Currency wars and the euro

Jens Nordvig 25 November 2013

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A new battle for the ECB to fight

Last year, the ECB entered an existential battle for the euro. By promising to do ‘whatever it takes’ to safeguard the euro, the ECB managed to calm sovereign debt markets and engineer a much-needed easing of overall credit conditions in the Eurozone.

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Topics:  EU institutions Exchange rates Monetary policy

Tags:  ECB, eurozone, euro, unemployment, Bundesbank, Currency wars

Global and Eurozone imbalances: A question of civic capital?

Sascha Bützer, Christina Jordan, Livio Stracca 23 November 2013

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Macroeconomic imbalances have been the subject of much debate in recent years, and are still in the spotlight. Before and during the financial crisis, a lot of attention was devoted to global imbalances – in particular to the persistent current-account deficits of some countries (such as the US) and the persistent surpluses of others (such as China). With the advent of the Eurozone sovereign-debt crisis, the attention has shifted to imbalances within the Eurozone.

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Topics:  Europe's nations and regions International trade

Tags:  eurozone, global imbalances, trust, World Values Survey, civic capital

A bank restructuring agency for the Eurozone – cleaning up the legacy losses

Thorsten Beck, Christoph Trebesch 18 November 2013

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At the core of the Eurozone crisis is the deadly embrace between banks and governments. Sovereign fragility has led to pressure on banks’ balance sheets. The weak fiscal position of governments in many periphery countries, on the other hand, has led to delays in recognising bank problems and addressing them (Acharya et al., 2012). The situation, however, also has a political dimension, as regulators in many European countries have become too close to the regulated entities.

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Topics:  EU institutions Financial markets

Tags:  eurozone, banking crises, bank restructuring agency

Revisiting sovereign bankruptcy

Lee C. Buchheit , Beatrice Weder di Mauro, Anna Gelpern, Mitu Gulati, Ugo Panizza, Jeromin Zettelmeyer 12 November 2013

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Sovereign-debt crises occur regularly and often violently. The recent debt crisis in Greece almost led to the collapse of the euro. Yet, there is no legally and politically recognised procedure for restructuring the debt of bankrupt sovereigns.

Procedures of this type have been periodically debated – most recently, about a decade ago – when IMF management proposed a global sovereign debt restructuring mechanism (Krueger, 2002). Yet, they have so far been rejected.

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Topics:  EU institutions Global economy

Tags:  eurozone, IMF, sovereign debt crisis

Massacre memories: German car sales and the EZ Crisis in Greece

Vasiliki Fouka, Hans-Joachim Voth 23 October 2013

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When Angela Merkel visited Athens earlier this year, local protesters upset about austerity measures and alleged German dominance depicted her on placards wearing a Nazi uniform. Cypriots demonstrating against the terms of their country's bailout showed the stars of the EU surrounding a swastika. As the European debt crisis spreads, protests against austerity have become more frequent and often violent (Lynn, 2010 ).

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Topics:  Europe's nations and regions Global crisis

Tags:  eurozone, Greek debt

Banking union for Europe – where do we stand?

Thorsten Beck 23 October 2013

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In a few days, pending some last-minute diplomatic conflict between the UK and the European Commission, the ECB will begin an asset-quality review of European banks. This is supposed to be the entry point to the supervisory role of the ECB in the context of the Single Supervisory Mechanism (SSM), the first of three pillars of the planned banking union. Little political progress has been made on the other two pillars, bank resolution and deposit insurance, in spite of proposals by the EU Commission.

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Topics:  EU institutions Global crisis

Tags:  ECB, eurozone, monetary union

The impact of sovereign-debt exposure on bank lending: Evidence from the European debt crisis

Alexander Popov, Neeltje van Horen 06 July 2013

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The sovereign-debt crisis which erupted in the Eurozone in 2010 has sent ripples through the global banking system and prompted interventions by governments and central banks on a scale comparable to the programs implemented during the financial crisis of 2008-09. Its impact has reached far beyond Europe’s borders, with the IMF calling it “the most immediate threat to global growth” (IMF 2012). The consequences of the crisis, however, are not yet well understood and many questions have been raised regarding the link between sovereigns and banks.

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Topics:  Financial markets International finance

Tags:  eurozone, sovereign debt, bank exposure

Putting the ‘system’ in the international monetary system

Michael Bordo, Angela Redish 20 June 2013

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The Eurozone and Bretton Woods are prime examples of planned international monetary arrangements designed in each case to deal with the perceived flaws of earlier more ‘spontaneous order systems ‘based on domestic monetary institutions (Gallarotti 1995).

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Topics:  Economic history Macroeconomic policy

Tags:  eurozone, monetary policy, Bretton Woods

EZ banking union with a sovereign virus

Daniel Gros 14 June 2013

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The purpose of the proposed banking union is to de-link banks from their sovereigns.

  • Putting the ECB in charge of supervision and creating a common resolution mechanism should help.

But this is not enough.

  • European banks hold too much government debt of their own governments to really sever the sovereign-bank link.

Until the link is broken, the Eurozone will continue to be vulnerable to disruptive, self-reinforcing feedbacks of the type that brought the Eurozone to the brink of collapse in 2011-12.

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Topics:  EU institutions Europe's nations and regions

Tags:  eurozone, EZ banking union

Panic-driven austerity in the Eurozone and its implications

Paul De Grauwe, Yuemei Ji 21 February 2013

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Southern Eurozone countries have been forced to introduce severe austerity programs since 2011. Where did the forces that led these countries into austerity come from? Are these forces the result of deteriorating economic fundamentals that made austerity inevitable? Or could it be that the austerity dynamics were forced by fear and panic that erupted in the financial markets and then gripped policymakers. Furthermore, what are the implications of these severe austerity programs for the countries involved?

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Topics:  Financial markets Macroeconomic policy

Tags:  eurozone, financial panic, austerity

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