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Rethinking German Economic Policy

Cohen, Desmond, (2017), “Rethinking German Economic Policy”, Social Europe, 31 May It is only too evident that economic policy in Germany remains rooted in pre-Keynesian ideas that most macroeconomists rejected many years ago, and this helps explains the German Government’s intransigence in the face of persistent criticism – including now from the IMF. It has not been prepared to listen despite the fact that its policy stance has directly contributed to …Read More

Flexible labour markets, real wages, and economic recoveries: Views of economists

Den Haan, Wouter, Ellison, Martin, Ilzetzki, Ethan,McMahon, Michael, Reis, Ricardo, (2017), “Flexible labour markets, real wages, and economic recoveries: Views of economists”, VoxEU, 30 May Real hourly wage growth has behaved quite differently across countries over the past ten years. This column describes how the majority view of the latest Centre for Macroeconomics and CEPR expert survey is that low growth of real wages has had a positive impact on European …Read More

Is the recent increase in long-term interest rates a threat to euro-area recovery?

Clayes, Gregory, Efstathiou, Konstantinos, (2017), “Is the recent increase in long-term interest rates a threat to euro-area recovery?”, Bruegel, 29 May After reaching historically low levels in the first half of 2016, European long-term sovereign yields experienced a notable increase in the second half of 2016 and at the beginning of 2017, before stabilising in the last few months. The nominal long-term interest rate can be decomposed into the following components: …Read More

Bank bail-in: The effects on credit supply and real economy

Beck, Thorsten, Samuel Da-Rocha-Lopes, Samuel, Silva, Andre, (2017), “Bank bail-in: The effects on credit supply and real economy”, VoxEU, 26 May The new resolution and bail-in regime in Europe hypothetically lets banks fail without resorting to public funding. This column examines the effects of the bail-in of the Portuguese Banco Espírito Santo. Existing borrowers from the banks exposed to the bail-in experienced a negative impact on their credit supply from these …Read More

Bank resolution: The importance of a public backstop

Cecchetti, Stephen, Schoenholtz, Kim, (2017), “Bank resolution: The importance of a public backstop”, Vox Eu, 28 May 2017 The failure of Lehman on 15 September 2008, signalled the most intense phase of the Global Crisis of 2007-2009, fuelling a run on a broad array of intermediaries. Following Congress’ approval of the Troubled Asset Relief Program (TARP) funding that was used mostly to recapitalise US financial firms, the mantra of US regulators became …Read More

How Portugal’s leaders exploited the bail out to pass measures they already supported

Moury, Catherine, Standring, Adam, (2017), “How Portugal’s leaders exploited the bail out to pass measures they already supported”, EUROPP, May We recently conducted both an analysis of official statements and interviews with many of the main political actors that were in power during the sovereign debt crisis in Portugal (2010-2015). Our research highlights that both the crisis and the bailout made the executive stronger in relation to other domestic actors. Consequently, when …Read More

Financial integration in the Eurozone should not be a tough sell

Brosens, Teunis, (2017), “Financial integration in the Eurozone should not be a tough sell”, Vox Eu, 24 May Much progress has been made in recent years to improve the financial integration of the Eurozone. Banking union is the most important example. Increasing stability is an important objective. But let us not forget that an integrated financial market also helps European consumers and companies in a more direct way. A fully equipped …Read More

Welfare: Savings not taxation

Douglas, Roger, MacCulloch, Robert, (2017), “Welfare: Savings not taxation”, Vox Eu, 25 May Across many countries, the cost of publicly funded healthcare, retirement, and other welfare programmes are forecast to put rising pressure on government budgets. As a result, many nations are seeking to reform their welfare states so that costs to the government can be reduced, quality of outcomes increased, and the plight of low- and middle-income earners improved. Regrettably …Read More

Populism, Austerity And Democratic Deficit

Watt, Andrew, Andor, László, (2017), “Populism, Austerity And Democratic Deficit”, Social Europe, 23 May Critiques of the European Union target a political problem – the so-called democratic deficit – and an economic (and social) one: austerity, sometimes subsumed under the broader heading of neoliberalism. It is also often claimed or simply assumed that there is a connection between the two: the first being the main cause of the second. Bureaucrats …Read More

Governance and Ownership of Significant Euro Area Banks

Véron, Nicolas, (2017), “Governance and Ownership of Significant Euro Area Banks”, PIIE, May European policymakers and analysts often appear to assume that most euro area banks are publicly listed companies with ownership scattered among many institutional investors, a structure in which no single shareholder has controlling influence and that allows for considerable flexibility to raise capital when needed. Such an ownership structure is indeed prevalent among banks in advanced countries such …Read More