The Euro Crisis. Political and Economic Perspectives
Science Po. Master Paris School of International Affairs:
Course outline

Session 1: A single currency for Europe



  •  B. Eichengreen and J.A. Frieden, "An analytical Introduction", in The Political Economy of European Monetary Unification,  Oxford : Westview Press, 2001

  • F. Van Esch (2012) Why Germany Wanted EMU: The Role of Helmut Kohl's Belief System and the Fall of the Berlin Wall, German Politics, 21:1, 34-52

available here

Session 2: The theoretical foundations of a common currency: the Optimal Currency Area (OCA)

Slides for sessions 2 and 3

Assignment: read  and answer questions


The Economics of Monetary Union, Paul de Grawe, 9th Ed. Oxford, chapters 1-4*

available here :Edition 2018,   Edition 2016, Edition 2012

  1. Give a simple definition of a monetary union

  2. What are the benefits of sharing a common currency?

  3. What are the costs of a monetary union?

  4. What are the adjustment mechanisms to limit these costs described in the theory?


Session 3: Was Europe an OCA and why it matters? 

​​Assignment: pick up only one of the two following readings and answer questions

Bayoumi, T., & Eichengreen, B. (1992). Shocking aspects of European monetary unification (No. w3949). National Bureau of Economic Research.

available here

Krugman, P., & Venables, A. J. (1996). Integration, specialization, and adjustment. European economic review, 40(3-5), 959-967.

available here

  1. What are the research questions in this paper? Describe their methodology to address it.

  2. What are their main findings?

  3. What are the policy implications?

Additional reading:

Feldstein, M. (1997). The political economy of the European Economic and Monetary Union: Political sources of an economic liability. Journal of Economic Perspectives, 11(4), 23-42.

available here

Session 4-5: Before the crisis, the accumulation of internal imbalances

Slides for sessions 4 and 5

Assignments: read and answer questions

Session 4:

J. Pisani-Ferry, The euro-crisis and its aftermath, Oxford University Press, chapter 6-8*

available here


  1. How did imbalances build up across Europe?

  2. Why wasn't crisis-prevention efficient?

  3. Why were the imbalances so pervasive?

Chen, R., Milesi-Ferretti, G. M., & Tressel, T. (2013). External imbalances in the eurozone. Economic Policy, 28(73), 101-142.

available here



  1. Give a simple definition of the current account and current account imbalances

  2. What are the main factors explaining current account imbalances in the euro zone?

  3. Why could imbalances keep growing during the first decade after the introduction of euro?

Session 5:

Dustmann, Fitzenberger, Schönberg and A. Spitz-Oener (2014), From Sick Man of Europe to Economic Superstar: German’s Resurgent Economy, Journal of Economic Perspectives, Vol 28 (1)



  1. Explain the main research questions of this article

  2. Explain the evolution of the distribution of real wages in Germany: what do the authors take away from this evolution?

  3. Explain the controversy in Germany about the role of Hartz reforms. What is the thesis of the authors?

Sessions 6-7: Bank-sovereign nexus during the crisis

Slides for sessions 6 and 7

Assignments: read and answer questions

V. Acharya, I. Drechsler and P. Schnabl, "A Tale of Two Overhangs: The Nexus of Financial Sector and Sovereign Credit Risks", Banque de France Financial Stability Review, 16, April 2012

available here


  1. Comment chart 3 and chart 4: describe and interpret

  2. Referring to the analysis reported in Table 1, What is the impact of sovereign risk on banks risk once controlled for bank rating?

  3. Conclude: explain the doom loop between banks and sovereigns

Session 8-9: Crisis Management : the economics and politics

Slides for sessions 8 and 9

Assignments: read and answer questions (3 different assignments)

J. Pisani-Ferry, The euro-crisis and its aftermath, Oxford University Press, chapter 14.

available here

Alesina, A., O. Barbiero, C. Favero, F. Giavazzi, M. Paradisi, “Austerity in 2009-

2013,” Research Brief, Cato Institute, February 2015


available here


Revisiting the evidence on expansionary fiscal austerity: Alesina’s hour? Iyanatul Islam and Anis Chowdhury

available here


  1. Describe the crisis management in Europe compared to the one adopted in the US.

  2. What explains the different approaches?

  3. What is the research question and the main findings in Alesina et al. (2015)?

  4. Explain the controversy about their findings according to Islam and Chodhury

Peter A. Hall (2012), The Economics and Politics of the Euro Crisis, German Politics

available here


1- Given your past readings how relevant is the analysis of the root of the crisis according to Peter Hall?

2- Briefly describe the management of the crisis

3- Why at is the politics of the crisis management according to Hall?

4- Do you share his analysis on the future of the Euro?

Jones, E., Kelemen, R. D., & Meunier, S. (2015). Failing Forward ? The Euro Crisis and the Incomplete Nature of European Integration, 1–25.

available here

Frieden, J., & Walter, S. (2017). Understanding the Political Economy of the Eurozone Crisis. Annual Review of Political Science, 20(1), 371–390.

available here


1- What is specific about the European integration process according to Jones et ali. (2015)?

2- What risks does this strategy imply?

3- Explain the political economy of the crisis management  according to Frieden and Walter (2017). In particular, describe the distributional effects.

4- What is specific about this crisis compared to previous balance of payment crises?

Howarth & Quaglia 2015), The Political economy of Banking Union: Howarth & Quaglia 2014

Gocaj & Meunier 2013: ESM ESF


Session 10-11: Lessons from the US Dollar History

Slides for sessions 10



Hugh Rockoff, ‘How long did it take the United States to become an optimal currency area?’, in Forrest H. Capie and Geoffrey E. Wood (eds.), Monetary Unions: Theory, History, Public Choice (London, 2003)

available here



  1. How did the US loose its central bank? Show the regional division

  2. Why did southern secessionists argue that the South would be better off as an independent country with its own independent monetary and economic policies even before the Civil war?

  3. What broke the monetary union? How was it reunified? Were the regional lines of dispute settled though?

  4. Was the US an OCA in 1890?

  5. What did complete the monetary union?


Session 12: Conclusion: How to Democratize Europe?

Slides for sessions 12

Christiano Thomas, Democratic, Legitimacy and International Institutions, eds. Besson, Samantha, and John Tasioulas. The philosophy of international law. Oxford University Press, 2010.

Moravcsik, Andrew. "Reassessing legitimacy in the European Union." JCMS: Journal of Common Market Studies 40.4 (2002): 603-624.

Follesdal, Andreas, and Simon Hix. "Why there is a democratic deficit in the EU: A response to Majone and Moravcsik." JCMS: Journal of Common Market Studies
44.3 (2006): 533-562.

available here

Sacriste G. and A. Vauchez, The Euro-ization of Europe, in "How to democratize Europe?", Harvard University Press (2019) available here



Extra session : The Rise of populism in Europe (New- Work in Progress)

Final assignment: instructions here