Europe's nations and regions

Wages, productivity, and employment in Italy

Paolo Manasse, Thomas Manfredi, 19 April 2014

Italy’s labour market productivity has been stagnating in the past decade despite numerous reforms. This column gives an explanation why this is so. By focusing exclusively on flexibility, past labour market reforms have completely neglected incentives. There is severe allocative malfunctioning in the Italian labour market. Wages do not reflect sector productivity in the short run, while in the long run they rise in sectors in which productivity falls. Thus, a comprehensive reform of the collective bargaining system is crucial.

UK growth: A new survey of macroeconomists

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 14 April 2014

Fears that the financial crisis will have a significant negative impact on long-term UK economic growth are unfounded, according to a majority of the UK macroeconomics profession surveyed by the Centre for Macroeconomics (CFM). What’s more, the inaugural CFM survey, summarised in this column, indicates some optimism about the UK’s immediate capacity for higher growth: while roughly half of the respondents share the views of the Office of Budget Responsibility, the other half is substantially more optimistic about the capacity for the economy to recover.

The increasing competitiveness of the southern Eurozone

Raphael Auer, 11 April 2014

Some view the improvements in current accounts for Greece, Italy, Portugal, and Spain as short-lived – the result of a temporary compression of import demand that is likely to be reversed as the recession eases. This column argues the contrary, based on the fact that their improving trade balances reflect better export performance. This development points toward a fundamental stabilisation of the competitiveness of these economies.

Delivering the Eurozone ‘Consistent Trinity’

Marco Buti, Maria Demertzis, João Nogueira Martins, 30 March 2014

Although progress has been made on resolving the Eurozone crisis – vulnerable countries have reduced their current-account deficits and implemented some reforms – more still needs to be done. This column argues for a ‘consistent trinity’ of policies: structural reforms within countries, more symmetric macroeconomic adjustment across countries, and a banking union for the Eurozone.

Six fiscal reforms for the UK’s ‘lost generation’

John Muellbauer, 25 March 2014

The generation born in the UK after 1979 has suffered grave disadvantages. By the early 2000s, housing had become very expensive relative to income; since 2007, labour market conditions for new entrants have been poor. University fees have increased, and soaring public debt will in future have to be serviced by this self-same generation. Restorative justice is one of the aims of the six fiscal reforms proposed in this column.

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