Copelovitch, Mark, Jeffry Frieden, and Stefanie Walter. "The Political Economy of the Euro Crisis". Comparative Political Studies, Vol.49, No.7 (2016): 811-840.

Copelovitch, Mark, Jeffry Frieden, and Stefanie Walter. "The Political Economy of the Euro Crisis". Comparative Political Studies, Vol.49, No.7 (2016): 811-840.

• The Euro Crisis is the most serious economic and political crisis in the history of the EU, with economic output in the EU in 2016 still below pre-crisis levels. The economic and financial ramifications have been more severe for Europe than was the Great Depression and the political fallout threatens the entire project of European integration and has resulted in domestic turmoil in several countries (811-812).
• General dissatisfaction with the EU reached the lowest levels ever after the Euro Crisis, while radical populist parties were greatly strengthened (815).
• The Euro Crisis has greatly increased public interest in monetary policy and the politicization of these issues, leading to greater public involvement and scrutiny of monetary and financial policy, as well as the rise of eurosceptic parties and increased criticism of the European project (832).
• Most analyses of the Euro Crisis have been too focused on the economic dimensions of the crisis, and have thus ignored how politics created the conditions for the crisis, impacted the response, and will shape the feasible solutions that the EU could take. Similarly, political analyses of the aftermath of the Euro Crisis fail to consider the unique economic factors, such as the internal balance of payments crisis within the EU, that drive the Euro Crisis (812-813).
• The European Monetary Union [EMU] was officially completed in January 1999, when 11 EU member states adopted the euro. The prospectus for the euro was generally positive even in early 2009, when the EU declared that the EMU had been an important part of the ability of the EU to withstand the 2008 financial crisis (814).
• The Euro Crisis began in late 2009, when Greece admitted that it had hidden the full extent of its budget deficits, which were far higher than imagined and far in excess of the limits imposed by the Stability and Growth Pact. Major ratings agencies responded by downgrading Greece's credit rating, resulting in the yields on Greek government bonds soaring to pre-1999 levels (814).
• Greece implemented some austerity measures, but still had significant budget deficits that it now had difficult financing. It asked the EU for assistance in early 2010, but this was not forthcoming until May 2010, when the EU agreed to work together with the IMF to provide assistance on the condition that Greece implements structural reforms and imposes austerity. The austerity policies triggered major domestic unrest in Greece (814).
• Massive resistance to austerity continued in Greece throughout 2010 and 2011, raising the possibility of 'Grexit', i.e., Greece abandoning the euro. After protracted negotiations, Greece and the Troika agreed to a second bailout of 130 billion euro, which also included a reduction in Greek debt owed to private creditors (815).
• In January 2015, Greece elected Syriza, led by Alexis Tsipras, on a platform of ending austerity and retaining the euro. The Syriza government demanded new terms, leading to months of deadlocked negotiations with the Troika and mounting liquidity issues in Greece. Prime Minister Tsipras called a public referendum on the bailout and imposed a bank holiday and capital controls. Greek voters rejected the bailout terms, but, under threats of being expelled from the Eurozone, the Tsipras government later accepted another bailout with even stricter terms (816).
• The crisis worsened throughout 2010, as massive credit busts in Ireland and Portugal as a result of the 2008 financial crisis caused bond yields on Irish and Portuguese government bonds to rise. The 'Troika' of the EU, IMF, and European Central Bank [ECB] bailed out Ireland to the tune of 85 billion euro in November 2010 and Portugal in May 2011 with 78 billion euro (815).
• Bond yields on Spanish and Italian government debt began to rise in 2011, following market turmoil and the bailouts of Ireland and Portugal. In June 2012, Spain received a 100 billion euro bailout to recapitalize its banking system (815).
• By 2014, growth had returned to Spain, Portugal, and Ireland. The continued crisis in Greece now exerted very little influence on the bond yield rates of these countries (816-817).
• To prepare for another crisis on the scale of Greece, the EU established the European Financial Stability Facility, which was given 440 billion euro to provide financial assistance to Eurozone members in crisis (814). In December 2010, it was agreed that the Stability Facility would be replaced by a permanent body, the European Stability Mechanism, that would begin operating in September 2012 (815).
• In 2010, the ECB approved extraordinary measures, including its purchase of sovereign debt from third-party holders (815). This measures were extended in July 2012, when the ECB initiated a new program of bond purchases and promised to do everything necessary to save to euro (816). The beginning of the ECB quantitative easing program in January 2015 has helped boost recovery and prevented a deflationary crisis (817).
• The EU also began negotiations in the aftermath of the Greek crisis to strengthen the Stability and Growth Pact and conduct greater surveillance of macroeconomic trends, as expressed in the Six Pact reforms adopted in December 2011. (814-815).
• In March 2012, all EU members except for the UK and Czechia, signed a 'fiscal compact' committing them balanced budgets (816).
• The Euro Crisis subsided in late 2012, allowing multiple countries to leave the assistance program: Ireland in December 2013, Spain in January 2014, Portugal in May 2014 (816).
• The Euro Crisis was primarily a balance of payments crisis within the EU, triggered by the sudden stoppage of capital inflows into deficit countries. The crisis was intensified by the lack of a lender of last resort, close ties between failing banks and governments, and the inability of deficit countries in the Eurozone to devalue their currency. All of these issues were built into the structure of the EMU and have yet to be resolved [as of 2016] (817).
• The underlying issue in the EMU is that all member states have mutually exclusive currency needs, with northern European states demanding currency stability and peripheral states experiencing high growth and needing a currency that could respond to inflationary pressures. The imposition of a currency with a low inflation rate on peripheral countries with rapidly growing economies meant that real interest rates were negative, encouraging massive borrowing and deficit spending. This gap was expressed in trade imbalances, as northern European capital savings was borrowed by peripheral Europe to finance private consumption and investment (818-819).
• Despite the appearance of major trade imbalances within the Eurozone in the first years of its existence, the EU did nothing to fix unequal capital flows. The EU had established the Stability and Growth Pact for this purpose, but it was ignored, including by France and Germany. Most European governments were reluctant to abandon the system, however, as they benefitted from the availability of capital and the demand for loans (819-820).
• No system of financial regulation existed at the EU-level, despite the integrated nature of the European financial markets, meaning that national regulators were generally unaware of broad macroeconomic trends and there was nobody to take responsibility during a Europe-wide financial crisis. European regulators were thus unprepared for the scope of the Euro Crisis and unable to muster an effective response (821).
• The belief that a financial crisis in one EU member would force a broader bailout was common, despite EU insistence to the contrary, leading actors to take greater risks on the assumption they would be bailed out, as expressed in low and converging borrowing costs for Europeans. This left European banks holding risky loans and allowed southern Europe to become heavily indebted (821-822). 
• Like all balance of payments crises, the Euro Crisis devolved into arguments over who would bear the costs of adjustment, with deficit Europe demanding a write down on debt and surplus Europe demanding harsh austerity and repayment of debts in full. The cost of adjustment have fallen primarily on deficit countries, specifically private sector workers and beneficiaries of public spending; this situation has mainly benefitted financiers and savers in surplus countries (822-823, 827).
• Source mine of discussions on IPE in Europe, monetary policy modeling, monetary union, and the politics of bailouts on pages 824, 825, and 826.
• The fundamental issues facing the Eurozone mean that it likely that a transfer union will need to be established, with fiscal powers given to the EU by national governments, or the Eurozone will continue to face the possibility of disintegration (826).
• The Euro Crisis is different from all prior debt and financial crises because the involved parties cannot devalue their currencies, the IMF is involved for the first time working among developed countries, and it takes place in the context of growing economic integration within a single market (827).
• Europe now bears disturbing similarities to Japan, which has suffered from a high debt burden, deflationary crises, and stagnant growth since the 1990s. High levels of debt in countries like Greece could doom those states to decades of stagnation, high unemployment, and deflation (833).
• The EU has not yet taken firm steps towards any of the solutions that would necessary to solve its growth and debt issues: increased labor mobility within the EU, a common lender of last resort, a strictly enforced and monitored stability and growth pact, and a strong fiscal union. There are no technical barriers to the adoption of these policies, only that they are political unpalatable (834).