The European Central Bank has expanded its monetary policy stance considerably. Despite the expansion of its policy, the ECB has disappointed financial markets as it had promised an even stronger expansion.… [continue reading]Read more
The European Central Bank decision to stay course does not come as a surprise. The weaker projected inflation and growth figures were expected. The ECB is caught in a difficult dilemma: with its projections, the ECB admits that it will miss its price stability objective over the medium term. But it is wise for the ECB to follow a wait-and-see strategy. Global uncertainty has risen and is very high. The biggest concern for the ECB is not China or the … [continue reading]Read more
The Greek tragedy must not go on. Europe’s growing frustration with the new Greek government has triggered calls for stopping negotiations and even accepting “Grexit”, Greece’s exit from the euro. We believe that this would be a mistake. Grexit would be a collective political failure. Above all, it would cause a social and economic catastrophe for Greek citizens.
However, keeping Greece in the euro … [continue reading]Read more
The Greek government yesterday proposed the transformation of part of its official debt into GDP-linked bonds. DIW Berlin has published a detailed study, which analyses how such an instrument might work. DIW Berlin considers this proposal as a constructive option to improve debt sustainability, which will ultimately foster a return to economic growth. Such a solution will help Greece accept ownership of its reform prorgramme – which is the key for a sustainable recovery of the economy. It is … [continue reading]Read more
Statement on the recommendation of the ECJ advocate general Cruz Villalón on bond purchasing of the ECB
The recommendation of the advocate general of the ECJ is an overwhelming success for the European Central Bank (ECB). Such a strong and overwhelming support for the ECB is surprising and could not have been expected. The decision finds the OMT program to constitute a legal instrument of monetary policy that pursues a legitimate objective. The recommendation is in clear contradiction to the … [continue reading]Read more
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]Read more
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]Read more
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]Read more