debating progressive politics in Europe and beyond
Simon-Wren Lewis (here and on these pages) is as disappointed by the ECB’s lack of action as I am. He makes a number of important additional points, such as the fact that the ECB’s perceived upside risks to price stability (administered prices, VAT and oil) are things that most sensible macroeconomists do not believe that [...]
I planned to blog on the failure of the ECB to take the opportunity of its Council meeting today to inject confidence and optimism (or at least counter fear and pessimism) in the face of the recession, record unemployment and falling inflation by announcing concrete steps to underpin the promise “to do all its takes” [...]
A particularly warm welcome goes to economic stabilization policies (i.e. smoothing the economic cycle) which seem to be back at the EU stage after having been away for more than two decades. Surprise, surprise! What has happened? I.) Rompuy Report to European Council meeting on 13/14 December 2012 The Gang of Four (van Rompuy, Barroso, Juncker, [...]
As had been expected, despite the dissention of the Bundesbank, the ECB has announced a programme of, in principle, unlimited purchases of euro area government bonds on secondary markets. Adding yet another acronym to the alphabet soup engendered by the crisis, the program is termed OMT – Outright Monetary Transactions – and will replace the [...]
Financial markets are blinking. Spanish and Italian sovereign yeilds are falling in the expectation that the ECB will finally engage in a purchasing programme which will cap yields and allow these countries to breathe. Is the crisis over? Before anybody start celebrating, consider the following points. The German centre-right will not accept an open-ended purchase [...]
One of the phrases frequently written in economic circles in the United States (and to a lesser degree in Europe) is “the Euro is going to collapse.” Those who repeat that phrase over and over again do not seem to know how the Euro was established, by whom, and for whose benefit. If they knew [...]
The recent[1] ECB Governing Council turned out to be something of an anti-climax. Mario Draghi created huge expectations when he stated one week before that the ECB would do ‘whatever it takes to save the Euro’. It was hoped that the ECB would finally step in from the sidelines and send a strong signal to [...]
Almost exactly one year ago I wrote a blog post entitled ECB success shows extent of failure. The ECB had just announced its intention to buy Spanish and Italian bonds. Interest rates on the bonds had fallen significantly. The markets were happy. As I pointed out, this was more an indication of policy failure than [...]
Since late last year, a series of positive developments has boosted investor confidence and led to a sharp rally in risky assets, starting with global equities and commodities. Macroeconomic data from the United States improved; blue-chip companies in advanced economies remained highly profitable; China and emerging markets slowed only moderately; and the risk of a [...]
There was a lot of European economic news today. Not all of it was bad. The media and investors are celebrating the success of today’s bond auctions by Spain and Italy, the two most critical countries in Europe’s sovereign debt drama. Bond yields fell and stock markets rose, in Italy by 2.7%. Yet it is [...]
While the outcome of the European summit was very disappointing, there was one chink of light: that the agreement, and particularly the fiscal compact, would be used as a cover under which the ECB could abandon its reticence to support distressed sovereign debt markets, which was justified by the ‘moral hazard’ of bailing out allegedly [...]
Back in July it was clear that Italy was well on its way to becoming the fourth euro area domino. The country is now wobbling so badly, that one wonders whether it can yet be stabilised. Start with the economics. Ten-year bond yields reached a euro area high of 6.67% yesterday. Given a debt-to-GDP ratio [...]
All Content