The EU Economy: The Euro Area in 2009

The year 2009 may well have been one to forget for the euro area but it was undoubtedly one to remember for scholars of economic and monetary union (EMU). Although it lacked the high drama of 2007, which saw euro area money markets freeze following the collapse of the US sub-prime mortgage market (Verdun, 2008), and the suspense of 2008, which brought euro area banks to the brink after the demise of Lehman Brothers (Quaglia et al, 2009; Verdun, 2009), there was no shortage of action as the real effects of the global financial crisis continued to unfold. For economists, 2009 provided an opportunity to observe at close quarters the euro area’s response to a large symmetric shock with significant asymmetric effects. The euro area as a whole remained in recession as world trade experienced its worst slump since World War II and credit shortages squeezed firms and consumers. No euro area member escaped this recession but economies with a heavy reliance on exports (for example, Germany) and those facing significant financial losses (for example, Ireland) or sharp falls in housing prices (for example, Spain) experienced tougher times than most (Commission, 2009). For those with an interest in euro area governance, 2009 shed further light on EMU’s experimental approach to policy-making (Hodson, 2010). European