the banking and financial problems before reverting them to the Eurozone? The BNB oversees and guarantees the health of the banking system, at least in theory. Yet at the same time, two presidents, one


  This morning, as Italians go to the polls to vote in a constitutional referendum, European TV channels broadcast a special programme going to the root of the referendum – Italy’s banking crisis.   A series of senior bankers, chairmen and chief executives expressed their views.  None were optimistic.   The head of Societe Generale in Italy offered the view that there is no point recapitalising banks who have no realistic hope of making any profits.  Another said effectively that non-performing loans (NPLs) were bad, but the threats facing Italian banks from non bank lenders and technological developments were much worse.  Yet a third conceded that Italy should have copied Spain and applied for a bailout from the European Stability Mechanism (unfunded bailout fund).   Then the young interviewer met with Prime

Photo: Wikimedia Commons/ Markus Bernet

  Deutsche Bank, which is Europe’s largest investment bank, and one of the largest of the world, has attracted a lot of attention from regulators, analysts and media lately. News have not been good. In June the Fed announced the firm’s U.S. operation failed — twice in a row — the Fed’s stress test. An IMF research report awarded it the title of “the biggest contributor of systemic risk”. Impact of Brexit was predicted to take a material toll on its investment bank, headquartered in London.  As a result, Deutsche’s stock has been in a tear, with the market capitalization falling below EUR18bn, a quarter of its book value. Since early 2016 its credit default swaps (a measure of its credit risk) has sharply grown and has been trading in