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Analysis of the proposal „A constructive approach to Euro Area reform“

February 16, 2018 by andrew36 Leave a Comment

A group of 14 prominent economists, seven each from France and from Germany, has issued a detailed and rather comprehensive proposal for reform of the Euro Area (CEPR 2018).* This is a welcome initiative. There is a window of opportunity for reform in the Euro Area. Economically it has been created by the strengthening and increasingly broad economic upturn: policymakers can leave firefighting mode and focus on structural governance reforms. Politically it has been opened up by the 2015 report by the five presidents of the EU institutions, the initiatives by the new French President Macron, the proposals by the European Commission of December 2017, and, most recently, the declarations of intent on Europe emerging from the grand-coalition talks in Germany.

Together Germany and France account for half of Euro Area GDP. The authors of the report are all well-known in policy-oriented circles, while coming from different traditions. For all these reasons the report is set to be very influential. This appraisal follows the structure of the report itself, examining the underlying philosophy and problem analysis (1), the proposals relating to the financial sector (2), to fiscal governance (3) and finally institutional questions (4). An overall assessment with recommendations for extensions and alternatives concludes (5). [Read more…]

Filed Under: Commentary Tagged With: CEPR, ECB, economic governance, Emmanuel Macron, EMU, EU Commission, Euro Area, Euroreport, fiscal capacity, fiscal rules, France, Germany, Macroeconomic Dialogue, Macroeconomic Imbalance Procedure, Wirtschaftsdienst

Speech Pulse of Europe: On some recent developments in the Euro Area

June 6, 2017 by andrew36 Leave a Comment

The following text in German is a slightly revised version of a speech at the Pulse of Europe event in Dusseldorf, 4 June 2017

Der folgende Text ist die leicht überarbeitete Version einer Rede bei der Pulse of Europe-Veranstaltung in Düsseldorf, 4. Juni 2017

 

Mit dem neuen monatlichen Pulse of Europe-Veranstaltungsrhythmus haben wir die Chance, mehr Gedanken über Inhaltliches zu machen, darüber wohin sich Europa treibt. Wir wollen auf unseren Kundgebungen über neuste Entwicklungen berichten, und Debatten initiieren.

Heute möchte ich einige Neuerungen des letzten Monats aufgreifen, die gemeinsam haben, dass sie alle mit der gemeinsamen Währung, dem Euro zu tun haben.

Griechenland

Anfang Mai wurde ein neues Maßnahmenpaket in Griechenland beschlossen. Das ist aber leider keine gute Nachricht. Denn es sind weitere erhebliche Kürzungen der Renten beschlossen worden. Und der Grundfreibetrag wird stark gesenkt. Das sind Maßnahmen, die die Masseneinkommen und die Nachfrage weiter schrumpfen lassen und damit die Fortsetzung – sieben Jahre nach Ausbruch der Krise im Lande – einer gescheiterten Austeritätspolitik.

Im Gegenzug konnte sich die Eurogruppe aber nicht auf ein Paket von Schuldendienst-Erleichterungen oder anderen Unterstützungsmaßnahmen für Griechenland einigen, nicht zuletzt wegen des andauernden Streits zwischen der EU und dem Internationalen Währungsfonds. Dieser Zwist zwischen den Kreditgebern muss umgehend beendet werden – am saubersten dadurch, dass die EU die Verbindlichkeiten Griechenlands an den IWF übernimmt. Am 15 Juni tagt die Eurogruppe erneut. Wir sollten eine klare Botschaft an die Finanzminister, auch den deutschen schicken: Es kann nicht sein, dass Griechenland weiter am langen Arm verhungert.

Das bringt mich zu … [Read more…]

Filed Under: Commentary Tagged With: current account, deepening, Emmanuel Macron, EMU, EU Commission, Euro Area, France, Germany, Greece, Pulse of Europe, reflection papier

Après Macron – Schulz en marche?

May 10, 2017 by andrew36 Leave a Comment

On Sunday Emmanuel Macron embarks on a five-year term as President of the second largest EU country. An overwhelming two-thirds of those casting a valid ballot – and a sizeable 42% of all eligible voters – backed him. French people are weary of the political system, as manifested by the demise of the traditional centre-right and centre-left parties.  While France faces several problems, its economic and social model is far from the basket case that it is often made out to be by those antithetic to a large public sector and who want more liberté and less égalité et fraternité.

Nonetheless, the fact is that without external support Macron and his La République en marche! Movement/party will fail. The reasons for this are not the superficial ones linked to the candidate himself. His youth and inexperience are not the issue. He may lack a party machine but he does not need a parliamentary majority for the party emerging from his movement. I would be surprised if he fails to put together a working-majority coalition between centrists and the right wing of the social democrats (PS) and the left wing of the conservatives. With the PS pulverised and the Republicans demoralised, I don’t anticipate any shortage of takers.

His problem – and it is very much Europe’s problem – is rather that his programme is very unlikely to work electorally under prevailing circumstances. Essentially, ‘Macronism’ consists of a two-handed, and supposedly joined-up, strategy. At home, ‘structural’ reforms to increase competitiveness and stimulate growth, along with moderate fiscal consolidation to reduce government debt levels. In Europe, far-reaching changes to economic governance in the direction of a step-change in political integration, driven by a new and equal partnership between that old two-cylinder motor: Germany and France. The alleged link is that the efforts to strengthen France domestically will force Germany to recognize it as an equal partner, while falling debt levels reduce the perceived risk to German policymakers of pooling sovereignty.

There are many reasons why this sensible-sounding approach is highly unlikely to work, unless external conditions change for the better. [Read more…]

Filed Under: Analysis Tagged With: competitiveness, economic governance, elections, Emmanuel Macron, En marche!, Euro Area, fiscal capacity, France Germany, Martin Schulz, Merkel, public investment, Schäuble, SPD, structural reforms, unemployment

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Links to content I am involved in

  • My articles on Social Europe
  • IMK (EN pages)
  • iAGS - independent Annual Growth Survey
  • FMM - Research Network Macroeconomics and Macroeconomic Policy
  • Hans-Böckler Stiftung

Recommended links

  1. Mainly macro (Simon Wren-Lewis)
  2. Paul Krugman
  3. econoblog101 (Dirk Ehnts)