The ECB is right to orientate its policy towards price stability at the mid-term and not to react to short-term price movements. Calls for an early exit of the ECB’s expansive policy are misplaced and premature. The price dynamics of the past two months mainly reflect a normalization of energy prices. The euro area economy remains weak and unemployment rates are too high to allow for a quick return to price stability and for an end to the expansive monetary … [continue reading]Read more
Now that Germany’s current-account surplus has reached a record €270 billion ($285 billion), or close to 8.7% of GDP, the ongoing debate about its economic model has intensified. Eurozone politicians and Donald Trump’s administration in the United States are each blaming the other for the economic imbalance; and all are blaming the euro.
Trump’s administration, for its part, has attacked Germany for exporting too much, and accused it of manipulating the euro. In fact, Germany’s trade surplus has little to … [continue reading]Read more
The ECB decision is wise and balanced. It may disappoint many in Germany. The extension of the PSPP programme was inevitable as the risks to the euro area economy are still huge and the ECB is likely to miss its price stability mandate through 2019.
The ECB decision is wise as it leaves all options open. The ECB is introducing more flexibility through the changes to the PSPP programme. The ECB decision implies a longer period of low interest rates … [continue reading]Read more
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.Read more
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]Read more
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]Read more
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]Read more
In the latest Spotlight, DIW President Marcel Fratzscher explains why helicopter money offers the possibility to “circumvent” the banking system and make loans and funding directly available to households and private companies, which would help the ECB to fulfill their price stability mandate again.… [continue reading]Read more
Joint op-ed by: Marcel Fratzscher, Reint Gropp, Hans-Helmut Kotz, Jan Krahnen, Christian Odendahl, Beatrice Weder di Mauro and Guntram B. Wolff published on Bruegel.org. A shorter version of this op-ed was published in FAZ.
The eurozone remains in a deep, largely macro-economic crisis. A robust global economy and falling oil prices have supported Europe’s economy for some time, but by now it is clear that the eurozone will only be able to pull itself … [continue reading]Read more
Perhaps the greatest damage caused by the confrontation with Greece is a general loss of confidence. If we want to get Greece back to growth, people, companies and investors have to regain confidence in the viability of the country. For this to work, a legitimate and competent government as well as an efficient administration and judiciary are essential. Yet the issue of debt sustainability is … [continue reading]Read more