Past Event

Role of national structural reforms in enhancing resilience in the Euro Area

At this event Gita Gopinath, Chief Economist at the IMF will discuss the role of national structural reforms in enhancing resilience in the Euro Area.

Date: June 17, 2019, 12:30 pm Topic: European Macroeconomics & Governance

video & audio recordings

summary

The event started with the presentation of an IMF paper titled Strengthening the Euro Area: The Role of National Structural Policies in Building Resilience. Shekhar Aiyar, Division Chief at the IMF, first made the remark that inspecting output and employment data across the EU, countries have diverged markedly in their performance. One of the reasons for this divergence is that due to structural dissimilarities in the economies, countries have responded differently to shocks. Recessions in euro area economies have been both more severe and more frequent relative to other advanced economies since the start of the monetary union. Structural reforms can help build economic resilience.

There are two types of structural reforms: union-wide architectural changes, and national structural reforms.  This paper focuses on the latter, quantifying the effects of product market reforms, labor market reforms, and reforms to corporate insolvency regimes. The authors find that more stringent labor and product market regulations are associated with reduced resilience on average and with weaker resilience to major recessions. Furthermore, higher-quality corporate insolvency regimes are associated with lower misallocation of inputs and more efficient capital allocation.

In addition, Romain Duval, senior advisor at the IMF, discussed the following points:

  • Structural reforms have a disproportionate impact on resilience for members of a monetary union.
  • Less flexible economies are more sensitive to shocks, including fiscal policy shocks – but fiscal space is key to any policy effectiveness.
  • National structural reforms can improve monetary transmission and reinforce architectural reforms.
  • National and EU-wide reform should go hand-in-hand to strengthen resilience of the Euro area.

Returning to the discussion, Gita Gopinath, the IMF Economic Counsellor and director of research, elaborated on the political viabilities of structural reforms. There is no one-size-fits-all approach; the two important principles are the adaptability of the labor market to cyclical conditions, and to ensure there is employee protection and a mechanism for employees to find new jobs.

Discussing the linkage between exchange rate flexibility and the euro zone, Gopinath remarked that because of adjustment in prices, there were countries that gained real exchange rate competitiveness (e.g. Spain). On the other hand, the countries that did not gain are the ones that are not very competitive. The paper highlights the importance of reforms, an area where not much progress was seen. Particularly in a period when the risks are high, it is important for countries to undertake structural reforms at the national level.

Discussing the architecture of the euro zone, Gopinath stressed the importance of capital markets union. The necessary reforms are better transparency, a common oversight authority, and minimum standards for corporate insolvency. In order for the euro to become a global currency, an important requirement is to produce a safe asset in the currency, something that a capital markets union would help deliver.

Speaking of the global landscape, Gopinath listed US-China trade tensions, the possibility of a no-deal Brexit, and high levels of private and public debt as major risks. Accounting for all the existing and possible tariff measures between U.S. and China, the IMF estimates that global growth will be reduced 0.5 percent in 2020.

Notes by Tianlang Gao

Schedule

Jun 17, 2019

12:00-12:30

Check-in lunch

12:30-12:40

Presentation of IMF Staff Discussion Note

Shekhar Aiyar, Division Chief, International Monetary Fund

Romain Duval, Senior Advisor, IMF

12:40-13:15

Panel discussion

Chair: Guntram B. Wolff, Director, Bruegel

Maria Demertzis, Deputy Director

Gita Gopinath, Economic Counsellor and Director of the Research Department, International Monetary Fund

13:15-13:30

Q&A

13:30

End

Speakers

Shekhar Aiyar

Division Chief, International Monetary Fund

Maria Demertzis

Deputy Director

Romain Duval

Senior Advisor, IMF

Gita Gopinath

Economic Counsellor and Director of the Research Department, International Monetary Fund

Guntram B. Wolff

Director, Bruegel

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Katja Knezevic

[email protected]

Read about event More on this topic
 

Upcoming Event

May
27
13:00

The Covid Crisis and European State Aid Rules: The Case for a Rational Approach

Considering a new approach to find the way out of the Great Financial Crisis.

Topic: European Macroeconomics & Governance
Read article More on this topic More by this author
 

Blog Post

Banking regulation in the Euro Area: Germany is different

Despite progress in recent years towards a single banking policy framework in the euro area – a banking union – much of the German banking system has remained partly sheltered from uniform rules and disciplines that now apply to nearly all the area’s other banks. The resulting differences in regulatory regimes could generate vulnerabilities in the still-incomplete banking union, which is being tested in the context of the COVID-19 pandemic.

By: Nicolas Véron Topic: European Macroeconomics & Governance Date: May 7, 2020
Read article More on this topic
 

Opinion

A European approach to fund the coronavirus cost is in the interest of all

We had not seen a common challenge as clear as this pandemic. The sum of national actions and programs is likely to be insufficient.

By: Agnès Bénassy-Quéré, Arnoud Boot, Elena Carletti, Jan Krahnen, Miguel Otero-Iglesias, Lucrezia Reichlin, Dirk Schoenmaker and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: April 6, 2020
Read article Download PDF More on this topic
 

External Publication

Facing the lower bound: what will the ECB do in the next recession?

In responding to the global financial crisis, the ECB has pushed its monetary policy into unchartered territories . Today, it appears increasingly constrained by persistently low interest rates. This paper seeks to understand this challenge and assess whether its toolkit would allow the ECB to weather a European recession.

By: Aliénor Cameron, Grégory Claeys and Maria Demertzis Topic: European Macroeconomics & Governance Date: March 27, 2020
Read article Download PDF More on this topic
 

External Publication

How has the macroeconomic imbalances procedure worked in practice to improve the resilience of the euro area?

This paper shows how the Macroeconomic Imbalances Procedure (MIP) could be streamlined and its underlying conceptual framework clarified. Implementation of the country-specific recommendations is low; their internal consistency is sometimes missing; despite past reforms, the MIP remains largely a countryby-country approach running the risk of aggravating the deflationary bias in the euro area. We recommend to streamline the scoreboard around a few meaningful indicators, involve national macro-prudential and productivity councils, better connect the various recommendations, simplify the language and further involve the Commission into national policy discussions. This document was prepared for the Economic Governance Support Unit at the request of the ECON Committee.

By: Agnès Bénassy-Quéré and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: March 24, 2020
Read article More on this topic More by this author
 

Blog Post

What should be done to reduce euro-area spreads?

Spreads are rising again in the euro-area at the worst possible time, when fiscal policy is needed to fight the coronavirus pandemic and the related economic shock. This blog post reviews the main options available to European policymakers, their feasibility and potential effectiveness to deal with this issue.

By: Grégory Claeys Topic: European Macroeconomics & Governance Date: March 18, 2020
Read article More on this topic More by this author
 

Opinion

Why OMT is not the solution for Italy right now

The Outright Monetary Transactions tool is not well suited for Italy right now. Italy needs fiscal support both by itself and by the EU. Italy and the rest of the EU need a fiscal bazooka. We should find a way of backstopping our economies immediately.

By: Maria Demertzis Topic: European Macroeconomics & Governance Date: March 16, 2020
Read article Download PDF More on this topic
 

Policy Contribution

Market versus policy Europeanisation: has an imbalance grown over time?

This Policy Contribution tests the hypothesis that an imbalance has grown in Europe over the last few decades because markets have integrated to a greater extent than European-level policymaking, potentially creating difficulties for the democratic process in managing the economy. This hypothesis has been put forward by several authors but not so far tested empirically.

By: Leonardo Cadamuro and Francesco Papadia Topic: European Macroeconomics & Governance Date: January 9, 2020
Read about event More on this topic
 

Past Event

Past Event

The Great Reversal-Causes and implications of the rising corporate concentration in the US

During this event, Thomas Philippon presented his thesis on market concentration and explained the reasons behind the rising corporate market power in the US.

Speakers: Thomas Philippon, Georgios Petropoulos and Reinhilde Veugelers Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 11, 2019
Read about event More on this topic
 

Past Event

Past Event

Issues in productivity measurement

This Bruegel public event is organised in the framework of MICROPROD, a research project that aims to improve our understanding of productivity, its drivers and the way we measure it. Panellists and participants will take stock of the current challenges in productivity measurement, discuss the preliminary findings of the project and reflect on future research and policy priorities.

Speakers: Maria Demertzis, Filippo di Mauro, Alexandr Hobza, Peter Bøegh Nielsen and Lynda Sanderson Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 4, 2019
Read article Download PDF More by this author
 

Policy Contribution

Crisis management for euro-area banks in central Europe

Euro-area bank integration has decreased as post-financial crisis national rules require banks to hold more capital at home. It might be undermined further by bank resolution planning. Either a Single Resolution Board takes the lead for the entire banking group or independent local intervention schemes need to be developed for crisis resolution.

By: Alexander Lehmann Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: November 19, 2019
Read article More on this topic
 

Opinion

Politics, not policy will help Lagarde save the eurozone

Her success at helm of Europe’s central bank will depend on her ability to mend fences with hawkish policymakers.

By: Guntram B. Wolff and Rebecca Christie Topic: European Macroeconomics & Governance Date: November 4, 2019
Load more posts