EU ministers apparently made little progress last week on terms under which the European Stability Mechanism (ESM) would recapitalize weak banks, though they still hope for an agreement by end month. That said, if a draft plan circulated by European Commission Secretariat is a guide, we are seeing another step in the disappointing (and risky) retreat from last year’s promise to decisively break the link between troubled periphery banks and their sovereign. This plan looks like more of a bruise, or a slight bend, rather than a break. The good news is that events likely will force a change down the road.
How does the attack on the two academic’s work change the landscape for macro policy, if at all?