Paolo Gentiloni took over from Matteo Renzi as Italian Prime Minister in December, but the country’s politics remain volatile amid infighting within Renzi’s Democratic Party and calls from the Five Star Movement for a referendum on Italy leaving the euro. Miguel Otero-Iglesias highlights the widespread anger some voters feel toward the EU and Germany, but suggests that even if Grillo […]
Krugman’s argument that the Eurozone is not an optimum currency area could easily be applied to the US
In a recent conference, the distinguished economist Paul Krugman repeated the oft-heard critique that the eurozone is not an optimal currency area. Waltraud Schelkle disagrees with this characterisation, and argues that no country or group of countries represents an optimal currency area – one region or country always loses out from a single monetary policy. But countries can use […]
The euro should either be made growth and employment friendly as fast as possible, or it should be dismantled
Nobel laureate Christopher Pissarides was once a passionate believer in the benefits of European monetary union. In light of the damaging effects of the Eurozone crisis, he now writes that the euro requires urgent reforms to restore its credibility. He argues that the single currency should either be dismantled in an orderly way, or the direction of economic policy should […]
There is a significant divide in how countries of the Eurozone’s north and south react to changes in monetary policy.
The European Central Bank (ECB) is charged with maintaining price stability across the Eurozone, which it does via its monetary policies. While the euro has had some success in smoothing out the asymmetries within the Eurozone, Matteo Barigozzi finds that when the ECB changes monetary policy, the Eurozone’s southern countries experience fluctuations in prices and unemployment outside of the Eurozone’s […]
In past decades, the International Monetary Fund has had a potent reputation, especially in the developing world. In its programmes in Europe, however, the IMF has had to take a back seat to the desires of the European Commission and the European Central Bank, whose policies have thus far been less than successful. In light of this, Sony Kapoor makes […]
The DGB’s proposals for a new ‘Marshall Plan’ for Europe may mark the beginning of a discussion on the concrete alternatives to austerity.
For nearly five years, austerity has been touted as the only way to tackle the effects of the Eurozone’s financial crisis. Steve Coulter profiles a new initiative from the German trade union confederation, the Deutsche Gewerkschaftsbund, which aims to leverage Europe’s idle private capital via a ‘European Future Fund’. This fund would focus on green investment, as well as training, […]
Given the current economic crisis, and questions about the legitimacy of the European Union, what is the future of European integration? As the EU faces its most serious economic and political test, Luuk Van Middelaar’s account of its history asks us to reconsider the forces that underpin the EU, hold it together and drive it forward. Renaud Thillaye finds that […]
The connection between fiscal and monetary policy is currently under scrutiny by the German Constitutional Court in the context of the European Central Bank’s (ECB) Outright Monetary Transactions bond-buying programme. Paul De Grauwe and Yuemei Ji argue that most analyses are deeply flawed by the misapplication of private-company default principles to the central bank. ECB bond-buying transforms public bonds into […]
Poor economic performance may leave the UK with no choice but to join the euro if it wishes to remain in the EU.
In light of the Eurozone crisis, many commentators in the UK maintain that the Eurozone and the EU are doomed. Recalling the UK’s desire to remain apart from embryonic attempts towards European integration in the 1950s, Tim Bale argues that, should the euro survive, the UK may be unable to resist further integration. With a relatively poor outlook for growth […]
Contrary to what is promoted by the EU’s central bankers, higher taxes tend to coincide with lower deficits and low debt.
Eurozone central bankers have advocated cutting taxes as part of deficit reduction, placing the burden entirely on public spending cuts, while politicians across the eurozone have tended to prefer spending cuts over tax increases in implementing austerity. But are lower taxes the key to deficit reduction? Craig J. Willy looks at evidence from across the OECD and finds that higher taxes tend […]
Brussels blog round-up for 30 March – 5 April: A turbulent Easter for Cyprus, Iceland’s crowd-sourced constitution canned, and is the Eurogroup opaque?
Chris Gilson takes a look at the week in Brussels blogging. The EU centre and the crisis In the aftermath of the Cyprus bailout crisis, The New Federalist wonders if the Cyprus bail-in is now a model for rescuing EU member states. Meanwhile, Lost in EUrope says that the crisis has shown that the ‘euro bosses’ act arbitrarily, and that the […]
Brussels blog round-up for 23 February – 1 March: Beppe Grillo shocks Berlin and Brussels, Putin’s Eurasian Union ambitions, and should bankers’ bonuses be capped?
Chris Gilson and Stuart A Brown take a look at the week in Brussels blogging. The EU centre and the crisis According to Open Europe, after weekend elections, Cyprus is currently in the process of negotiating a large bailout, from the EU, IMF and the ECB. Real Time Europe reports that these negotiations must be successful by 3 June – when […]
Despite a historic fall in spending, last week’s budget deal will help to increase the EU’s effectiveness.
At last week’s European Council summit, the EU’s leaders agreed to a real terms spending cut to the EU budget for the first time. Despite this, Patrick Diamond and Renaud Thillaye argue that not only could the overall amount of money spent at EU level be higher in the next seven years, but that a great deal will also depend […]
Many commentators advocate a banking union as a partial solution to the eurozone crisis, arguing that it will break the ‘vicious circle’ between weak banks and weak sovereigns. Looking at the current role of the European Stability Mechanism, Sony Kapoor and Charles Goodhart write that a banking union may prove ineffectual because equity cannot be injected into weak banks or […]
As Europe’s fiscal union marches on, it is time for the centre-left to debate what it can do to make the eurozone more progressive
While the EU edges ever closer to fiscal federalism, it still lacks a federal budget, which would be able to assist areas of the eurozone that are in economic difficulty. Dan Corry argues that in the absence of a eurozone-wide federal budget, Europe’s centre left must begin to consider and debate measures that would help struggling regions, such as more […]
The December 2012 agreement on EU bank supervision is a good first step towards an effective banking union.
In December 2012 European finance ministers reached an agreement that will create a single European system of bank supervision, with the European Central Bank in charge of directly overseeing some of Europe’s largest banks. Jacopo Carmassi, Carmine Di Noia and Stefano Micossi welcome the agreement as a good first step towards a European banking union and discuss a number of […]
Brussels blog round-up for 8 – 14 December: French conservatives implode, Wilders resurgent, and should Europe accept higher inflation?
Chris Gilson and Stuart A Brown take a look at the week in Brussels blogging. The EU centre This week saw a European Council summit on banking supervision and further political integration in Europe. Place du Luxembourg has a good overview of negotiations on banking supervision, while the Bottom-up-blog at Blogactiv.eu has a checklist for discussions on political union. More generally, Simon Wren-Lewis […]
Member states will inevitably reach a compromise on the EU budget, but there is little chance of necessary reforms being carried out.
Last month’s European Council summit failed to secure an agreement on the next seven years of the EU’s budget (2014-2020). Ahead of another Council summit later this week, Jorge Núñez Ferrer writes that EU governments have the broad foundations for a compromise based around the proposals of Council President Herman Van Rompuy. He argues, however, that the eventual compromise will […]
Slovenia’s membership of the euro is only partly to blame for the country’s economic problems, however it could prove a decisive obstacle to carrying out necessary reforms.
Slovenia became the thirteenth member of the eurozone when it adopted the single currency in 2007. As Luka Oreskovic writes, the country was initially held up as a success story of the enlargement process, but the economic situation has deteriorated significantly since the start of the financial crisis. He argues that while joining the eurozone is not entirely to blame […]
A depreciation of the euro is not the silver bullet to solve the eurocrisis that many are looking for.
Some commentators are now advocating a devaluation of the euro, citing that this would help the uncompetitive economies of the South to export more to non-EU countries as well as benefiting the eurozone’s larger economies such as Germany. Bob Hancké assesses the merits of devaluing the currency, but finds that owing to the eurozone’s relatively closed nature as a trade […]