Rules, Cooperation and Trust in the Euro Area

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Trust amongst citizens is a fundamental feature which facilitates economic and financial transactions. Without it we need often ineffectual detailed regulation to prevent uncooperative behavior, cheating, and the breaking up of contracts. Without trust courts get overwhelmed and socially useful public policies are unfeasible. In Europe, the recent Greek crisis has certainly reduced the level of trust amongst Europeans, especially along the North South axis. Thus, it will become more difficult to engage in the necessary regulatory reforms needed in the Euro area including a more integrated fiscal policy, a European level unemployment subsidy legislation and banking union.