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Policy Contribution

In sickness and in health: protecting and supporting public investment in Europe

The long-term decline in gross public investment in European Union countries mirrors the trend in other advanced economies, but recent developments have been different: public investment has increased elsewhere, but in the EU it has declined and even collapsed in the most vulnerable countries, exaggerating the output fall.

By: and Date: February 7, 2014 European Macroeconomics & Governance Tags & Topics

The provisions in the EU fiscal framework to support public investment are very weak.The recently inserted ‘investment clause’ is almost no help. In the short term, exclusion of national co-funding of EU-supported investments from the fiscal indicators considered in the Stability and Growth Pact would be sensible.

In the medium term, the EU fiscal framework should be extended with an asymmetric ‘golden rule’ to further protect public investment in bad times, while limiting adverse incentives in good times. During a downturn, a European investment programme is needed and the European Semester should encourage greater investment by member states with healthy public finances and low public investment rates. Reform and harmonisation of budgeting, accounting, transparency and project assessment is also needed to improve the quality of public investment.

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Opinion

Alicia García-Herrero

South Korea and Indonesia: a capital match

Mutually beneficial Jakarta-Seoul relationship could develop further with an upgrade in Jakarta’s sovereign debt.

By: Alicia García-Herrero Topic: Finance & Financial Regulation, Global Economics & Governance Date: November 23, 2016
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Blog Post

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Trump, NATO and European defence spending

US President-Elect Donald Trump made critical statements about low European defence spending during the election campaign - signaling an expectation that Europe should contribute more to the cost of its security. Indeed, most European NATO members have spending well below the 2% target that NATO membership entails. Reaching this target could cost the EU27 NATO members 96 billion USD per year.

By: Justine Feliu Topic: European Macroeconomics & Governance, Global Economics & Governance Date: November 15, 2016
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Policy Contribution

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Are advanced economies at risk of falling into debt traps?

One of the consequences of the global financial crisis has been rapid growth in public debt in most advanced economies. This Policy Contribution assesses the size of public debt in advanced economies and considers the potential consequences of sovereign insolvency.

By: Marek Dabrowski Topic: European Macroeconomics & Governance Date: November 10, 2016
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Blueprint

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An anatomy of inclusive growth in Europe

This Blueprint offers an in-depth analysis of inequalities of income and wealth in the EU, as well as their causes and consequences. How evenly are the benefits of growth distributed in our economies, and what does this mean for fairness and social mobility? How could and should policymakers react?

By: Zsolt Darvas and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: October 27, 2016
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Blog Post

Silvia Merler

Should we rethink fiscal policy?

What’s at stake: there has been quite some discussion recently on whether we should rethink the framework of fiscal policy in order to make it more appropriate and effective in a world where demand seems to be chronically anemic, inflation is low and the interest rates are likely to stay close to zero (if not negative) for a long time. According to some of the authors, in the Eurozone these concerns are particularly pressing.

By: Silvia Merler Topic: Global Economics & Governance Date: October 24, 2016
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Past Event

Past Event

Potential impediments to long-term investment

How can we encourage long-term investment in Europe? Many factors hinder long-term investment but are there risks involved in reviewing existing regulation?

Speakers: Sophie Barbier, Grégory Claeys, Miguel Gil Tertre, Edoardo Reviglio and Sandra Rigot Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 4, 2016
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Blog Post

Silvia Merler

The US infrastructure investment debate

What’s at stake: Infrastructure investment has been and will continue to be a prominent campaign theme in the run up to the US elections. Both Hillary Clinton and Donald Trump have promised significant public investment in infrastructure. For some time, the discussion has revolved around the opportunities and costs of increased government infrastructure spending.

By: Silvia Merler Topic: Global Economics & Governance Date: September 19, 2016
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Policy Contribution

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What are the prerequisites for a euro-area fiscal capacity?

In this Policy Contribution, Maria Demertzsis and Guntram B. Wolff discuss three progressive steps for strengthening the fiscal framework at the euro-area level. These lead to less interference in national fiscal policymaking thanks to a more credible no-bailout clause, increased risk sharing and different degrees of provision of euro-area-wide public goods and fiscal stabilisation.

By: Maria Demertzis and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: September 9, 2016
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Blog Post

Jérémie Cohen-Setton

The fiscal stance puzzle

What’s at stake: In a low r-star environment, fiscal policy should be accommodative at the global level. Instead, even in countries with current account surplus and fiscal space the IMF appears to have trouble advocating fiscal expansion. This also raises a political economy puzzle regarding the persistence of the current policy mix of tight fiscal and easy money.

By: Jérémie Cohen-Setton Topic: Global Economics & Governance Date: August 29, 2016
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Opinion

Dalia Marin

What’s the matter with Austria?

Austrian firms invested heavily in Central and Eastern Europe. They offshored the parts of the value chain that required specialized skills and produced valuable research. This resulted in lowered growth in Austria.

By: Dalia Marin Topic: European Macroeconomics & Governance Date: August 9, 2016
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Opinion

Alicia García-Herrero

‘Old China’ bad, ‘New China’ good: Growing divergence in Chinese corporate health

Divergence in debt levels and corporate health in China is growing, with many state-owned companies still stuck in the past and new industries such as tourism and healthcare overtaking the old ones. While fiscal and monetary stimulus may temporarily cover up the problems of companies in the old industries, a restructuring of these sectors seems inevitable.

By: Alicia García-Herrero and Bruegel Topic: Global Economics & Governance Date: July 26, 2016
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Blog Post

Silvia Merler

Italy’s bail-in headache

Weakness in the Italian banking sector is a major concern for the euro area. Retail investors stand to lose out if BRRD bail-in rules are strictly applied, and many in Italy are seeking an exception for political reasons. However, Silvia Merler argues that this would set a dangerous precedent. She calls for an orderly bail-in, followed by compensation for investors mis-sold unsuitable products.

By: Silvia Merler Topic: Finance & Financial Regulation Date: July 19, 2016
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