Lacklustre investment in the Eurozone: Is there a puzzle?
Marco Buti, Philipp Mohl, 4 June 2014
Investment in the Eurozone is forecast to remain below trend until 2015, with a particularly large shortfall in the periphery. Low investment reduces aggregate demand, thus lowering short-term growth, and it also hampers medium-term growth through its effect on the capital stock. This column highlights three causes of low Eurozone investment – reduced public investment, financial fragmentation, and heightened uncertainty – and proposes a series of remedies.
On the importance of investment for the Eurozone economy
According to the European Commission’s most recent forecast, real economic activity in the Eurozone is expected to recover at a moderate pace until 2015, and to remain significantly weaker than in the US (European Commission 2014a).
Topics: EU policies, Macroeconomic policy
Tags: banking union, Bankruptcy, European Commission, eurozone, Eurozone crisis, financial fragmentation, growth, investment, public investment, structural reforms, uncertainty
Delivering the Eurozone ‘Consistent Trinity’
Marco Buti, Maria Demertzis, João Nogueira Martins, 30 March 2014
Although progress has been made on resolving the Eurozone crisis – vulnerable countries have reduced their current-account deficits and implemented some reforms – more still needs to be done. This column argues for a ‘consistent trinity’ of policies: structural reforms within countries, more symmetric macroeconomic adjustment across countries, and a banking union for the Eurozone.
As argued in an earlier commentary, the financial crisis exposed important economic inconsistencies in the way that EMU operated.1 Although progress has been made, the reality is that more needs to be done.
Topics: Europe's nations and regions, Macroeconomic policy
Tags: banking union, debt, EMU, euro, eurozone, Eurozone crisis, fiscal consolidation, fiscal policy, imbalances, internal devaluation, Stability and Growth Pact, structural reforms
Structural reforms and regional convergence
Natasha Xingyuan Che, Antonio Spilimbergo, 11 July 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.
The Eurozone crisis is at heart a crisis of failed regional convergence and lack of structural reforms. The euro was supposed to facilitate a rapid convergence in the level of income and, most importantly, of productivity across countries.
Topics: Europe's nations and regions, Global economy
Tags: Eurozone crisis, regional convergence, structural reforms
A different country: Russia’s economic resurgence
Lúcio Vinhas de Souza, 13 June 2008
Russia has enjoyed impressive economic performance in recent years. This column takes stock of its success, identifies its growth drivers, and highlights the need for microeconomic and structural reforms.
Russia is now once again one of the ten largest economies in the world.1 Moreover, Russia is the third largest EU trade partner and one of its essential energy suppliers. This recovery makes Russia an economic – and political – actor that we cannot ignore.
Tags: economic performance, growth, Russia, structural reforms