Spain looks set to turn to the EFSF for a formal bailout subject to stringent conditionality. In this column, Francesco Giavazzi – one of Europe’s leading macroeconomists and an advisor to the Monti government – argues that Italy’s situation is nothing like Spain’s. To avoid submitting itself to its EFSF conditionality, Italy should reduce its borrowing needs with a determined programme of public asset sales and bridge financing from the Cassa Depositi e Prestiti.
Francesco Giavazzi, Monday, August 13, 2012
Uri Dadush, Zaahira Wyne, Shimelse Ali, Tuesday, July 24, 2012
The US and the Eurozone are slowly recovering after the bursting of their huge housing bubbles. Yet the hardest-hit states in the US have adjusted more rapidly than the most troubled European economies. This column examines differences between the US and Eurozone monetary unions that can help explain why.
Tito Boeri, Friday, July 20, 2012
Solving the EZ crisis will almost certainly involve some financial transfers in exchange for some loss of sovereignty. This column suggests a guiding principle for which policies should be under EZ control. Transfers of authority to supranational bodies must make a no-further-bailout clause credible.
Guillaume Gaulier, Daria Taglioni, Vincent Vicard, Thursday, July 19, 2012
Some view uncompetitiveness in the Eurozone’s periphery as the fundamental cause of the region’s crisis. This column presents evidence that rising unit labour costs in the periphery were not a cause but rather a symptom of the local demand shocks triggered by large capital inflows in the 2000s.
Paul De Grauwe, Friday, July 13, 2012
Paul De Grauwe of the LSE talks to Viv Davies about his recent Vox column on the potentially destabilising effects of the decisions taken at the last crisis summit of Eurozone leaders. He explains how the new recapitalisation role established for the ESM is doomed to fail and how the ECB is operating on the wrong business model. They discuss how full banking union will not be possible without a degree of political union, and how trust could create self-fulfilling positive outcomes for the Eurozone. The interview was recorded in London on 10 July 2012.
Natasha Xingyuan Che, Antonio Spilimbergo, Wednesday, July 11, 2012
A major cause of the Eurozone crisis is the difference in income and productivity between the core and the periphery. This column presents evidence suggesting that structural reforms can be instrumental in fostering the development of lagging regions within a country. It argues that this in turn can accelerate the rate of convergence across countries within a currency union.
Urs Birchler, Monika Bütler, Tuesday, July 10, 2012
Plans for an EZ banking union have been subjected to ‘dueling open letters’ by German-speaking economists. This column, by two Swiss-based economists, views the letters as closer than one thinks. The difference rests, not on economics, but on a judgement – will the the EU Summit’s promises be fulfilled, or is this one more instance of ever-larger dollops of euros and ever-emptier buzzwords?
Michael Burda, Hans Peter Grüner, Frank Heinemann, Martin Hellwig, Mathias Hoffmann, Gerhard Illing, Hans‐Helmut Kotz, Tom Krebs, Jan Pieter Krahnen, Gernot Müller, Isabel Schnabel, Andreas Schabert, Moritz Schularick, Dennis J Snower, Uwe Sunde, Beatrice Weder di Mauro, Monday, July 9, 2012
The EU Summit decision on banking union is being questioned by some economists in Germany. This column argues that a banking union is a critical step in ending the EZ crisis and building a more stable EZ financial architecture. It is a translation by Michael Burda of the German-language manifesto drafted by the First Signatories listed below and signed by over 100 economists.
Daniel Gros, Saturday, July 7, 2012
The EZ crisis – born as a debt crisis (Greece) – has grown up into a banking crisis (Ireland, Cyprus, Spain, …). This column argues that Spain is symptomatic of larger banking problems, so the EU Summit decisions on banking union are welcome and critical to any long-term solution. Yet someone must pay for Spanish bank losses. Spanish politics is shielding Spanish creditors, European politics is shielding EZ taxpayers, so the Spanish government will pay – and in doing so may go the way of Ireland. This crisis is far from over.
Luc Laeven, Fabian Valencia, Monday, July 9, 2012
Do advanced economies have an edge in resolving financial crises? This column shows that the record thus far supports the opposite view, with the average crisis lasting about twice as long as in developing and emerging market economies. It argues that macroeconomic stabilisation policies in advanced countries often delay the necessary financial restructuring.
Nicolas Véron, Friday, July 6, 2012
For many, Europe’s latest summit on 29 June effectively promised a banking union. This column praises the move but argues that this remains just a bare bones promise and the details are yet to be fleshed out. In the short term it calls for a temporary task force, akin to that used by the US for its auto industry in 2009, to help Europe’s failing banks.
Zsolt Darvas, Friday, July 6, 2012
The forefathers of Europe’s single currency argued that rather than devalue their currencies to restore competitiveness, countries could devalue ‘internally’. Against the current of bad press, this column presents a novel way of recording competitiveness and argues that Ireland, Spain, Latvia, and Lithuania have all managed these adjustments – but not without paying a huge toll in jobs lost.
Paul De Grauwe, Monday, July 2, 2012
Among the questions still remaining since last week’s summit of European leaders is whether the new measures will stabilise government bond markets. This column’s answer is ‘no’.
Paolo Manasse, Monday, July 2, 2012
Just as with Italy’s football team, Mario Monti has been hailed for beating the Germans – in his case at the recent EU summit. But this column argues that, just as with the football, Italy’s victory over Germany may soon lead to disaster.
Nicholas Crafts, Wednesday, June 27, 2012
Renewed calls are being made for a Marshall Plan for Greece. Yet this column argues that few people seem to understand what the Marshall Plan actually was. It suggests that repeating the 1940s’ recipe would mean a ‘structural adjustment programme’ targeting supply-side reforms and, as such, would probably appeal to Greeks even less than it would to Germans.
Rafael Doménech, Javier Andrés, Tuesday, June 26, 2012
The next meeting of the European Council takes place on 28 and 29 June amid growing fear and uncertainty over the Eurozone’s future. This column proposes a solution to the crisis – one that is bold and challenging, and that cannot wait.
Jeffrey Frankel, Wednesday, June 27, 2012
Solutions to the Eurozone crisis must balance the evils of austerity and moral hazard. This column argues that the blue/red Eurobonds proposal might just get this balance right.
Thorsten Beck, Daniel Gros, Dirk Schoenmaker, Sunday, June 24, 2012
After more than two years of efforts and innumerable emergency summits, the Eurozone crisis shows now signs of responding to treatment. This column argues that solving the Eurozone crisis requires policies that separate the banking and sovereign facets of the crisis. The losses incurred by Europe’s banks must be swiftly recognised by establishing a European Resolution Authority to identify weak banks and fix or liquidate them. Such an institution needs a fiscal backstop and the ESM should provide one. But this would not create Eurobonds – the very need for Eurobonds might to some extent disappear with a strong banking union.
Piero Ghezzi, Saturday, June 23, 2012
€100 billion in fresh support to the Spanish government failed to calm markets; private investors asked for even higher risk premiums on Spanish bonds. Conventional wisdom is that this reaction reflects the way any new official debt – which gets paid off first in case of distress – harms private debt holders. This column challenges this subordination logic and argues that Spain’s latest bank bailout announcement actually increased the value of privately held Spanish sovereign debt..
Paolo Manasse, Luca Zavalloni, Monday, June 25, 2012
If Greece defaults, what about Spain, what about the rest of the Eurozone, and what about the rest of Europe? “Contagion” has become a buzzword in international economics. This column asks whether markets are responding irrationally to the nightmare scenario or finally waking up to reality.