Irish interest spreads did not fall and contagion continues. Here one of the world’s leading international economists explains why. Short-sighted, wishful thinking by EU and German leadership designed a package that is not economically feasible in the long run (it would trigger a vicious debt deflation spiral) and it is not politically sustainable in the short run. The Eurozone had better have a Plan B for when the new Irish government rejects the package next year and imposes a haircut on Irish bank bondholders.
Barry Eichengreen, Friday, December 3, 2010
Willem Buiter, Ebrahim Rahbari, Tuesday, October 12, 2010
CEPR Policy Insight No.51 explains how and why the fiscal crisis in the Eurozone came about and how it is likely to evolve during the rest of this decade.
The Editors, Tuesday, October 12, 2010
The saga of Greece’s public finances continues, and it is not the only country whose fiscal sustainability is in doubt. This column introduces a new Policy Insight by Willem Buiter and Ebrahim Rahbari that analyses the sovereign debt crisis in the Eurozone and the response of the national authorities, EU institutions, and IMF.
Harald Uhlig, Monday, October 4, 2010
Identifying recessions is crucial to guiding policymaking. This column reports the findings of the CEPR Business Cycle Dating Committee for the Eurozone for the last recession. It reports that the trough in economic activity occurred in the second quarter of 2009, marking the end of the recession that began in the first quarter of 2008. The recession lasted 6 quarters and the total decline in output from peak to trough was 5.5%. April 2009 marked a clear trough in industrial production, following the peak in January 2008.
Charles Wyplosz, Monday, October 4, 2010
Can the Eurozone’s Stability and Growth Pact be made to work? This column argues that the European Commission’s reform proposals for the pact include some good ideas but many bad ones. If adopted, it says the pact will not significantly advance fiscal discipline in the Eurozone but it could turn out to be a transition to an effective framework.
Daniel Gros, Friday, July 2, 2010
Daniel Gros of CEPS talks to Viv Davies about Vox's latest eBook, which brings together the views of leading economists on what more needs to be done to rescue the Eurozone. While not excluding the possibility of a breakup of the eurozone, Gros discusses a potential solution for Greece and the key role of the proposed stress tests on European banks, warning that the "devil is in the detail". The interview was recorded in late June 2010.
Dalia Marin , Sunday, June 20, 2010
Discussions about the current-account imbalance within the Eurozone have focused on the under-competitive periphery and super-competitive Germany. This column suggests that the argument ignores one powerful way that Germany lowered its relative unit labour costs. German firms offshored parts of their production to the new member states in Eastern Europe, Russia, and the Ukraine.
Richard S. Grossman, Friday, May 21, 2010
Richard Grossman of Wesleyan University talks to Romesh Vaitilingam about the role of gold standard in propagating the Great Depression – and what we might learn for the crisis in the world’s most important fixed exchange rate system of today, the eurozone. The interview was recorded at a conference on ‘Lessons from the Great Depression for the Making of Economic Policy’ in London in April 2010.
Paul van den Noord, Ralph Setzer, Guntram Wolff, Saturday, May 15, 2010
The monetary policy framework in the Eurozone emphasises the role of monetary aggregates, but less so their differences across member countries. This column argues that the surveillance of national monetary developments may prove useful, as they may have been masking diverging trends at the country level which had systemic financial stability implications for the Eurozone.
Charles Wyplosz, Wednesday, May 12, 2010
Markets liked the European Stabilisation Mechanism but a closer look shows that the money is announced but not available. When markets realise this, they may do to Portugal and Spain what they did to Greece. Worse still, crucial principles have been sacrificed for the sake of unconvincing announcements. The debt crisis is unlikely to go away and the monetary union will have to be reconstructed to re-establish the principle of collective fiscal discipline.
Michael Burda, Stefan Gerlach, Tuesday, May 11, 2010
This weekend’s plan has been received positively by the markets, but it is too early to call it a success. Future monetary historians may judge it either a brilliant move or the first step on a slippery slope to ruin. The EU needs to set up an independent institution to vet fiscal plans of Eurozone governments and apply a sliding scale of sanctions. If the euro is to survive the current decade, Greece cannot happen again.
Daniel Gros, Thomas Mayer, Tuesday, May 11, 2010
The European Stabilisation Mechanism is a major initiative, but is it enough? This column argues that more is needed. All EU bank supervisors should conduct stress tests to gauge their banks’ exposure to risky sovereign debt; those who fail should be re-capitalised or closed to ring-fence the problem. The ‘Mechanism’ should also be transformed into an institution that manages the Eurozone’s rescue contributions, supervises conditionality, and sets up mechanisms for orderly debt rescheduling should austerity programmes fail.
Giancarlo Corsetti, Sunday, May 9, 2010
Eurozone membership seemed to shield economies with structural problems from the “original sin” – the obligation to borrow in foreign currency while the ability to pay is in domestic currency. This column argues that the sin is still with Greece and other Eurozone nations with weak institutions. Reforms that boost the nation’s competitiveness or the government’s fiscal positions reduce short-term government revenue directly or via a recession. Solving the problem will require coordinated Eurozone intervention to correct internal imbalances
Barry Eichengreen, Friday, May 7, 2010
EU and IMF efforts to rescue Greece have failed to stabilise Europe's financial markets. Now there are significant concerns about Spain and Portugal's financial circumstances. This column says Europe needs to wake up, face the facts, and take action. It outlines what the IMF, ECB, and Eurozone members need to do to prevent the crisis from spreading. It may be too late for Greece, but it is not too late for Europe.
Gilles Saint-Paul, Wednesday, May 5, 2010
As world markets continue to raise concerns about Eurozone countries, this column argues that the euro has been a failure. Why should money be poured into Greece to "save the euro"? Besides the moral hazard effects of the intervention, it makes little sense to prolong a monetary regime which is actually one of the reasons why these Eurozone countries are in trouble.
Francesco Paolo Mongelli, Saturday, May 1, 2010
CEPR Policy Insight No. 47 argues that the benefits of a monetary union develop gradually over time and require policymakers to seize opportunities and perseverance in the face of adversity.
Francesco Paolo Mongelli, Saturday, May 1, 2010
Why would countries share a single currency? This column introduces a new CEPR Policy Insight and argues that some aspects are missing in the current debate on the merits of the EMU. Benefiting from monetary union is a matter of time, perseverance, and seizing opportunities.
Jacques Melitz, Sunday, May 2, 2010
CEPR Policy Insight No. 48 attributes the Greek-linked difficulty largely to the claim by the ECB and government officials in Eurozone member countries that the Eurozone is founded on fiscal discipline and the Stability and Growth Pact.
Jacques Melitz, Sunday, May 2, 2010
How should the Eurozone deal with the Greek fiscal crisis? This column introduces a Policy Insight that attributes the Greek-linked difficulty largely to the claim by the ECB and government officials that the Eurozone is founded on fiscal discipline and the Stability and Growth Pact. To guarantee a long-run future for the Eurozone, a change of doctrine is critical.
Patrick A Messerlin, Friday, April 16, 2010
If the US government does brand China as a “currency manipulator”, should the EU follow suit? This column argues that EU officials are likely to be low key on the issue. There are far too many imbalances within the EU, notably Germany’s trade deficit, so that any complaints about China are doomed to degenerate into intra-EU discord.