High unemployment, bleak economic outlook, high public and private debts, dysfunctional banks, weak competitiveness, and an unfavorable external environment are just a few of the challenges facing southern members of the euro zone. Despite these hurdles, the ever-optimistic European Council and other leaders said in January that the euro crisis had bottomed out. Herman Van Rompuy, the president of the European Council, proclaimed, “The worst is behind us, in particular the existential threat to the euro.” Then there was Mario Draghi, president of the European Central Bank (ECB), who declared that “the darkest clouds over the euro area [have] subsided.” Read more
Bruegel blog
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The Euro Crisis: Mission Accomplished?*
28th February 2013
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Is struggling Europe on the right track?
27th February 2013
The latest European Commission outlook forecasts 2014 unemployment rates above 25 per cent in Greece and Spain, in the vicinity of 15 per cent in Ireland and Portugal, but close to 5 per cent in Austria, Germany and the Netherlands. In the same year it expects GDP per capita to be almost 7 per cent above the pre-crisis level in Germany, but about 7 percent below in Ireland, Portugal and Spain, and a terrifying 24 per cent below in Greece. So the deep economic and social divide that as emerged within the euro area is expected to linger. Read more
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Good deal for Ireland, but no magic bullet
12th February 2013
The promissory note deal announced last week by the Irish government and the Central Bank of Ireland will bring benefits to Ireland’s public finances and to the country’s financial stability. As a result, Ireland’s prospects for economic recovery and its chances of emerging from its EU/IMF programme of financial assistance have improved markedly. Indeed, yields on long-term Irish government bonds are now well below those of Italy and Spain. Read more
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Blogs review: A bird’s eye view on Bruegel’s research in the crisis
25th January 2013
What’s at stake: On 22 January 2003, the idea of setting up what would become Bruegel had been given a strong impetus by the Chirac-Schröder declaration issued on the occasion of the 40th anniversary of the Elysée Treaty. Ten years after that first impulse, Bruegel has been ranked as 1st think-tank in Western Europe, 2nd outside the US, and 1st worldwide in International Economic Policy in the 2012 Global Go To Think Tanks Report. In the spirit of the Stability and Growth Pact, we decided to grant an exception the rules governing our blogs review and survey some of our very own publications for those of you (especially in the blogosphere since we were pretty late at joining the dance) who may have missed these. Read more
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The three dimensions of the euro area crisis
22nd January 2013
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, Asia-Europe Economic Forum conference on European troubles, Asian worries, Brussels, 21 January 2013. Read more
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The eurozone will muddle through (again)
4th January 2013
At the last European Council summit of 2012, politicians decided to go ahead with the banking union while ending their reflections on fiscal union they had initiated in June, a time of acute market stress. The message: banking union is needed; the rest is not. This behaviour confirms that the eurozone has little appetite to think about its own future. Read more
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The euro area’s need for stabilization in historical perspective
19th December 2012
It is not unusual that some European countries register strong growth rates and others less so. Yet, significant divergence in output is historically associated with dramatic events (or crises). This implies that a euro area budget used for stabilization will end up being activated only a few times. Moreover, there is no historical record of core Europe marching above and the periphery below potential. This makes it unrealistic to conceive of a euro area budget that transfers resources on the spot from badly hit to just moderately hit countries. Some institutional engineering would be necessary. Read more
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Capital outflows in the euro area: is there a sign of relief?
13th December 2012
An update of the underlying data to September 2012 suggests that private capital outflows from a number of Southern European countries has showed signs of stabilisation, over recent months. Read more
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François Hollande doit choisir ses contraintes
13th August 2012
Les grammairiens s’étonneront peut-être de la lecture que le Conseil constitutionnel vient de faire du traité budgétaire européen. Certains de nos partenaires y verront sans doute une prise de liberté avec l’esprit de l’accord à 25 conclu en mars dernier à la demande de l’Allemagne. Mais la décision rendue est claire : soit la France se dote d’une règle budgétaire contraignante, de type règle d’or, et elle doit réviser sa constitution ; soit elle fait reposer le respect des normes européennes de finances publiques sur la mise en place de procédures de décision et d’exécution budgétaires, et elle n’en a pas besoin. Read more
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Blogs review: the ECB’s new doctrine of explicit policy conditionality
8th August 2012
What’s at stake: Last week was dominated by Thursday’s ECB Governing Council meeting and Mario Draghi’s subsequent press conference, where he clarified some of the statements made earlier in London. In particular, he gave a precise idea about what commentators had previously referred as “a grand master plan” or “the two-pronged approach” where ECB intervention on the secondary market would be conditioned on countries making first a request to the EFSF and accepting the strict conditions and supervision attached to it. While there is still uncertainty about how things will play out – the board gave “a determined guidance for the committees to design the appropriate modalities for such policy measures” over the coming weeks – the change of approach from implicit (illustrated by the now infamous letter to Berlusconi from last year) to explicit policy conditionality was important enough to generate surprise and excitement among several ECB watchers. Read more