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Cambridge, September 3, 2016
Panel: Managing Debt Overhang Rolf Strauch (European Stability Mechanism), Jeromin Zettelmeyer (German Ministry of
Economics and Transport), Martin Weale (Queen Mary/Bank of England) Chair: Ramon Marimon
April 2010: Lava and ash
explode out of the
caldera of Iceland's
Eyjafjallajokull volcano
No one blamed Earth Scientists for not having
predicted the explosion and its severe impact.
Ex-post, we were told why there was no Sun in
Northern Europe for days and days in April 2010.
October 2008:
the three largest
Iceland’s banks
collapse, their
assets equal 11
times Iceland’s
GDP!
Greedy bankers were blamed, but also Economic
Science for not having predicted the 2008 financial
crisis and its severe impact.
Ex-post, we were told why the financial crisis turned
into an economic and social crisis but, nevertheless,
Southern Europe got into the euro crisis after April
2010.
Flaws of science or engineering?
or both?
(confusing science and engineering,
confusing engineering and housekeeping)
Science vs. Engineering vs. Policy problems:
being ahead and being behind
• Sci. ahead of Eng.
– Risk-sharing mechanisms
– The time-inconsistency of the Fiscal Compact
• Eng. ahead of Sci.
– The QE of the ECB
– Banking Union
• Sci. and Eng. behind Pol. prob.
– Debt overhang
– Fiscal Union
Cambridge, September 3, 2016
Panel: Managing Debt Overhang Rolf Strauch (European Stability Mechanism), Jeromin Zettelmeyer (German Ministry of
Economics and Transport), Martin Weale (Queen Mary/Bank of England) Chair: Ramon Marimon