Three New Lessons of the Euro Crisis
Subramanian, Arvind. While some observers argue that the key lesson of the eurozone’s baptism by fire is that greater fiscal and banking integration are needed to sustain the currency union, many economists pointed this out even before the euro’s introduction in 1999. The real lessons of the euro crisis lie elsewhere – and they are […]
Europe’s Procrustean Nightmare
Henkel, Hans-Olaf. The European Union’s policy of saving the euro at all costs is enough to guarantee the euro’s survival. But is preserving the “one-size-fits-all” euro really worth sacrificing the eurozone’s competitiveness and, ultimately, European solidarity? Πηγή: Project Syndicate πλήρες κείμενο
Budget balance, structural unemployment and fiscal adjustments: The Spanish case
Andrés, Javier, Doménech, Rafael. Fiscal adjustment and structural reform are key parts of Eurozone bailout packages (or key features of government policy that aims to avoid such bailouts). This column argues that patience is the most prized virtue of policymakers implementing fiscal adjustment and structural reform. Reducing unemployment and fiscal consolidation are mutually reinforcing, but they […]
The Meaning of Cyprus
Gros, Daniel. The root of the problem in Cyprus is well known. Its two major banks had attracted huge deposits from abroad, largely from Russia, and presumably mostly from individuals who wished to escape scrutiny at home or elsewhere. The proceeds were then invested in Greek government bonds and loans to Greek companies. When Greece […]
One Size Fits None
Krugman, Paul. In today’s Business Insider, Joe Weisenthal reports on Europe’s truly dismal PMIs (survey-based indexes that act as early-warning indicators for official economic data). There’s no doubt at all that the continent is falling deeper into recession, even in the core countries. And reading this news reminds me of something I’ve been meaning to […]
Large banks relative to GDP: is there a risk beyond Cyprus?
Darvas, Zsolt. Are other EU countries with large bank balance sheet relative to GDP also running a risk similar to Cyprus? The answer is no. The major reason for the banking troubles in Cyprus is the massive losses that the two biggest banks have suffered. Πηγή: Bruegel πλήρες κείμενο
The capital controls in Cyprus and the Icelandic experience
Danielsson, Jon. Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment. […]
Banking Union with a Sovereign Virus: The self-serving regulatory treatment of sovereign debt in the euro area
Gros, Daniel. In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however, that the relative concentration of public […]
Where has all the (base) money gone?
Papadia, Francesco, Giuseppe Daluiso. The short answer is: into the liquidity trap[1]. The longer answer starts from two quotations from Milton Friedman, which give the essence (but not the subtleties) of monetary policy as it stood before the Neo-Wicksellian school concluded that prices, in the guise of interest rate, not quantities, as monetary aggregates, are […]
Ο από μηχανής θεός είναι σε διακοπές διαρκείας
Παπαγιαννίδης, Αντώνης. Η δραματικότητα των στιγμών -ακροβασίες χωρίς δίχτυ ασφαλείας, όντως- για την Κύπρο, δεν επιτρέπει να δούμε σε αρκετό βάθος το πόσους εσωτερικούς διχασμούς έχει φέρει αυτή η ιστορία στην «Ευρώπη». Δεν το επιτρέπει, γιατί; Διότι την έχουμε την τάση -και οι Ελλαδίτες και οι Κύπριοι- αποδείχθηκε αυτό με τη συνεχή προσδοκία επικουρίας από […]