Economic Policy


151 - 180 of 602
30 November 2011

The multiple attempts to restore confidence in the eurozone over the 18 months that have passed since the first Greek rescue in May 2010, have clearly failed. Indeed, following each round of emergency measures agreed by the eurozone summits, matters have turned for the worse. This contribution by Stefano Micossi exhorts the leaders of the eurozone to go back to the drawing board and overcome their political disagreements on how to proceed.

16 November 2011

In this analytical policy brief, CEPS Director Daniel Gros explores whether there is a fundamental difference between a formal sovereign default with a haircut and debt monetisation, which reduces the purchasing power for investors by the same amount. He argues that there is indeed a difference because a formal sovereign default invariably leads to a banking crisis.

16 November 2011

CEPS Senior Fellow Paul De Grauwe expresses astonishment in this new Commentary at the continued insistence in both Brussels and Frankfurt on budgetary austerity as the necessary and sufficient response to stop the government debt crisis in the eurozone. In his view, the austerity programmes should be softened and spread over a longer period of time, allowing the automatic stabilisers in the national budgets to prevent the economies from spiralling downwards.

08 November 2011

This contribution by CEPS Director Daniel Gros lays the blame for Italy’s poor growth, which presently poses an existential threat to the entire eurozone, squarely on the country’s abysmal record on such governance factors as corruption and the rule of law. Reversing this political decline will take years of national commitment – of which he sees little sign.

03 November 2011

Contrary to the high hopes being attached to the proffer of Chinese assistance at the G20 in Cannes this week, CEPS Director Daniel Gros warns in this Commentary that a large inflow of funds from China and other 'investors' could in fact do more harm than good. In his view, the incoming capital would strengthen the euro and thus make a recovery in the periphery even more difficult.

01 November 2011

Thirteen years after the Barcelona Process was launched, in 2008, Euro-Mediterranean relations were provided with a new framework for regional cooperation: the Union for the Mediterranean (UfM). Since then, the institution has attracted wide attention less because of its achievements than because of its stalemate. The much publicized cancellation of Heads of State Summits and Foreign Affairs Meetings, the delays in setting up the Secretariat and the empty chair policies pur- sued by its members were a blow to the institution’s credibility.

27 October 2011

Eurozone leaders agreed this morning on the rough outline of a package of measures designed to end the crisis in the eurozone. This commentary argues that a central pillar of the package will not work. The so-called ‘first-loss insurance’ of eurozone sovereign debt relies on an incomplete analysis of the underlying problem and the proposed solution.

Daniel Gros is Director of CEPS.

26 October 2011

This paper examines two questions related to the sustainability of the major neoliberal, economic and social reforms in the new EU member states, namely the flat income tax and private pension pillars. First, we look at the relationship between the political consensus/controversy at the time major policy reforms were passed and the future sustainability of these reforms after a change of government.

24 October 2011

Unlike the banking crisis of 2008; when governments had significantly lower debt burdens, governments today cannot recapitalize banks without triggering downgrades and renewed fears of sovereign default. In order to stop this downward spiral in the eurozone, a credible floor has to be put in place on the prices of government bonds. This CEPS Commentary argues that the European Central Bank is the only institution capable of imposing such a floor and breaking this vicious circle.

13 October 2011

The European Union should move quickly to enact an American-style ‘TARP’ in the eurozone to strengthen the financial sector and maintain lending, argues CEPS CEO Karel Lannoo.

12 October 2011

In his latest Commentary, Daniel Gros allows that the eurozone might just be stepping back from the brink. He attributes this welcome development to the inclusion of a key component that has been missing so far in any proposed framework to resolve the ongoing sovereign debt crisis, namely a liquidity backstop for the eurozone’s fiscal authority.
Daniel Gros is Director of the Centre for European Policy Studies.
 

28 September 2011

In light of the continued difficulties experienced by the Greek government to implement the promises it gave to its creditors and convince its own population of the need for further rounds of tough reforms in combination with investors’ doubts that the country will ever be able to grow out of its public debt, this CEPS Commentary reiterates the authors’ earlier proposal to take advantage of the low prices of Greek debt to implement a market-based approach to debt reduction.
Daniel Gros is Director of CEPS. Thomas Mayer is Chief Economist of Deutsche Bank.

19 September 2011

The recent constitutional reform agreed by the Spanish Parliament on 7 September 2011 aims to mitigate concerns over public finances by constraining the general government’s spending and borrowing capacity. In their analysis of this historic agreement, José M.

08 September 2011

With the completion of the latest rescue package for Greece – which relieved the country of short-term liquidity problems and eased the borrowing terms, but which made only a small dent in the overall debt burden – this Commentary explores the question whether Greece can now ’grow solvent’? The prognosis is not encouraging: given the country’s unfavourable demographic prospects and the small size of its tradable sector, Greece will face a huge task in growing out of its debt burden.

05 September 2011

Under extreme pressure from the financial markets and from Germany, member countries of the eurozone feel obliged to introduce balanced budget clauses into their constitutions. In this new Commentary, CEPS Senior Associate Research Fellow Paul De Grauwe explains why the balanced budget rule is a bad idea.
 

22 August 2011

‘Blue’ or Eurobonds guaranteed via joint and several liability by the eurozone member states have been proposed as an important tool to stabilise and structure the eurozone sovereign bond markets. But in this new Policy Brief, Hans-Joachim Dübel argues the case for a partial insurance of sovereign bonds by the European Stability Mechanism.
Hans-Joachim Dübel is an independent financial sector consultant based in Berlin and founder of Finpolconsult.
 

19 August 2011

As the Eurozone debt crisis reaches a turning point, this Policy Brief argues for a more organised intervention by the ECB to stop contagion through the creation of a quantitative easing programme, coupled with a political agreement among member states on a more federalist budget for the Eurozone.

18 August 2011

Investors are anticipating the unravelling of the 21 July 2011 ‘solution’. In this new CEPS Commentary, CEPS Director Daniel Gros and Chief Economist of Deutsche Bank, Thomas Mayer argue that the EFSF cannot work as intended but if it were registered as a bank the generalised breakdown of confidence could be stopped while leaving the management of public debt under the supervision of the finance ministers.

11 August 2011

In his latest Commentary, Karel Lannoo expresses frustration over the inconsistency between the latest Eurobarometer survey indicating is a clear indication of public support for EU institutions to more aggressively take the lead in resolving the economic crisis and the timidity of those institutions, with the possible exception of the ECB, to do so.

08 August 2011

The first act of the eurozone debt drama was about whether any European Union member country could ever become insolvent. It ended when the highest EU authority, the European Council, officially recognised in late July that Greece does need a reduction in its debt obligations. But that acknowledgement of reality does not end the drama. The second act will be about restoring growth prospects for the EU periphery, which will pose an even more difficult challenge.

04 August 2011

This paper asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders. Until recently, the European Central Bank performed this role either directly by buying government bonds, or indirectly by accepting government bonds as collateral in its liquidity provision to the banking system, but it has made it clear that it is now unwilling to continue to do so.

22 July 2011

In the immediate aftermath of yesterday’s European Council’s decision to effectively transform the European Financial Stability Facility (EFSF) into a European Monetary Fund, this CEPS Commentary explores whether the EFSF has enough resources to become a credible deterrent against a recurrence of the recent turbulences in the euro area sovereign debt markets. The authors argue that an increase in lending capacity of the EFSF, which has been agreed politically but has not yet been fully ratified, is urgently needed.

13 July 2011

This paper analyses the implications of a continued divergence of TARGET2 balances for monetary policy in the euro area. The accumulation of TARGET2 claims (liabilities) would make the ECB’s liquidity management asymmetric once the TARGET2 claims in core countries have crowded out central bank credit in those regions. Then while providing scarce liquidity to banks in countries with TARGET2 liabilities, the ECB will need to absorb excess liquidity in countries with TARGET2 claims.

12 July 2011

In this Commentary, CEPS Director compares the developments in Greece today with those that took place in Argentina in the decade leading up to its messy default in 2001-02, following its decision a decade earlier to peg its currency to the dollar. He sadly concludes that the Greek experience – so far, at least – looks like a replay of the Argentine drama.

01 July 2011

Since the onset of the debt crisis in late 2009, the comparisons between Greece and Argentina have multiplied, with an emphasis more on the similarities than the differences. This is not surprising given the stunning parallels. This Commentary draws a systematic comparison between the two countries over the decade before the crisis and the management of the crisis. Overall it suggests that there may be little left for Greece to do to avoid a repeat of the Argentine default, but on a larger scale.

01 July 2011

This Policy Brief by Christian Kopf examines the merits of a new proposal from France aimed at resolving the Greek debt crisis in which French commercial banks would swap €85.5 billion in Greek government bonds maturing between 2011 and 2014 into a combination of new long-term Greek bonds with principal guarantee and cash payments.

27 June 2011

The EU’s R&D policy has recently come under the spotlight. It is a central element both in the review of the EU budget and in the so called ‘Europe 2020’ strategy, where the goal of increasing the level of investment in R&D in the EU to 3% of GDP is emphasised. This report, commissioned by the Swedish think tank SIEPS (Swedish Institute for European Policy Studies), discusses the strengths and weaknesses of the Union´s R&D policy and examines areas in which the EU should pay particular attention in order to ensure that results are delivered.

23 June 2011

Protests continue in Greece as its leaders debate the latest suggestions for dealing with its crippling debt. One proposal is for Greece to privatise several of its assets. This Commentary argues that privatisation is a mirage. If solvency is the problem, privatisation will only make matters worse, especially if it has to be done at distressed prices.
Daniel Gros is the Director of CEPS.
 

23 June 2011

Pointing out that disorderly default or further bailouts are not the only solution to the Greek debt crisis, Daniel Gros and Thomas Mayer argue in this CEPS commentary that a sounder and less messy approach would be to take advantage of the current low prices of Greek debt to go for a market-based debt reduction.
Daniel Gros is Director of CEPS. Thomas Mayer is Chief Economist of Deutsche Bank.
 

26 May 2011

Based on the latest round of difficulties to emerge from the Greek financial assistance programme, this commentary concludes that there are serious flaws in the design of the eurozone’s crisis management system that periodically push the members to the brink of financial meltdown. He warns that the same is bound to happen again with Ireland and Portugal, and each time with higher risks that the fabric of cooperation within the eurozone will tear irreparably.