To keep the euro-area economy afloat, the European Central Bank has put in place a large number of measures since the beginning of the COVID-19 crisis. This response has triggered fears of a future increase in inflation. However, the ECB's new measures and the resulting increase in the size of its balance sheet, even if it were to be permanent, should not restrict its ability to achieve its price-stability mandate, within its legal obligations.
COVID-19 has triggered a severe recession and policymakers in European Union countries are providing generous, largely indiscriminate, support to companies. As the recession gets deeper, a more comprehensive strategy is needed. This should be based on four principles: viability of supported entities, fairness, achieving societal goals, and giving society a share in future profits. The effort should be structured around equity and recovery funds with borrowing at EU level.
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.
The German Constitutional called today on the ECB to justify its bond-buying program. What does today's ruling of the German Constitutional Court mean for the ECB's QE program? Could such a decision open a precedent when it comes to contesting EU law? Today, Giuseppe Porcaro and Guntram Wolff are joined by Franz Mayer, chair of Public Law at the University of Belefield, to analyse the German Constitutional Court's ruling.
What does today's ruling of the German Constitutional Court mean for the ECB's Quantitative Easing programmme
The extraordinary operations that are under way in most countries in response to the COVID-19 shock have raised fears that large-scale monetisation will result in a major inflation episode. This column argues that so far, there is no evidence that central banks have given up, or are preparing to give up, on their price stability mandate. While there are obviously some reasons to worry, central banks are doing the right thing and the authors see no reason to panic.
Self-employed workers are hardest-hit by COVID-19 lockdowns. Yet they often receive less government support than salaried employees. Is the disparity justified?
We had not seen a common challenge as clear as this pandemic. The sum of national actions and programs is likely to be insufficient.
We are not in normal times and we have to surpass, albeit only for the duration of the COVID-19 shock, the hurdles that did not allow the euro-area to endow itself of a common fiscal policy.
Because even thriving companies can be killed in a matter of weeks by a recession of the magnitude now confronting the world, advanced-economy governments have reacted in a remarkably similar fashion to the COVID-19 crisis. But extending liquidity lifelines to private businesses and supporting idled workers assumes a short crisis.
Which macroeconomic policy response is the best option to deal with the crisis currently unfolding and will ensure that the recovery will be as quick as possible?
Bruegel is delighted to welcome the governor of the Central Bank of Ireland, Gabriel Makhlouf. He will deliver a keynote address about how adequate the European toolbox is to tackle financial stability risks in a low rate environment. Following his speech, a panel of experts will further discuss the topic.