Currency and Financial Markets ECB Europe Monetary Policy

Statement on ECB interest rate decision

The ECB keeps its options open about the exit of its expansionary monetary policy stance. There has been no significant change in ECB communication. The statement by President Draghi makes a very gradual tapering of its bond purchases in 2018 the most likely path. Many open questions about ECB monetary policy remain unanswered. It is still open when the ECB will end its bond purchases and when it will start raising interest rates.

The overreaction of financial markets to ECB … [continue reading]

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Europe Foreign Trade and International Economic Relations

Helmut Kohl Was Right

Economists criticize his decisions on German reunification and the euro, but he understood better the relationship between politics and economics.

Helmut Kohl’s death earlier this month has revived a contentious debate over his legacy. Although the former chancellor of Germany is widely considered to be a political genius, conventional wisdom holds that his economic policy was a failure. It’s time to reassess that view. Kohl was smarter on economics than many professional economists are willing to admit.

The arguments that … [continue reading]

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Europe Foreign Trade and International Economic Relations

America First, But Germany Second

If Trump wants a Europe that takes care of its own needs, he needs a strong partner in Berlin.

Donald Trump’s relationship with Angela Merkel has gotten off to a rocky start. Trump has, effectively, singled out Germany and its chancellor as his main nemesis in Europe. He has criticized her for her policy toward refugees, for an unfair trade policy, and for a lack of leadership in Europe. For its part, the German government, alongside many of its European … [continue reading]

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Election2017 Europe

A German debate over the future of Europe is long overdue

The op-ed was first published on FT.com on February 28, 2017.

The emergence of Martin Schulz as the centre-left Social Democrats’ (SPD) candidate for chancellor has fundamentally altered the dynamics of German politics. It is also changing the debate in Germany on inequality and the future of Europe in ways that will have a significant impact across the continent.

Germany is regarded as an economic success story. Unemployment is at its lowest level since reunification, while the trade surplus has … [continue reading]

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ECB Europe

Statement on today’s meeting of the Council of the ECB, October 20, 2016

The ECB decision bears no major surprises. Draghi did not contradict market expectations of an extension of the QE program to be announced in December. Such an extension has thus become even more likely. I do not expect a reduction in the monthly purchases by the ECB. Such a step would disappoint market expectations and could trigger undesired market reactions. The latest economic news are not encouraging and give little cause for a fundamental change in monetary policy.

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ECB Europe Foreign Trade and International Economic Relations Macroeconomics Monetary Policy

Statement on today’s meeting of the Council of the European Central Bank (ECB), July 21, 2016

The European Central Bank is facing a difficult dilemma. The slower the euro area economy is growing, the lower interest rates and the harder it becomes for the ECB to implement its public sector purchase program. The ECB has assumed a wait-and-see strategy in the hope that its new measures will be effective and the economy will not deteriorate further. Italy’s banking crisis, more than the Brexit, is an enormous risk for the entire euro area, also for Germany, and … [continue reading]

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ECB Economic Policy Europe Foreign Trade and International Economic Relations

Making the Eurozone more resilient: What is needed now and what can wait?

This article was first published on VOXEU.org on June 25, 2016. 

Britain voted to leave the EU. This is terrible news for the UK, but it is also bad news for the Eurozone. Brexit opens the door to all sorts of shocks, and dangerous political snowball effects. Now is the time to shore up the Eurozone’s resiliency. The situation is not yet dire, but prompt action is needed. This VoxEU column – which is signed by a wide range of [continue reading]

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Currency and Financial Markets ECB Europe Macroeconomics Monetary Policy uncategorized

Supplement: Statement on the result of the Brexit referendum

An important aspect, that has been widely ignored in the debate about the consequences of a Brexit, is the impact on ECB monetary policy. Lower oil prices and a weaker economy in the euro zone and in Germany are likely to increase deflationary pressures further. As a consequence, the ECB is likely to extend its expansionary monetary policy path further into the future. The Brexit will most likely imply a longer period of zero interest rates for the euro area.… [continue reading]

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Economic Policy Europe Foreign Trade and International Economic Relations Public Finances and Financial Economics

Statement on the result of the Brexit referendum

The Brexit decision is a catastrophe for all Europeans. The economic costs will be enormous for all of Europe. Britain could slide back into recession. We at DIW Belin expect a 0.5 percentage points lower economic growth in Germany in 2017 as a result of lower German exports to the UK alone. The risk is highest for countries such as Italy, which are vulnerable and could slide even deeper into the financial crisis.
I expect major volatility in financial markets … [continue reading]

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Economic Policy Europe Public Finances and Financial Economics

Judy Asks: Can Debt Relief Save the Euro?

A selection of experts answer a new question from Judy Dempsey on the foreign and security policy challenges shaping Europe’s role in the world.

The question is not whether debt relief is needed, but how and when it will take place.

Almost one year after the Greek debt drama, which almost ended with Greece’s exit from the eurozone, the conflict between the Greek government and its European partners is again heating up. The bad news is that progress on Greek … [continue reading]

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