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Confronting the Euro Crisis

Martin Wolf

Brown Journal of World Affairs: How did the focus of the global economic crisis move from the United States to Europe? What was the main driving mechanism? Martin Wolf: That's an interesting question. As you implied, the first view in Europe was that this crisis had nothing to do with Europe. It became obvious that European banks were quite heavily involved because they held quite a lot of subprime paper. Already, this made people worry about European banks. Then it was clear that the European economy was very badly affected by the downturn in the world economy in late 2008 and early 2009. There was a very big recession, which made lenders aware of risks. Associated with that event, a number of things started to happen. Some asset prices and markets started to collapse