Nicholas Comfort, (2018), “ECB’s Nouy Says EU Is Repeating Crisis Mistakes in Capital Rules”, Bloomberg, 5 December The European Union’s overhaul of bank capital rules show it’s forgetting some of the lessons of the financial crisis, according to Daniele Nouy, head of the European Central Bank’s supervisory arm. Nouy pointed to a provision in the draft legislation that would stop the ECB requiring banks to meet firm-specific capital requirements using only …Read More
Quantitative easing draws to a close, despite a faltering economy
The Economist, (2018), “Quantitative easing draws to a close, despite a faltering economy”, The Economist (print edition), 6 December Central banking can be agonising. The effect of monetary policy on the economy is not immediate, so decisions must be based on expectations for two years’ time. That means putting faith in forecasts that could well turn out to be wrong. Some soul-searching might be expected at the monetary-policy meeting of the …Read More
The French “Yellow Vest” Movement and the (Current) Failure of Representative Democracy
Olivier Blanchard, “The French “Yellow Vest” Movement and the (Current) Failure of Representative Democracy”, Peterson Institute for International Economics, 3 December Images of gilets jaunes in France—so named for the yellow vests they wear—have flooded news broadcasts in recent weeks. To trace the deep roots of their protests, one has to go back to the end of communism and the failure of central planning as an alternative to the market …Read More
Europe Plays With Fire on Italy Contagion
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