The Euro, European economics, finance, business and regulation

The potential benefits of the EU-US free trade deal may be much smaller than we have been led to believe

Last week, the latest round of talks on the EU-US free trade agreement got underway. Gabriel Siles-Brügge and Ferdi De Ville write that while an EU-US trade deal is assumed to generate a number of benefits, the reality may be far less impressive in practice. Rather than represent ‘the cheapest stimulus package you can imagine’, they argue the deal is a […]

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The EU’s latest agreement is still some distance from a fully-fledged banking union

Eurozone finance ministers have agreed a new system for dealing with failing European banks, with the agreement being seen as an important step toward creating a European ‘banking union’. Emmanuel Mourlon-Druol writes that while the aim of creating a banking union has been portrayed as a relatively recent phenomenon, it has a much longer history stretching back to the early […]

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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 […]

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EU summit meetings have had little effect on financial markets during the Eurozone crisis

European crisis management and EU summit meetings have become increasingly significant during the financial crisis. Dieter Smeets examines whether crisis meetings of European heads of state had a significant impact on Europe’s financial markets. He assesses their effect on member states’ sovereign bond yields, stock market indices and the exchange rate of the common currency, but finds limited impact. He […]

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The Eurozone is not suffering from an economic crisis, but a crisis of national politics

One of the most worrying aspects of the Eurozone crisis has been its effect on democracy. Sonia Alonso argues that while the crisis has weakened democracy in several countries, particularly with regard to the implementation of austerity policies against public opposition, this should not be understood as the imposition of technocratic policymaking from Brussels. She writes that national governments have […]

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The ECB rate cut was driven by the needs of Germany, not the needs of the Eurozone

Earlier this month, the European Central Bank cut its benchmark interest rate to a new low of 0.25 per cent, down from 0.5 per cent. Frances Coppola writes that the rate cut is unlikely to offer any help to the struggling economies in southern Europe. She argues that the rate cut was framed largely around the interests of Germany, and […]

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Optimum currency area theory provides important insights on how the Eurozone might be redesigned

Optimum currency area theory (OCA) is a body of work that was seen as highly influential by the Eurozone’s creators. As Holly Snaith writes, it is often framed as providing a ‘checklist’ of ideal policies against which – it is usually claimed – the Eurozone does not match up. She argues that the theoretical contribution of OCA is considerably more […]

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Angela Merkel will soften her stance on austerity and debt mutualisation, regardless of whether German citizens support it or not

One of the key issues in relation to the new German government is whether it will alter its course on European issues, in particular by relaxing the promotion of austerity policies and embracing some form of debt-mutualisation in the Eurozone. Gunnar Beck outlines eight reasons why Angela Merkel will relax her stance on austerity and debt mutualisation. He argues that […]

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Despite signs of recovery, the Eurozone crisis is still far from over

The Eurozone emerged from recession in the second quarter of 2013, with the single currency area’s GDP increasing by 0.3 per cent. Bob Hancké writes that although the situation in the Eurozone has improved, a closer look at the economic data would suggest reason for caution. He argues that the root cause of Europe’s sovereign debt crisis may not have […]

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Five minutes with Tim Harford: “It’s one thing to shut down parts of the US government, it’s another to blow up international financial markets”

Tim Harford is an economist, author and columnist at the Financial Times. His most recent book, The Undercover Economist Strikes Back: How to Run or Ruin an Economy, brought him to the LSE for a public lecture. In this conversation, he gives his views on a range of topics, from the role of central banks, to the actions of the […]

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Despite a reduction in the labour intensity of European exports, they continue to contribute to employment growth

Increasing the number of exports produced by European countries is a potential route to creating more jobs within the European Union. José Manuel Rueda-Cantuche writes on the impact of exports sent outside of the EU on European job creation. He notes that in addition to creating jobs in manufacturing industries, exports also create jobs in related service industries. Outlining the […]

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Strengthening ‘startup ecosystems’ is one potential option for boosting job creation in European cities

One of the key challenges European policy-makers face in the context of the Eurozone crisis is tackling rising unemployment rates. Katrin Suder, Holger Haenecke and Julian Kirchherr argue that strengthening startups is one potential avenue to revive an economy. Drawing on the results of a case study on Berlin’s ‘entrepreneurial ecosystem’, they outline a range of initiatives which can help […]

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Non-Community spending is a little known, but important part of Europe’s financial resources

Following lengthy negotiations earlier this year, the EU’s member states eventually agreed on the content of the 2014-2020 EU budget. Amélie Barbier-Gauchard writes that in addition to the budget, the EU’s member states also fund a number of projects and initiatives through ‘non-Community European spending’. This form of public spending involves EU members co-operating outside of the EU’s institutions, often […]

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The euro complements Northern European economies more effectively than those in Southern Europe

Why has the Eurozone crisis affected Southern European countries more severely than Northern European countries? Benedicta Marzinotto writes that it is necessary for monetary and fiscal policies to complement structural factors within an economy, such as labour market institutions. She argues that the transition to the euro created problems for Southern European countries as the single currency’s macroeconomic regime was […]

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The threat of Geert Wilders winning snap elections is likely to be enough to force a compromise on the Netherlands’ 2013 budget

In 2012, the Netherlands held snap elections following disagreement between Mark Rutte’s government, and Geert Wilders’ right-wing PVV over the country’s budget. Adam Evans writes that one year on from the elections, Rutte is once again facing difficulty negotiating support for the 2013 budget. He argues however that with the PVV enjoying high polling ratings, the prospect of forcing another […]

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Central bank governors in Europe are less likely to be removed from office if they have the same political affiliation as the current government

Over recent decades it has become the norm for central banks to be made formally independent from governments and political actors. Laurenz Ennser-Jedenastik writes that despite this insulation from the world of politics, the political affiliations and ideological positions of central bank governors have still played a significant role in their appointments and removal from office. Outlining the results of […]

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Spanish companies which employ former politicians have seen their business returns fall, but politicians can still give companies unfair lobbying advantages.

Many politicians choose to pursue a role in business following the end of their political careers. Pau Castells and Francesc Trillas assess whether the presence of former politicians in large businesses should be a cause for concern. They write that while in theory politicians might give companies unfair lobbying advantages, in reality this does not always lead to increased success. Using […]

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Including Canada and Mexico in an EU-US free trade agreement would create a genuine transatlantic market that would deliver significant economic benefits

Recent months have seen the beginning of negotiations between the US and the European Union toward a Transatlantic Trade and Investment Partnership. Michelle Egan writes that ‘comprehensive’ trade deals, such as this one, are easy to pursue or target, but are incredibly difficult to achieve. She also argues that including Canada and Mexico in the agreement, who are already linked to […]

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The US may show the EU the way forward on fiscal integration

The financial crisis has not affected all of the countries of the EU in the same way. Member states in the EU’s periphery are struggling with unemployment rates of over 25 per cent, while the core nations, such as Germany, have rates around 5 or 6 per cent. Using another currency union, the US, as a comparison, James Feyrer and […]

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Europe’s austerity policies may have created less unemployment in countries with liberalised labour markets.

Austerity policies have been linked to rising unemployment in European countries, but what effect have policies aimed at liberalising labour markets had during the crisis? Alessandro Turrini finds that contrary to expectations, austerity policies may have been responsible for creating more unemployment in countries with stronger employment protection legislation. One potential reason for this is that while countries with more […]

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