A European Exit Strategy. Bruegel Policy Brief 2009/05, 15 October 2009

This Policy Brief was adapted from a paper written by the three authors and presented by Bruegel Director Jean Pisani-Ferry at the informal ECOFIN Council meetings in Gothenburg, Sweden, on 1 Oct. In the brief, the authors argue that bank recapitalisation and restructuring should be a matter of urgency for EU member states and that governments should not undertake the necessary fiscal and monetary policy exit until problems within the financial sector are addressed. The authors also recommend that European states set debt targets to be reached by the end of 2014 and explain that proper incentives are necessary to ensure that an exit strategy, once implemented, is done so in coordination between various institutional actors. Such a policy framework should be in place by summer 2010, the authors say, in order to avoid a buildup of financial instability during the process.