During the three years that have elapsed since the collapse of Lehman Brothers in 2008 –an event which heralded the most serious global financial crisis since the 1930s – CEPR’s policy portal Vox, under the editorial guidance of Richard Baldwin, has produced 15 books on crisis-related issues written by world-leading economists and specialists. The books have been designed to shed light on the problems related to the crisis and to provide expert advice and guidance for policy makers on potential solutions.The Vox books are produced rapidly and are timed to ‘catch the wave’ as the issue under discussion reaches its high point of debate amongst world leaders and decision makers. The topic of this book is no exception to that pattern. European leaders are gathering to search for a solution to the Eurozone debt crisis – proposals for the recapitalisation of Europe’s banks are high on the agenda.
Whilst many people were of the opinion that the banking crisis was more or less resolved two years ago and that the more pressing issue to tackle was the emerging sovereign debt crisis and the risk of contagion, the full extent to which sovereign risk and banking risk are in reality so dangerously intertwined has become increasingly clear – no big European bank is now safe from the potential impact of holding bad government debt. What began as a banking crisis in 2008, symbolised by the collapse of Lehman Brothers, soon became a sovereign debt crisis in Europe, which in turn has precipitated a further banking crisis with potentially massive global implications; if European banks fail then there will also be serious repercussions for Asian and US lenders too. Effectively, Europe’s problem is now the world’s problem. It is our sincere hope that this Vox book helps towards clarifying the way forward.
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