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