Business Cycles, Growth, Economic Structure Europe Foreign Trade and International Economic Relations Public Finances and Financial Economics

The German locomotive has become Europe’s liability

This article was first published on ft.com on 27 August 2014.

The news that German output declined in the second quarter has dented the country’s economic euphoria, but only a little.

Many blame the Ukraine crisis and transient factors such as the mild winter, and believe that Europe’s largest economy remains fundamentally strong. They are wrong. Germany’s disappointing performance mostly reflects structural weaknesses, both at home and in the eurozone. Policy makers should act quickly, before the problems become further … [continue reading]

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Business Cycles, Growth, Economic Structure Currency and Financial Markets Economic Policy Europe Foreign Trade and International Economic Relations Macroeconomics

Sanctions Blowback

This article was first published on Project Syndicate on 14 August 2014.

With the crisis in Ukraine intensifying, the United States and the European Union are locked in a battle of wills – and sanctions – with Russia. Indeed, in retaliation for the intensification of Western financial sanctions, Russia has announced a ban on food and agricultural imports from the US and the EU. But the real threat to the West lies in the potential impact of a financial crisis … [continue reading]

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Business Cycles, Growth, Economic Structure Europe Macroeconomics Public Finances and Financial Economics

Europe Doesn’t Need More Public Spending

This article was first published in The Wall Street Journal Europe on 4 July 2014

Europe is stuck in a deep slump and facing the prospect of many more years of stagnation and high unemployment. European leaders are right in their diagnosis that a growth stimulus is urgently needed to end the crisis. But they are wrong in their solution: The Continent doesn’t need more public spending and bigger government. It needs more competition, innovation and the completion of the … [continue reading]

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Currency and Financial Markets Economic Policy Europe Macroeconomics

Germany’s Pyrrhic Victory

This article was first published on Project Syndicate on 10 February 2014.

The German Constitutional Court has ruled against the European Central Bank’s pledge to buy potentially unlimited quantities of distressed eurozone countries’ government bonds, and has called on the European Court of Justice (ECJ) to confirm its decision. Until that happens, the “outright monetary transactions” (OMT) scheme is effectively dead, weakening the ECB’s ability to act as an effective and credible financial-market backstop at a time when European governments … [continue reading]

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Currency and Financial Markets Europe

Temporary End of the OMT Programme

The German Constitutional Court today declared that the OMT programme of the European Central Bank (ECB) constitutes a violation of European law, and asked the European Court of Justice to confirm its ruling. The curiosity is that the German Constitutional Court has no mandate to issue such a ruling on European law, as stressed by the two dissenting judges.

The ruling implies a temporary end to the OMT programme, as it would be highly controversial for the ECB to implement … [continue reading]

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Currency and Financial Markets Europe

Taking the mandate of the ECB seriously

by Marcel Fratzscher, Michael Hüther and Guntram B. Wolff

This is a translation of the original German article published in FAZ on February 6, 2014.

European Central Bank President Draghi has played down German fears about high inflation and urged Germany not to ignore the positive impact of European monetary policy. Bundesbank president Weidmann has also recently stressed that there are no reasons for German concern about inflation. The public debate about European monetary policy, however, has become more heated … [continue reading]

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Economic Policy Europe Foreign Trade and International Economic Relations

Investment, not the surplus, is Germany’s big problem

This article was first published on FT.com on 18th November 2013.

Germany is under attack from the US government, the International Monetary Fund and the European Commission for its huge current account surplus. The criticism is right, but for the wrong reasons. The surplus is excessive, but the accusation that it hurts Europe is nonsense. Worse, it distracts German policy makers from tackling the true cause of the national surplus and the country’s economic Achilles heel: its huge private investment … [continue reading]

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Currency and Financial Markets Europe Macroeconomics

Delusional Gemany

This article was first published on Project Syndicate on 14 November 2013.

In recent days, Germany’s representative on the European Central Bank’s governing council has expressed strong disagreement with the ECB’s decision on November 7 to cut its benchmark interest rate. Now the European Commission has opened an investigation into whether or not Germany’s huge current-account surplus is causing economic damage in the European Union and beyond. This investigation and criticism of Germany’s export-based growth model has incited outrage in … [continue reading]

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