Revisiting the pain in Spain

Paul De Grauwe 07 July 2014

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The different macroeconomic adjustment dynamics in Spain – a member of a monetary union – and the UK – a stand-alone country – is stark. Paul Krugman popularised this contrast in his New York Times blog with the title “The Pain in Spain” (Krugman 2009, 2011), and commented on my own analysis in De Grauwe (2011).

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Topics:  Europe's nations and regions Global crisis Macroeconomic policy

Tags:  ECB, monetary policy, euro, EMU, Spain, monetary union, fiscal policy, UK, government debt, austerity, EZ crisis, Outright Monetary Transactions, currency depreciation

Job losses from the credit crunch during the Great Recession

Samuel Bentolila, Marcel Jansen 01 February 2014

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Policymakers in both Europe and the US are concerned about the economic implications of the current shortage of credit. As the International Monetary Fund put it recently, “policymakers want to support markets because the decline in lending is seen to be a primary factor in the slow recovery” (IMF 2013).

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Topics:  Global crisis

Tags:  Spain, Credit crunch, Great Recession, job losses

The new sustainability factor of the public pension system in Spain

Rafael Doménech, Víctor Pérez-Díaz 11 December 2013

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As in many other European countries, long-term trends in population growth and life expectancy in Spain make the current pay-as-you-go pension system unsustainable. A later baby boom and a recent immigration wave help explain why Spain has postponed the implementation of reforms already introduced in other European countries in the 1990s (see, for example, Chapter 1 of OECD 2012). A deep economic crisis has now revealed how dramatic the scenario really is.

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Topics:  Europe's nations and regions Welfare state and social Europe

Tags:  democracy, transparency, Spain, pensions, accountability, Sustainability

War of attrition between the parliament and the executive in 1575

Carlos Álvarez-Nogal, Christophe Chamley 21 October 2013

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The recent showdown between the parliament and the executive in the US began when a faction in the Republican Party tried to stop the implementation of the healthcare law of President Obama. They refused to raise the legislatively determined ceiling on the federal public debt – a ceiling that has to be raised with the growth of the economy.

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Topics:  Economic history Financial markets

Tags:  Spain, sovereign debt, financial crises, credit freeze

Unity in diversity: Protecting the common market with divergent macroprudential policies

Aerdt Houben, Jan Kakes 30 July 2013

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The credit crisis and ensuing sovereign crisis powerfully illustrate the limitations of traditional macroeconomic policies to contain financial imbalances. Despite debate on the desirability to dampen credit cycles and asset-price fluctuations, countries have long been reluctant to include this in policy objectives.

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Topics:  Global crisis International finance

Tags:  Italy, Spain, Ireland, Greece, Eurozone crisis, Portugal, macroprudential tools, GIIPS

When good intentions go wrong: Effects of bank deregulation and governance on risk taking

Manuel Illueca, Lars Norden, Gregory F Udell 26 June 2013

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The motivation of economic liberalisation is to foster competition in order to increase allocative efficiency, economic growth and social welfare. This paradigm hinges on the assumption that firms maximise value and that more competitors in a market automatically leads to more competition.

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Topics:  Europe's nations and regions International finance

Tags:  Spain, liberalisation, banking

Are Germans poorer than other Europeans? The principal Eurozone differences in wealth and income

Giovanni D'Alessio, Romina Gambacorta, Giuseppe Ilardi 24 May 2013

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The Household Survey (European Central Bank 2013) is a joint project of the ECB and all the Eurozone central banks providing harmonised information on the balance sheets of 62,000 households in 15 Eurozone countries (all except Ireland and Estonia).1

Media hype had been generated by the ranking of the countries’ median household wealth results, especially by the fact that:

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Topics:  Europe's nations and regions

Tags:  Italy, Germany, Spain, household income, Greece, Eurozone crisis, household wealth

Budget balance, structural unemployment and fiscal adjustments: The Spanish case

Javier Andrés, Rafael Doménech 05 April 2013

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One of the most important questions in the current process of fiscal consolidation in many developed economies concerns the size and the pace of the adjustment. An excessive and/or too-fast fiscal retrenchment can have dramatic effects on unemployment and growth, while if it is too slow, it can prove to be ineffective and lack credibility in the eyes of the financial markets. Thus, when the debt-to-GDP ratio is high and there is limited fiscal space, the challenge is to find the proper balance between growth, efficiency and credibility of the fiscal adjustment.

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Topics:  Europe's nations and regions

Tags:  unemployment, Spain, fiscal policy, Eurozone crisis, structural adjustment

Another look at Ricardian equivalence: The case of the European Union

Thomas Grennes, Andris Strazds 28 February 2013

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The so-called Ricardian equivalence suggests that a government will have the same effect on private spending whether it raises taxes or takes on additional debt to finance higher government spending. The logic behind it is that as the government gets more indebted, people would put aside more money in expectation of higher taxes in the future. However, there is no consensus on the empirical validity of Ricardian equivalence (see Seater 1993 for a comprehensive review).

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Topics:  Europe's nations and regions

Tags:  Germany, Spain, UK, Greece, Eurozone crisis, Ricardian equivalence

Winners of a European banking union

Dirk Schoenmaker, Arjen Siegmann 27 February 2013

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The aim of the prospective banking union is to foster financial stability in Europe. The euro sovereign debt crisis has shown that financial stability cannot be managed effectively at the national level, because of the diabolic loop between national governments and banks (Alter and Schüler 2012). A truly integrated European-level banking system can do much to stabilise the Eurozone by breaking this diabolic loop.

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Topics:  EU institutions EU policies Europe's nations and regions

Tags:  Sweden, Spain, UK, Netherlands, Bailouts, Eurozone crisis, banking union

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