Inflation in the euro area has finally reached 2%. But Draghi is right to warn that the underlying dynamics do not point to this being a self-sustaining trend. Breaking down the numbers shows that many inflation basket items are still showing weak price growth or even deflation.
The Commission's White Paper on the future of the EU sets out five scenarios, but misses the fundamental questions facing Europe. How should the EU interact with its neighbourhood? How can we manage the tensions created by multi-speed integration? And above all how can the Euro be made sustainable in the absence of a major step towards fiscal union?
This paper applies the info-gap approach to the unconventional monetary policy of the Eurosystem and so takes into account the fundamental uncertainty on inflation shocks and the transmission mechanism.
What’s at stake: the Financial Times reports that Peter Navarro, head of the US’s National Trade Council, has accused Germany of currency manipulation. He claims that the country uses a 'grossly undervalued' Euro to 'exploit' its trading partners. Angela Merkel replied that the Euro is managed by the European Central Bank, on which Germany does not exert influence. We review what the economic blogosphere thinks of this.
An analysis of macroecnomic developments shows that Central and Eastern European (CEE) EU member states fared much better in the aftermath of the crisis compared to euro-area periphery countries. Furthermore, they have a better chance to avoid the problems that the euro-periphery countries faced before the crisis.
Why is the Euro in trouble? Are philosophical differences between the founding countries to blame and can those differences be reconciled?
Jeroen Dijsselbloem, President f the Eurogroup, delivered the keynote speech at Bruegel's Annual Dinner 2016, held on 6 September 2016.
The recently published in-depth evaluation of the International Monetary Fund (IMF)’s role in the euro area crisis highlights important contrasts in the area of financial services. The IMF provided highly valuable analysis and recommendations to the EU on its banking sector and related policies. In individual countries (leaving aside Cyprus and the second Greek programme, not covered by this evaluation), the financial-sector aspects of the IMF’s interventions were highly successful in Ireland and Spain, ambiguous in Greece, and a missed opportunity in Portugal.
The sovereign debt crisis shook the Euro to its foundations. It soon became clear that there was no mechanism to allow a tidy insolvency of a state wishing to remain inside the euro area. To face future crises, does the EU need a sovereign insolvency mechanism?
Clearing houses in the UK operate an extremely sizable market in euro-denominated transactions. However, even though the numbers are big in value terms, in substance, clearing houses shifting to the continent will not make a big difference to the UK economy and employment. Arguably, there is a case for the ECB to claim that euro area business of clearing houses be relocated.
The current European fiscal framework is inefficient. It should be replaced with a system based on rules more suited to the two core objectives: public debt sustainability and fiscal stabilisation. The rules should be more transparent and easier to implement. These reforms would promote greater compliance.
Speech of François Villeroy de Galhau, Governor of Banque de France at Bruegel, Brussels, 22 March 2016.