Fiscal consolidation: Too much of a good thing?

John Van Reenen 27 April 2012

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This week’s political events in the Netherlands and France which look likely to lead to government dissolution, have been interpreted as a set-back for the pace of fiscal consolidation in Europe with popular resentment punishing incumbent leaders (“Leaders in Austerity Backlash” was the headline of the Financial Times on 24 April 2012). The response of the European economic establishment has been to stay the course.

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Topics:  Macroeconomic policy

Tags:  eurozone, fiscal consolidation, Bond market, austerity

Divergence of fortunes in recoveries

Prakash Loungani, M Ayhan Kose, Marco E Terrones 24 April 2012

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The last global recession was the deepest of the four recessions the world has experienced since World War II. Each recession led to fears of economic apocalypse but the global economy recovered in a year or two. Because of the depth of the last recession, some analysts worried that the world would relive the Great Depression of the 1930s. Luckily, and through significant policy actions, the global economy has been on a path of recovery over the past three years, but still suffering from the legacies of the crisis.

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Topics:  Global economy

Tags:  eurozone, emerging markets, recovery

Fiscal austerity and policy credibility

Marco Buti, Lucio R Pench 20 April 2012

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The renewed phase of tension in Europe, and the Eurozone in particular, since the second half of 2011, with the prospect of a double-dip recession alternating with that of a sovereign-debt crisis, has reignited the debate on fiscal austerity, to which European governments have been committed since the end of the most acute phase of the crisis in 2009.

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Topics:  EU policies Macroeconomic policy

Tags:  eurozone, fiscal policy, austerity

Is the euro rescue succeeding? An update

Uri Dadush, Zaahira Wyne 20 April 2012

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The current gyrations of sentiment over government-bond spreads are diverting attention from the real issue – the Eurozone periphery needs a big realignment towards the tradable sector to reignite growth sustainably. 

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Topics:  EU policies Exchange rates Macroeconomic policy

Tags:  eurozone, Eurozone crisis, real exchange rates

Too early to sound the alarm

Manfred J M Neumann 17 April 2012

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Debt finance of public consumption has clearly gone too far in several countries. Too far in the sense that it has reached if not exceeded the borderline of sustainability. Have austerity measures meanwhile gone too far, too?

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Topics:  EU policies Macroeconomic policy

Tags:  eurozone, fiscal policy, austerity

The EZ breakup contest: Take ignorance seriously

Richard Baldwin 10 April 2012

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The Eurozone might not survive in its current form. Buiter and Rahbari (2012) put a likelihood of 50% on Greek exit – an event that would be something between an historic event and a global economic catastrophe (depending on how it was handled).

Europe needs planning to reduce the disruption arising from possible EZ exits. To do the job right, the planners will need to be experts on:

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Topics:  Macroeconomic policy

Tags:  eurozone, EZ breakup contest, Greek exit

The problems of European monetary union – asymmetric shocks or asymmetric behaviour?

Andrea Boltho, Wendy Carlin 31 March 2012

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Much of the literature that was sceptical of the prospective success of the euro feared the effects of Mundellian asymmetric shocks on an area which (unlike the US) had little inter-country labour mobility and no common fiscal policy. Early research, for instance, pointed out that Europe’s periphery, in particular, had suffered from large idiosyncratic shocks in comparison to Europe’s core, let alone to US regions (Bayoumi and Eichengreen 1992). This, many felt, could create difficulties for the operation of a monetary union.

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Topics:  Europe's nations and regions

Tags:  eurozone, growth, governance

From vicious to virtuous: A five-point plan for Eurozone restoration

Marco Buti, Pier Carlo Padoan,

Date Published

Tue, 03/27/2012

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http://www.cepr.org/pubs/PolicyInsights/CEPR_Policy_Insight_061.asp

Download CEPR Policy Insight No. 61 here [1]. [1] http://voxeu.org/sites/default/files/file/PolicyInsight61.pdf

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eurozone, growth, fiscal consolidation

From a vicious to a virtuous circle in the Eurozone - the time is ripe

Marco Buti, Pier Carlo Padoan 27 March 2012

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The economic and financial crisis in the Eurozone is in its fourth year. In late 2011, it had evolved dangerously into a vicious circle of sluggish growth, tensions in sovereign debt markets and banking sector fragility. Investor confidence in the Eurozone seemed on the verge of collapse, many sovereigns and banks struggled to access market funding and the future of the Eurozone was widely questioned in financial markets and the policy debate.

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Topics:  Macroeconomic policy

Tags:  eurozone, growth, fiscal consolidation

Fiscal consolidations for debt-to-GDP ratio containment? Maybe … but with much care

Gianluca Cafiso, Roberto Cellini 20 March 2012

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In recent time a wide debate has been developing concerning the effects of restrictive fiscal policies on the dynamics of the debt-to-GDP ratio (eg Corsetti and Müller 2012). The debate is nourished by the current experience of EU countries, where fiscal-consolidation policies are implemented.

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Topics:  Macroeconomic policy

Tags:  eurozone, debt, austerity

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