Economic Policy

181 - 210 of 594
31 March 2011

The recent economic and financial crises have shown the weakness of EU economic governance. A process of strengthening macroeconomic and fiscal surveillance started in the course of 2010; among other proposals, the European Commission suggested a new binding criterion of debt reduction: debt-to-GDP ratio is to be considered sufficiently diminishing if its distance with respect to the 60% of GDP reference value has reduced over the previous three years at a rate of the order of one-twentieth per year.

28 March 2011

In a new EuropEos Commentary, Stefano Micossi conducts a post mortem on the comprehensive economic policy package agreed at the March 24-25th European Council and finds that the new measures effectively complete the economic arm of economic and monetary union and promise an end to stagnation and dismal employment performance throughout the EU.
Stefano Micossi is Director General of Assonime, the Association of Joint Stock Companies incorporated in Italy; Professor of Economics at the College of Europe, Bruges and member of the CEPS Board of Directors.


21 March 2011

After the Greek public debt crisis and the bilateral loans to Greece from the other members of the European Monetary Union (EMU), in May 2010 the Ecofin Council launched the European Financial Stabilization Mechanism (EFSM). In June of the same year the EMU countries instituted the European Financial Stability Facility (EFSF). These two mechanisms, which are charged with providing support to EMU countries in “exceptional difficulty”, received their baptism of fire with Ireland in January 2011 and successfully made their first bond issue on the market.

18 March 2011

The economic philosophy behind the Competitiveness Pact now before the European Council can be summarized by two hypotheses:
1. If we fix (relative?) wages, no external imbalances can arise since relative costs determine export performance.
2. Higher productivity always means more ‘competitiveness’, and is thus always useful to reduce divergences.
On first sight, this Commentary finds that both theses seem to make sense, but on closer inspection, neither corresponds to reality.

18 March 2011

Europe now must decide which countries and banks have access to funding, and at what cost. Drawing on the timeless wisdom of William Shakespeare, Daniel Gros warns that those countries now struggling under a mountain of debt should have realized earlier that excessive reliance on borrowing invites excessive consumption and wasteful investment. But the leaders of Germany and the other creditor countries should also be aware that a lender can lose both its capital and its friends.
Daniel Gros is Director of the Centre for European Policy Studies.

16 March 2011

At the European Council on 11 March 2011, EU leaders agreed to the outlines of a new mechanism to deal with eurozone debt problems after the current mechanism expires in 2013. This Commentary argues that this mechanism is a continuation of the leaders’ preference for ‘tough talk and soft conditions’ and warns that the package is merely the next step down the slippery slope of EU taxpayers sharing the burden with Greek taxpayers.
Daniel Gros is Director of CEPS.

15 March 2011

The pricing of sovereign credit risk is a necessary component of the financial architecture of the European Monetary Union. However, unnecessarily high and volatile risk premia on government bonds are currently preventing effective financial intermediation within the euro area, thereby inhibiting its economic recovery.

09 March 2011

Europe’s leaders have promised to find by the end of this month (March 2011) a comprehensive package, not only to end the euro crisis, but also to preserve the stability of the euro for the future. In the view of CEPS Director Daniel Gros, they are unlikely to succeed, unfortunately, because most of the elements of the package on the table so far at least deal with the symptoms and not the underlying cause of the crisis.

09 March 2011

At its forthcoming spring meeting, on March 24th-25th, the European Council will consider a comprehensive package of measures that can open a new age of European economic governance: one that is truly collective; capable of enforcing economic policy coordination and preventing the build-up of unsustainable imbalances in government as well as private balance sheets; and backed up by credible, quasi-automatic sanctions for any member state posing a threat to collective stability.

08 March 2011

Turkey can look forward to important opportunities with respect to the innovative products and services that the health sector can generate. With a growing call for health services due to the size of its population and expanding insurance coverage, its geographical proximity to world markets and technological infrastructure, Turkey is a significant source of demand for innovative products and services from the health sector.

11 February 2011

Various forms of common ‘European bonds’, or more precisely eurobonds, have been proposed recently as a way out of the current euro crisis, with proponents stressing the promise of lower borrowing costs. While acknowledging that the proposal is tempting and even quite promising in theory, this Commentary by CEPS Director Daniel Gros finds it seems mostly to be wishful thinking.

08 February 2011

The financial crisis has affected trust in national and European governmental institutions in different ways. This paper analyses the determinants of trust in the national and European institutions over the last decade and comes to the conclusion that inflation reduces citizens’ trust only when the economy runs smoothly. In times of crisis, citizens do not worry about inflation but rather about jobs and the effects of a recession.

03 February 2011

This paper proposes a two-step, market-based approach to debt reduction:

28 January 2011

The debt crisis that hit the eurozone last year forced European leaders to develop new solutions to deal with the crisis. In this CEPS Policy Brief, Paul De Grauwe asserts that these solutions have been misguided by the idea that sanctions should be imposed everywhere in the system. He argues that too much emphasis was put on designing punishment mechanisms to deal with the crisis and to prevent future ones and that a greater role should be given to forgiveness.
Paul De Grauwe is Professor of Economics at the University of Leuven and Senior Associate Research Fellow at CEPS.

19 January 2011

The hangover from the rich countries' housing bust is likely to depress growth and keep unemployment high in 2011 – and for much of the next decade. But, as CEPS Director Daniel Gros explains in this new Commentary, the dream of homeownership is very much alive – and is a powerful economic force – in the emerging world.

19 January 2011

For the second time in a decade, central banks around the world have responded to the collapse of an asset bubble by moving aggressively to ease monetary policy, a tactic explicitly justified by the need to avoid a Japanese-style ‘lost decade’. The problem, however; as argued in this Commentary, is that Japan never lost a decade…
Daniel Gros is Director of CEPS.

14 January 2011

To help both the United States and Europe grapple with their rising levels of government debt and large budget deficits, this Commentary suggests that EU policy-makers might be well advised to consider an innovative albeit quirky approach devised by Slovakia to deal with the problem, in which the personal prosperity of top national officials is based not only on wage developments in the economy, but also on the country’s fiscal prudence.

21 December 2010

This Policy Brief argues that some important considerations are missing in the current heated debate in the eurozone on bail-outs and bail-ins, the size of liquidity facilities and the terms of a crisis resolution mechanism. It is organised in three sections, the first of which surveys the diverse outcomes since the launch of the euro. This illustrates how the benefits the euro can generate depend on the degree of openness, flexibility and income correlation among euro area countries: these are economic concepts which over time are affected by policies.

09 December 2010

 Stefano Micossi, Director General of Assonime and member of the CEPS Board of Directors, observes in a new EuropEos Commentary that there is something surreal to the unfolding financial crisis of the eurozone, as the leaders grudgingly do what is needed to prevent disaster just minutes before it’s too late, and then in the next minute revert to the same behaviour that had brought them against the wall in the first place.

09 December 2010

This paper provides evidence on past growth of productivity, analysing the evolution of labour productivity, capital deepening and multi-factor productivity. Based on a literature review of recent studies, it shows that economic growth is increasingly attributable to the accumulation of intangible capital and that consequently, an increasing share of conventionally measured rise in labour productivity has, in fact, been ploughed back into the economy as intangible capital formation.

08 December 2010

Citing evidence that the levels of net trust in the national parliaments have dropped to -50% in three of the four troubled periphery eurozone countries (Ireland, Spain and Greece), this Commentary warns that the European and national policy-makers’ strategy of the three no’s – no bail-out, no default and no exit –appears to threaten political stability in these countries.
Felix Roth is a Research Fellow at CEPS.

07 December 2010

In an open letter to the President of the European Council in the run-up to the December meeting that will deliberate on new rules of economic governance, a team of expert economists from CEPS and EuropEos expresses serious doubt that the proposals under consideration are a sufficient cure for the economic plight of the European Union.

07 December 2010

In his latest Commentary, CEPS Director Daniel Gros draws an analogy between the situation in the eurozone for investors today and a crowded cinema with only one emergency exit: everyone knows that in case of fire, only the first to leave will be safe. To avoid a stampede, he calls upon the IMF and the ECB to show investors that they have enough funding to finance the simultaneous exit of all short-term investors by immediately widening the exit door and by prominently displaying huge fire extinguishers.

06 December 2010

Despite its large size relative to the small Irish economy, the bailout announced by the Eurogroup following its meeting of 28 November 2010 is not working, as evidenced by the continuing rise in risk premiums. CEPS Director Daniel Gros argues in this commentary that part of the problem lies in a seemingly innocuous provision in the proposed permanent successor to the current European Financial Stability Facility in 2013.

06 December 2010

Muddling through isn’t working. This commentary argues that troubled eurozone nations should simultaneously open restructuring talks while continuing to service their debts normally. Germany, France and other core eurozone nations would have to stand ready to recapitalise the banks most exposed to the restructured debt. The ECB would then stabilise the banking system and the EFSF would stabilise sovereign debt. This big bang could be prepared in a weekend; the market already seems to be pricing it in.

Daniel Gros is the Director of CEPS.

12 November 2010

This paper looks at the Slovak experience with euro adoption from the point of view of perceived versus actual inflation and with a focus on a specific set of non-tradable prices. It examines whether Slovak consumers experienced or perceived (or both) an unusual price jump at the time of euro adoption and the possible explanations for such a phenomenon.

10 November 2010

In this Commentary, Daniel Gros takes pains to discourage any great expectations from the 5th G20 summit taking place in Seoul, November 11-12, given the conflicting national policy imperatives that will be in strong evidence. He acknowledges, however, that a lot could be achieved through a frank exchange on key economic issues so that the world's leaders understand the concerns of their counterparts and agree to tone down the rhetoric.

10 November 2010

For decades, the world has complained that the dollar’s role as global reserve currency has given the US guaranteed access to cheap money. But there is no free lunch: in this Commentary, CEPS Director Daniel Gros tells the US that it must choose between job creation, which requires a more competitive exchange rate, and cheap financing of its external and fiscal deficits.

09 November 2010

Drawing an analogy with the ill-fated Exchange Rate Mechanism (ERM) of the pre-eurozone era, Paul De Grauwe argues in a new CEPS Commentary that the creation of a sovereign debt default mechanism is a very bad decision that will make the eurozone more fragile by making financial crises an endemic feature.

Paul De Grauwe is Professor of Economics at the Faculty of Business Economics at the University of Leuven and Senior Associate Research Fellow at CEPS.

09 November 2010

The Conclusions of the European Council on 28-29 October 2010 suggest the need for further consultations among the member states to design a “permanent crisis mechanism” to safeguard the euro area as a whole. This paper finds that the weakness of the current EMU governance is that it neither provides sufficient incentives for curtailing excessive lending and indebtedness, nor secures the level of political integration necessary to attain a sufficient degree of accountability in fiscal affairs. Any solution must address these two major flaws.