Does the Eurogroup’s reform of the ESM toolkit represent real progress? | BruegelThe deal reached on euro-zone reform at the December 4th Eurogroup is not ground-breaking. However, it contains a number of incremental but potentially key technical reforms – in particular regarding the ESM toolkit. Some constitute an improvement, but there are also clear flaws that should be corrected at the Euro Summit.
Italy’s new fiscal plans: the options of the European Commission | BruegelThe Italian government has announced an increase of its deficit for 2019, breaking the commitment from the previous government to decrease it to 0.8% next year. This blog post explores the options for the European Commission and the procedures prescribed by the European fiscal framework in this case.
Are SBBS really the safe asset the euro area is looking for? | BruegelThe European Commission is pushing to create a synthetic euro-area-wide safe asset in the form of sovereign bond-backed securities (SBBS). However, SBBS do not fully fulfil their original promises. If introduced on a massive scale, they might increase the supply of safe assets in good times and loosen the link between sovereigns and banks. But they will not give governments a means to maintain market access during crises, they might change incentives for governments to default, and they could pose a problem to individual bonds not included in SBBS if, in the end, they are put at a regulatory advantage vis-à-vis individual bonds.
Is the ECB collateral framework compromising the safe-asset status of euro-area sovereign bonds? | BruegelCentral banks’ collateral frameworks play an important role in defining what is considered as a safe asset. However, the ECB’s framework is unsatisfactory because it is overly reliant on pro-cyclical ratings from credit rating agencies, and because the differences in haircuts between the different ECB credit quality steps are not sufficiently gradual. In this note, the authors propose how the ECB could solve these problems and improve its collateral framework to protect its balance sheet without putting at risk the safe status of sovereign bonds of the euro area.
The Commission’s proposal for the next MFF: A glass half-full | BruegelThe Commission’s proposal for the next Multiannual Financial Framework provides a good basis for subsequent negotiations and includes a number of bold suggestions. But it has a number of deficiencies and some of the proposed tools are conceptually weak. We make proposals as to how to improve them.
Make euro-area sovereign bonds safe again | BruegelIn their recent Policy Insight, the team of French and German authors suggest introducing sovereign bond-backed securities to play the role of safe asset in the euro area. This column, part of the VoxEU debate on euro-area reform, argues that an improved euro-area architecture would, in the long run, make all euro-area sovereign bonds safer, and thus make the provision of safe assets through untested and potentially disruptive sovereign bond-backed securities unnecessary.
New EMU stabilisation tool within the MFF will have minimal impact without deeper EU budget reform | BruegelThe European Commission’s proposal for a new stabilisation instrument inside the EU budget for the countries of the economic and monetary union is disappointing. This analysis highlights the proposed instrument’s main limitations, as well as the restrictive factors that will persist without a deeper EU budget reform.
The European Globalisation Adjustment Fund: Time for a reset | BruegelIt is only in the last decade that the EU has had an active policy to reintegrate workers who lost their jobs as a result of globalisation, through the European Globalisation Adjustment Fund (EGF). In this blog, the authors assess the performance of the Fund and make three recommendations to improve its effectiveness. To be more successful, the Fund should improve its monitoring and widen the scope of its usage.
Debunking 5 myths about Frexit | BruegelFrench elections are fast approaching and the debate on euro membership is now in full swing. ‘Frexit’ supporters promise that the benefits of leaving the euro would be substantial for the French economy, that economic policy would be greatly improved, and most importantly that the exit process would be a piece of cake. This blog post shows that these claims are greatly exaggerated if not outright lies.
Amsterdam’s boom-bust housing market needs its own mortgage limits | BruegelHouse prices in the Netherlands are on the rise again. But at the local level the pattern is very uneven: house prices in major cities are rising faster than in the rest of the country. Yet, macroprudential policies in Europe are based on trends in national housing price indices. With such divergence between Dutch regions, is that appropriate?
Juncker plan: the EIB in the driver’s seat | BruegelAfter weeks of negotiations with the European Commission and the Council of the EU, the European Parliament on 24 June adopted the text establishing the European Fund for Strategic Investment (EFSI), the instrument at the centre of Commission president Jean-Claude Juncker's investment plan. Now that the details of the plan are available we can assess more precisely how it will work and what its impact might be on European growth and employment.
Keep calm … and reach a deal ASAP | BruegelA clear majority of Greek citizens has decided to decline the creditors’ proposal that was on the table on June 25. This result should not be over-interpreted and should be simply taken as it is, a clear NO to the policies that have been implemented in Greece over the last 5 years and that have failed to avoid a free fall of GDP 25% and a dramatic increase of unemployment to 25%
Inflation Surprises | BruegelWhile it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inflation expectations data allows us to get a sense of how inflation expectations have been evolving in the last few months.
ECB Quantitative Easing on track | BruegelOn 9 March 2015 the ECB began purchasing European sovereign and agency bonds and supranational debt securities under the Public Sector Purchase Programme (PSPP). Today, the ECB published its PSPP holdings and the corresponding weighted average remaining maturities for each member state and the supranational institutions after the first month of purchases.
The “Plucking Model” of recessions and recoveries | BruegelThe speed of economic recoveries is generally attributed mainly to economic policies. While this view might be true, a theory suggested by Milton Friedman in 1964 proposes a complementary hypothesis: strong recoveries are just natural after particularly deep recessions. This blog investigates the relevance of Friedman's theory for the recoveries currently taking place in Europe.
Deflation in France, hidden behind tax hikes? | BruegelThe significant divergence between the core inflation measures for France reported respectively by Eurostat and the national statistical office (INSEE) is due to the different definitions used. While the former defines core inflation simply as the overall inflation index excluding energy and unprocessed food, the INSEE defines core inflation as inflation excluding public sector prices, the most volatile consumer prices and tax measures.
Measuring Europe’s investment problem | BruegelUnder the leadership of Vice President Katainen, the Commission has designed a plan which will be announced this week. The announcement of the investment plan is scheduled to coincide with the announcement by the Commission of its assessment of national budgetary plans for 2015. Before evaluating whether the investment plan is sufficient to boost growth, there is a need to evaluate the extent of Europe’s investment problem, which is what this blog post does.
Do it yourself European Unemployment Insurance | BruegelTo illustrate our recent Policy Brief, this blog post proposes to give the reader the opportunity to take the main decisions on the design of a European Unemployment Insurance (EUI) Scheme and to visualize the evolution of the net flows from the scheme and its situation using a table, a line graph as well as a heat map of all European countries.
Is there a risk of deflation in the euro area? | BruegelEven though the euro area as a whole has not yet entered into deflation, this picture is worrying. Low inflation rates will make the relative price adjustment in the euro area more difficult, complicate debt deleveraging and put the sustainability of debt at risk.