Ferdinando Giugliano, (2018), “Europe Plays With Fire on Italy Contagion”, Bloomberg Opinion, 5 December Italy’s populist rulers may have been hoping for some market contagion fear to help them win their budget standoff with Brussels, but so far it’s been a dog that didn’t bark. The economic program of the League and Five Star spooked investors in Italian government bonds, but failed to affect any other member state of the monetary union, …Read More
ECB’s huge forecasting errors undermine credibility of current forecasts
Zsolt Darvas, (2018), “ECB’s huge forecasting errors undermine credibility of current forecasts”, Bruegel, 6 Debember In its latest projections, on September 13th 2018, ECB staff foresaw a core inflation increase to 1.5% on average in 2019 and further to 1.8% on average in 2020 (core inflation does not include volatile items like energy and food). Such forecasts, along with the renewed euro-area economic growth and the fall in the unemployment rate, constituted …Read More
Here comes the next euro crisis
POLITICO, (2018), “Here comes the next euro crisis”, politico.eu, 27 November The most worrying thing is that Europe itself is becoming an ever-more salient issue cutting through parties, parliaments and populations. Pro- and anti-EU camps are competing in elections across Europe today. The next crisis will not be sparked by some unpredictable “black swan.” Rather it will be brought about by a self-fulfilling prophecy: Banking systems showing weaknesses, countries losing access to …Read More
A changing economic vote in Western Europe? Long-term vs. short-term forces
Ruth Dassonneville and Michael S. Lewis-Beck, (2018), “A changing economic vote in Western Europe? Long-term vs. short-term forces”, European Political Science Review, 21 November, https://doi.org/10.1017/S1755773918000231 Considerable research shows the presence of an economic vote, with governments rewarded or punished by voters, depending on the state of the economy. But how stable is this economic vote? A current argument holds its effect has increased over time, because of weakening long-term social and political forces. …Read More
European Banks With Bad Loans May Get Help From the EU
Alexander Weber and Silla Brush, (2018), “European Banks With Bad Loans May Get Help From the EU”, Bloomberg, 27 November Banks from Greece to Italy that are struggling to get rid of a mountain of bad loans may soon get some help from European Union lawmakers. A bill that’s nearing the finish line in Brussels would soften the capital hit banks usually face when they sell non-performing loans at a loss. …Read More
How to provide liquidity to banks after resolution in Europe’s banking union
Maria Demertzis, Inês Goncalves Raposo, Pia Hüttl and Guntram B. Wolff, (2018), “How to provide liquidity to banks after resolution in Europe’s banking union”, European Parliament, Committee on Economic and Monetary Affaris, 22 November When banks are deemed to be ‘failing or likely to fail’ in the European Union’s banking union, they are either put into insolvency/liquidation or enter a ‘resolution scheme’. The Single Supervisory Mechanism (SSM) typically decides that a bank …Read More
Pockets of risk in European housing markets
Jane Kelly, Julia Le Blanc, Reamonn Lydon, (2018), “Pockets of risk in European housing markets”, VoxEU, 25 November Loan-to-value limits and other borrower-based macroprudential measures are now used in two-thirds of advanced economies. This column uses survey data to document changes in credit standards in a cross-section of countries in the run-up to, and aftermath of, the financial crisis. There is clear evidence of laxer credit standards in countries that …Read More
Italy’s Populists Aren’t the Only Ones to Blame
Ferdinando Giugliano, (2018), “Italy’s Populists Aren’t the Only Ones to Blame”, Bloomberg Opinion, 26 November Italy was allowed to join the euro in May 1998 even though its public debt stood just below 120 per cent of gross domestic product. The so-called “Maastrich criteria” – which EU members must meet to enter the single currency – stated that government debt shouldn’t exceed 60 per cent of GDP. Failing that, the ratio should …Read More
When left-leaning parties support austerity, their voters start to embrace the far right
Maria Snegovaya, (2018), “When left-leaning parties support austerity, their voters start to embrace the far right”, Washington Post, 20 November Recently, former White House adviser Anthony Scaramucci declared that President Trump is a “blue-collar president” — which some observers find curious, given his wealthy upbringing and boasts about being a billionaire. And in Sweden’s general election in September, the far-right Sweden Democrats finished in third place with 18 percent of the …Read More
A monetary policy framework for the European Central Bank to deal with uncertainty
Gregory Claeys, Maria Demertzis and Jan Mazzaa, (2018), “Monetary policy framework for the European Central Bank to deal with uncertainty”, Bruegel, 22 November Central banks face new challenges. First, the potential long-term decline in neutral rates of interest in advanced economies could reduce the space for central banks to make policy-rate cuts. Second, the potential flattening of the Phillips curve (i.e. the weakening of the relationship between inflation and unemployment) in recent …Read More