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External Publication

Reconciling risk sharing with market discipline: A constructive approach to euro area reform

This publication, written by a group of independent French and German economists, proposes six reforms which, if delivered as a package, would improve the Eurozone’s financial stability, political cohesion, and potential for delivering prosperity to its citizens, all while addressing the priorities and concerns of participating countries.

By: , , , , , , , , , , , , and Date: January 17, 2018 Topic: European Macroeconomics & Governance

After nearly a decade of stagnation, the Eurozone is finally experiencing a robust recovery. While this comes as a relief – particularly in countries with high debt and unemployment levels – it is also breeding complacency about the underlying state of the Eurozone. Maintaining the status quo or settling for marginal changes would be a serious mistake, however, because the currency union continues to suffer from critical weaknesses, including financial fragility, suboptimal conditions for long-term growth, and deep economic and political divisions. While these problems have many causes, a poorly designed fiscal and financial architecture is an important contributor to all of them:

  • The ‘doom loop’ between banks and sovereigns continues to pose a major threat to individual member states and the Eurozone as a whole. An incomplete banking union and fragmented capital markets prevent the Eurozone from reaping the full benefits of monetary integration and from achieving better risk sharing through market mechanisms.
  • Fiscal rules are non-transparent, pro-cyclical, and divisive, and have not been very effective in reducing public debts. The flaws in the Eurozone’s fiscal architecture have overburdened the ECB and increasingly given rise to political tensions.

The Eurozone’s inability to deal with insolvent countries other than through crisis loans conditioned on harsh fiscal adjustment has fuelled nationalist and populist movements in both debtor and creditor countries. The resulting loss of trust may eventually threaten not just the euro, but the entire European project.

Read more on VOX, CEPR’s policy portal

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Essay / Lecture

A new statistical system for the European Union

Quality statistics are essential to economic policy. In this essay, Andreas Georgiou demonstrates the existence of fundamental risks inherent in the European Statistical System. He argues that a paradigm shift is necessary and sets out a model that would deliver the quality statistics the European Union needs.

By: Andreas Georgiou Topic: European Macroeconomics & Governance Date: December 12, 2018
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Blog Post

Economic policy challenges in Southern and Eastern Mediterranean

For a long time, southern and eastern Mediterranean countries struggled with serious socio-economic challenges and dysfunctional economic systems and policies. Marek Dabrowski reviews the challenges the region has to face to get out of a low growth trap.

By: Marek Dabrowski Topic: Global Economics & Governance Date: December 11, 2018
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Blog Post

Providing funding in resolution: Unfinished business even after Eurogroup agreement on EMU reform

The recent Eurogroup agreement on euro-area reform foresees a greater role for the European Stability Mechanism (ESM) as a backstop to the banking union. This is a welcome step forward but important issues remain. We assess the agreement on how to fund banks after resolution and the best way to organise the fiscal role in liquidity provisioning to banks. We argue that the bank resolution framework will remain incomplete and its gaps could result in important financial instabilities.

By: Maria Demertzis and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: December 7, 2018
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Past Event

Past Event

How to speed up sustainable finance?

Which steps are needed to really change current practices and speed up sustainable finance?

Speakers: Sophie Barbier, Molly Scott Cato, Cathrine de Coninck-Lopez, Alain Deckers, Edmund Lakin and Dirk Schoenmaker Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: November 28, 2018
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External Publication

European Parliament

How to provide liquidity to banks after resolution in Europe’s banking union

Banks deemed to be failing or likely to fail in the banking union are either put into insolvency/liquidation or enter a resolution scheme to protect the public interest. After resolution but before full market confidence is restored, the liquidity needs of resolved banks might exceed what can be met through regular monetary policy operations or emergency liquidity assistance. All liquidity needs that emerge must be met for resolution to be a success. In the euro area, this can only be done credibly for systemically important banks by the central bank.

By: Maria Demertzis, Inês Goncalves Raposo, Pia Hüttl and Guntram B. Wolff Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: November 22, 2018
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Past Event

Past Event

Reviewing the EU fiscal framework

What are the positive and negative developments and is there scope for improvement?

Speakers: Niels Thygesen and Anne-Laure Delatte Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: November 22, 2018
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Blog Post

Euro-area sovereign bond holdings: An update on the impact of quantitative easing

Since the European Central Bank’s announcement of its quantitative easing (QE) programme in January 2015, national central banks have been buying government and national agency bonds. In this post the authors look at the effect of QE on sectoral holdings of government bonds, updating the calculations published initially in May 2016.

By: Michael Baltensperger and Bowen Call Topic: European Macroeconomics & Governance Date: November 20, 2018
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Blog Post

Could Italian private wealth compensate for flight of foreign bond-holders?

Italy’s deputy prime minister Matteo Salvini is "convinced" that Italians can help out their government, in the face of a widening yield spread between German and Italian government bonds. The authors assess the feasibility of recourse to household wealth in Italy, and estimate the relative importance of foreign debt-holders in the upcoming bond redemptions.

By: Jan Mazza and Silvia Merler Topic: European Macroeconomics & Governance Date: November 19, 2018
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Past Event

Past Event

EU Financial Markets: East Meets West

Banking and financial regulation in the East and the West: links, differences and future.

Speakers: Nicolas Véron Topic: Finance & Financial Regulation Location: Collegium Iuridicum II, Lipowa 4, Hall A3, Warsaw, Poland Date: November 16, 2018
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Blog Post

The consequences of Italy’s increasing dependence on domestic debt-holders

Bruegel’s updated data set of sovereign bond holdings illustrates how a rising share of Italian debt is held by domestic investors – a development with particularly significant implications, in the context of the Italian government’s disagreement with the European Commission over spending plans outlined in its draft budget.

By: Jan Mazza Topic: European Macroeconomics & Governance Date: November 6, 2018
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External Publication

Euro area reform: An anatomy of the debate

A year ago, a group of 14 French and German economists joined forces with the aim of forging common proposals for euro area reforms. Their report gave rise to a lively discussion among officials and academics. This Policy Insight summarises the group's proposals and also addresses some of the points raised in a subsequent VoxEU.org debate on the topic.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: November 5, 2018
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Opinion

Plädoyer gegen eine Politik der Scheinlösungen

Der Daueraufschwung verdeckt, dass Deutschland für die nächste Krise schlecht gerüstet ist. Und das Zeitfenster für Reformen schließt sich.

By: Jochen Andritzky Topic: European Macroeconomics & Governance Date: October 31, 2018
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