Currency and Financial Markets Economic Policy Foreign Trade and International Economic Relations Macroeconomics Public Finances and Financial Economics

GDP-linked bonds as a key for a sustainable recovery of the Greek economy

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]

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Currency and Financial Markets Europe Monetary Policy

The ECB’s dilemma

by Marcel Fratzscher, Michael Hüther and Guntram B. Wolff.
This text was also published on
BerlinOeconomicus (German), in Le Monde  and in El País.

As the ECB is likely to announce a government bond purchase programme on January 22, the opposition in Germany is growing. The potential election of a government in Greece with its intention to restructure debt towards its official creditors puts the upcoming ECB’s decision under even greater scrutiny. The fact that the ECB has … [continue reading]

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Currency and Financial Markets Foreign Trade and International Economic Relations

Decision by the Swiss National Bank was Long Overdue

The decision by the Swiss National Bank (SNB) was long overdue. Its exchange rate policy hat protected Swiss exporters and helped their competitiveness through a weaker Swiss franc. But this policy could prove a very expensive mistake, because the Swiss franc will had to appreciate against the euro in the foreseeable future. The valuation losses for the DNB could therefore become substantial. The timing of the decision by the SNB is certainly not a coincidence. The expectations of an ECB … [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 Public Finances and Financial Economics

The Costs for Germany if the Eurozone Collapses

This article first appeared in the Autumn 2013 issue of Europe’s World (www.europesworld.org).

It’s not a message that public opinion in Germany wants to hear, but a collapse of the EU’s troubled single currency would have devastating economic, financial and political consequences for the eurozone’s largest and most successful member.

Germans have long been among the most europhile of countries, but their mood is turning against Europe and its common currency, the euro. There’s now an openly anti-euro … [continue reading]

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