Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The search for a solution began in early 2010 in Schäuble’s finance ministry. Apparently without prior coordination with Angela Merkel’s chancellery, Schäuble proposed that the EU should establish a European Monetary Fund (EMF), able to conduct within the eurozone the kind of restructuring, stabilizing and disciplining role that the IMF played on the global stage.21 One version of the EMF idea, pushed among others by Deutsche Bank’s chief economist, Thomas Mayer, was for the fund to backstop debts up to a limit of 60 percent of a country’s GDP. Above that level debts would undergo restructuring, with bondholders taking a proportional and uniform haircut.22 It was a strikingly ambitious proposal that reflected Schäuble’s deeply held federalist European commitments. He was keen to use the crisis to push forward the agenda of European integration left unfinished at Maastricht in 1992. If Berlin had thrown its full weight behind the idea of an EMF and if its budget had been set to an appropriate size—what were needed were hundreds of billions of euros—the crisis might have taken another course.