Greek paper raises ‘red flag’ over Emu integration

The recent financial crisis has "neutralised" the integration resulting from the creation of the Economic and Monetary Union (Emu) in both equity and bond markets, according to a Bank of Greece working paper published today.

In Putting the Emu integration into a new perspective: the case of capital market holdings, George Palaiodimos says that initial gains from the formation of the single currency have been "cancelled [out]" since 2007. This reflects the "post-crisis disintegration" of Emu capital markets both internally and globally".

"These findings should be seen as a red flag over the current level of financial integration, suggesting the need for a quick policy response for a new Emu architecture in the form of greater fiscal and banking integration and supervision," the author says.

"Only in this way will Emu become a true currency union."