Bruegel

We analyse corporate balance sheet adjustment episodes in Germany and Japan, as well as a sample of 30 countries, using national account data. A panel econometric exercise shows that balance sheet adjustment periods are triggered by macroeconomic downturns as well as balance sheet stress due to high debt, low liquidity and negative equity price shocks.

The December large-scale provision of liquidity to banks by the ECB contributed to reducing spreads on Southern European sovereign bonds, but did it contribute to increasing the exposure of domestic banks to their own sovereign? Data do not yet allow determining whether and to what extent banks used ECB liquidity to purchase governments bonds. But this new paper by Silvia Merler and Jean Pisani-Ferry shows that already in autumn 2011 non-residents had decreased their exposure to Southern European sovereign bonds while that of domestic banks had increased. The opposite had happened in Germany.   

There are three ways to read the eurozone’s focus on austerity. The first is that its leaders genuinely think that the current crisis is rooted in non-observance of the stability pact. But it is hard to believe that this could apply to countries such as Spain or Ireland, which always stuck to the rules

On Thursday 2 February Chinese premier Wen Jiabao signalled intention to move towards helping the euro area extricate from its trouble and declared that China was “investigating and evaluating concrete ways in which it can, via the IMF, get more deeply involved in the European debt problem”. Why is China, and more generally Asia, taking this stance? A new paper by Jean Pisani-Ferry together with European and Asian colleagues from the Asia-Europe Economic Forum (AEEF) discusses the implications of the euro crisis for Asia, reasons for Asia-Europe cooperation in solving it, and obstacles on the way to this cooperation.

A drastic change in the way we produce and consume energy is necessary to contain the risk of global environmental catastrophe. For its part, the EU has set agreed to a greenhouse gas reduction target of 80-95 percent by 2050, compared to 1990. This Policy Contribution largely draws on research conducted for The great transformation: decarbonising Europe’s energy and transport systems.

Economic growth in Europe will be affected by the costs of this transition from the current energy and transport system. A smooth transition towards a low-carbon energy and transport system could come at comparatively modest cost. Bruegel is contributing to this debate with this report, which is based on research that received funding from the Fuel Cell and Hydrogen Joint Undertaking.