All of this talk on strategic retrenchment and autonomy is the language of escalation, not of appeasement and collaboration.

This piece was originally published in Kathimerini and is forthcoming in Helsingin Sanomat.

“There’s a fundamental truth of the twenty-first century within each of our own countries and as a global community,” President Joe Biden told the United Nations on 21 September. “Our own success is bound up with others succeeding as well.”
Biden’s actions however, seem to take a different direction. The withdrawal from Afghanistan marked the end of the pursuit of one set of objectives, while the rekindling of an Anglo-Saxon alliance with the United Kingdom and Australia in AUKUS marked the pursuit of different goal, that of containing China. Importantly, AUKUS also shows

The pandemic has certainly permanently affected our way of working. Whether this is for the better remains to be seen.
By:
Maria Demertzis
Date: September 28, 2021
Topic: European Macroeconomics & Governance

A Greek language version of this piece was published in the Money Review section of Kathimerini and a Spanish version is forthcoming in El Economista.

Support provided to firms to protect economic activity and employment during the pandemic has been unprecedented in most European Union countries. This has helped sustain employment at pre-pandemic levels, as the blue line in figure 1 indicates.
But even if jobs might have been protected, the pandemic has undoubtedly affected the way work is done. Many workers have switched to telework and businesses have had to adapt to

Can bitcoin surpass the dollar in popularity and make El Salvador the first state to operate entirely with a private currency?
By:
Maria Demertzis
Date: September 14, 2021
Topic: Finance & Financial Regulation

This piece was original published in Money Review and is forthcoming in El Economista.

In September 2021, the government of El Salvador became the first to make bitcoin legal tender. This means it can now be used to make payments and settle debts, if businesses have the technology to accept it. Importantly, one of the implications of this legal change is that if creditors do not accept settlement of debts in bitcoin, then that debt is cancelled.
It is worth mentioning that El Salvador has been fully dollarised since 2001, in other words, it does not have its own

If we need to get into a war-type mentality to fight climate change, we also need a war-type development plan, so that everyone manages the transition irrespective of their capacity.

A Greek language version of this piece was published in the Money Review section of Kathimerini and a Spanish version by El Economista.

The world’s annual global carbon emissions grew by 60% between 1990 and 2015, according to the Stockholm Environment Institute. In this period, therefore, accumulated greenhouse gases in the atmosphere approximately doubled. Almost half of the growth in emissions was caused by the world’s richest 10%. The top 5% were responsible for 35% of the growth.
But there has been a tilting of the geographical distribution of the burden of emissions. China is now responsible for 28%

Emphasis will be placed on greening monetary policy and clarifying the ECB’s price stability objective, but is this enough?
By:
Maria Demertzis
Date: June 23, 2021
Topic: European Macroeconomics & Governance

This piece was originally published in the Money Review section of Kathimerini and El Economista.

The COVID-19 pandemic forced the European Central Bank (ECB) to postpone the review of its monetary policy strategy, or how it goes about ensuring price stability in the euro area. Although measures to contain the pandemic’s economic fallout will continue to be in place for some time, the ECB is now expected to finalise its monetary policy strategy review by the end of the year, if not earlier, compared to the original aim of end-2020.
What changes can we expect the review

Do we need drastic changes in our lifestyles so that we can meet our climate ambitions by 2050?

This piece was originally published in the Money Review section of Kathimerini and El Economista.

In the European Union, support for fighting climate change is very strong. Almost all (93%) of EU citizens see climate change as a serious problem according to a recent survey, and 79% consider it a very serious problem. Europeans want their governments to do more to move to cleaner energy. A staggering 92% – and more than eight in ten individuals in each EU country – agrees with the objectives of the EU’s net-zero strategy, the European Green Deal.
Under the Green Deal, which is without doubt the most ambitious such initiative globally, climate neutrality would be achieved by 2050. Achieving

The pandemic has shown that the EU’s spending framework reflects an outdated economic orthodoxy.
By:
Maria Demertzis
Date: May 27, 2021
Topic: European Macroeconomics & Governance

This opinion piece was originally published in the Financial Times, the Money Review section of Kathemerini is forthcoming in El Economista.

Last spring, as the economic impact of the coronavirus pandemic began to bite, the European Commission suspended the stability and growth pact (SGP), a set of rules designed to ensure that countries in the EU pursue sound public finances and co-ordinate their fiscal policies.
And in March this year, the commission signalled that the rules would remain suspended for a further year in 2022. Paolo Gentiloni, the EU’s economics commissioner, said that where fiscal

Cryptocurrencies are here to stay but are unlikely to be considered a credible alternative to money anytime soon.

This opinion piece is forthcoming in the Money Review section of Kathimerini and El Economista.

Cryptocurrencies are here to stay. Coin Market Cap, a popular information site on all things crypto, lists close to 10,000 of them. The name suggests that they are currencies and most of them are, in that they have a value and are accepted as a means of payment. But they cannot be considered good alternatives to money for three main reasons.
First, they are not accepted universally. You cannot use cryptocurrencies for daily expenses. It is unlikely you will be able to pay with a cryptocurrency for holidays or flights, or to buy a cinema ticket. You might be able to buy a house

Electronic cash might be the future, but it is still unclear what payment innovation it offers for the public, certainly in the euro area. And it is unlikely to fully replace the comfort the consumer feels in having money under the mattress.

This opinion piece was originally published in the Money Review section of Kathimerini and is forthcoming in El Economista.

Central banks often update the money they issue to include new features. The next update will be to introduce a digital version of cash. Central bank digital currencies (CBDCs) are the closest alternative to a wallet of cash, except they come in a digital format and in electronic wallets that are stored by a country’s central bank.
CBDCs aim to mimic two crucial physical properties of cash. First, the holder remains anonymous:

Many gender gaps persist, but an important one that puts women in a very disadvantageous position is the gap in financial literacy.
By:
Maria Demertzis
Date: March 30, 2021
Topic: European Macroeconomics & Governance

This opinion piece was originally published in the Money Review section of Kathimerini and is forthcoming in El Economista.

In New York’s financial district stands a small bronze sculpture titled the Fearless Girl. The statue was meant to promote female empowerment and to remind the predominantly male financial sector to recruit more women and embrace diversity.
Many gender gaps persist, from the pay gap, to poor representation on corporate boards, or simply the lack of female leaders. But one important gender gap that puts women in a very disadvantageous

The European Commission’s digital compass attempts to build strong fundamentals. It is a start. An ambitious digital agenda however requires a strategy that is all encompassing and coherent.

This opinion piece was originally published in the Money Review section of Kathimerini and is forthcoming in El Economista.

On 9 March, the European Commission published a Digital Compass to help advance EU ambitions for a digital transformation by 2030.
The proposals rest on four points: 1) ensure more citizens and professionals have basic digital skills, 2) provide sustainable digital infrastructure, 3) promote the digital transformation of private businesses and public services and 4) encourage a system of cooperation between Member States to monitor and promote these goals.
How does this fit

The spine of the letter represents the fall in activity at the start of the pandemic. Then there is a split, which leads to the two ‘arms’ that capture the different directions taken by economic activity in different sectors.
By:
Maria Demertzis
Date: March 2, 2021
Topic: European Macroeconomics & Governance

This opinion piece was originally published in the Money Review Section of Kathimerini and is forthcoming in El Economista.

The shape of the post-pandemic economic recovery has gone through many letter characterisations, from V to W, to land more or less on the letter K. The spine of the letter represents the fall in activity at the start of the pandemic. Then there is a split, which leads to the two ‘arms’ that capture the different directions taken by economic activity

New approaches and new tools are needed to prevent excessive concentration of economic power in the hands of a few matchmaking digital platforms that form multi-sided markets. Regulation in this area is only just emerging.
By:
Maria Demertzis
Date: January 5, 2021
Topic: European Macroeconomics & Governance

This piece was originally published in the Money Review section of Kathimerini.

The best characterisation I have heard of the economic role of digital platforms is that they are matchmakers. They serve two distinct types of customers in a given market: say, the traveller who wants to find a holiday house, and the host who has a house to let. These two distinct customers need the platform to find each other. And if there is a value in connecting, there is scope for the

In the eyes of Europeans, Joe Biden’s US election win brings the promise of major change with global relevance. From climate to multilateralism, to trade and managing global public goods, here is a take on how to understand this promise.

This opinion piece was originally published on Kathimerini.

In the eyes of Europeans, Joe Biden’s US election win brings the promise of major change with global relevance. From climate to multilateralism, to trade and managing global public goods, here is a take on how to understand this promise.
What can we expect?
At the very least we can expect a clear change in the tone of the US leadership. There will no longer be a total disrespect for facts and expert opinion. In-depth knowledge and understanding will become again a virtue, not a vice, in

The return to normal may just have to wait.
By:
Maria Demertzis
Date: December 14, 2020
Topic: European Macroeconomics & Governance

This opinion piece was originally published on Kathimerini.

Finally, the vaccine is here. Stock markets have reacted exuberantly and we can see the light at the end of the tunnel. The confinement and isolation that have weighed on old and young alike will come to an end and the economy can rebound back from its semi-comatose state. We can then all go back to business as usual.
Not so fast. Four in 10 doctors in Belgium, the country where I reside, are not themselves keen to take the COVID-19 vaccine. Similar results have been found also in the UK. It is likely that such concerns exist in other countries as well.
These doctors are not vaccine

It’s time for the EU to make quick and indispensable progress in forming a capital markets union.
By:
Maria Demertzis
Date: May 15, 2020
Topic: European Macroeconomics & Governance

Necessary though it was, the temporary relaxation of state aid rules in the EU has brought grave unintended consequences. Through indiscriminate support, the EU is rapidly moving from an even playing field that promotes the “survival of the fittest” to a situation where only those with the “richest parents” survive.
The EU economic system will come out battered and unbalanced. Countries in the south will lose a substantial part of their production fibre as they lack the means to save those in need. But indiscriminate help in the richer north will also delay the natural sorting between productive and

Compromises hammered out in the next 11 months, by both British and European negotiators, will dictate the UK’s economic landscape for decades to come By: Maria Demertzis Date: January 31, 2020 Topic: European Macroeconomics & Governance This piece forms part of Bruegel’s ongoing work in EU3D, a research project that examines differentiation in the European political order. The EU3D project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 822419.So, Brexit is done tonight at 12.00 am. The UK will no longer be a member of the European Union.Now negotiators must move on to harder things. To quote a famous British Europhile, Winston Churchill “…this is not the end. It is not even the beginning of the end. But it

Should the EU fight to save the WTO when the US seeks to dismantle it? We argue that the only way for the EU to decide that is to first understand the US’s strategy (as distinct from its tactics) and then make up its mind in terms of how much of a threat it perceives China to be.The World Trade Organisation (WTO) is pivotal in enabling and protecting trade between countries. The recent US failure to appoint a judge at the WTO’s appellate court has meant that it will no longer be able to intermediate trade disputes. This means that the WTO, is at least partially, dead. The EU, while acknowledging its faults, ultimately wishes to save it.But what is the best way of protecting the multilateral system?Should the EU fight to save the WTO or is that equivalent to fighting the last war? Should it

Europe is no longer in crisis mode. However, it remains vulnerable; it is unprepared and it is procrastinating. Following European elections this May, new leaders are about to take their positions at the main European institutions for the next 5 years. They have the power in their hands to take action. But more importantly, they have the power to convene 28 states, which, if united, can play a significant global role. What are the urgent challenges that require collective European action? By: Maria Demertzis Date: September 10, 2019 Topic: European Macroeconomics & Governance Europe is no longer in crisis mode. But it remains vulnerable, it is unprepared and it is procrastinating. Challenges ahead cannot be met by simply more of the same, and this is a good time to be reminded

Είναι γεγονός ότι οι τωρινές εκλογές λόγω της ανάπτυξης των κομμάτων του λαϊκισμού είναι κάπως διαφορετικές από τις προηγούμενες. Αλλά πιστεύω ότι όλες οι εκλογικές διαδικασίες, εθνικές και ευρωπαϊκές, έχουν πάντα πολύ μεγάλη σημασία γιατί θέτουν μια ατζέντα για τα επόμενα πέντε χρόνια και εμείς ως πολίτες καλούμαστε να επιλέξουμε τις σωστές προτεραιότητες και να δώσουμε την εμπιστοσύνη μας στους κατάλληλους ανθρώπους.
By:
Maria Demertzis
Date: May 28, 2019
Topic: European Macroeconomics & Governance

This opinion was also published on ETHNOS

Οι προκλήσεις της επόμενης πενταετίας κατά την άποψή μου είναι δύο: η πρώτη είναι η κλιματική αλλαγή. Δεν υπάρχει πια καμία αμφιβολία στο θέμα της κλιματικής αλλαγής, είναι πάρα πολύ

The global multilateral system is being challenged by the US and China, which prompts the EU to rethink how well it can compete in the world.

This article was published by Capital.

Preferential trading agreements under the global trading system (known as the WTO) cover between one third and one half of world trade. EU countries do the greatest part of their trade under such preferential rules (including intra-EU) and have always been a big defender of open and free trade for all, and of the support system created around it.
However, there are two reasons for the EU to worry about a potential disruption to this global working system. The first threat is immediate and it comes from the US, while the second is much more structural and comes from China.
The unexpected election of

Testimony at the Committee for External Relations of the Belgium Federal Parliament

On 25 September Bruegel’s deputy director Maria Demertzis presented a testimony on transatlantic relations and EU-US cooperation at the Belgian Federal Parliament.

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Bruegel Annual Meetings 2018
The 2018 Annual Meetings will be held on 3-4 September and will feature sessions on European and global economic governance, as well as finance, energy and innovation.

Speakers: Maria Åsenius, Richard E. Baldwin, Carl Bildt, Barbara Botos, Maria Demertzis, Benjamin Denis, Lowri Evans, Mariya Gabriel, Svend E. Hougaard Jensen, Joanne Kellermann, Jörg Kukies, Emmanuel Lagarrigue, Philippe Lespinard, Rachel Lomax, Dominique Moïsi, Jean Pierre Mustier, Ana Palacio, Jean Pisani-Ferry, Lucrezia Reichlin, Norbert Röttgen, André Sapir, Johan Van Overtveldt, Martin Sandbu, Margrethe Vestager, Reinhilde Veugelers, Nicolas Véron, Thomas Wieser, Guntram B. Wolff and Georg Zachmann
Topic: Energy & Climate, European Macroeconomics & Governance,

The US threat of trade sanctions has put the EU in a difficult position. Nevertheless, the EU must respond decisively – not just to protect its own interests but those of the multilateral trading system, and to demonstrate to the US and other partners that trade is not a zero-sum game.
By:
Maria Demertzis
Date: May 17, 2018
Topic: European Macroeconomics & Governance

The threat of trade sanctions,  via direct tariffs or the breaking of the Iran deal, is an act of diplomatic aggression the like of which we have not seen in a long time.
Who wins when the US takes such a stance? Will America be great again? And how should the EU – the greatest (de facto) economic and diplomatic ally of the US – respond to this ‘invitation’ to

The challenges that Europe faces both from within and from outside require immediate, concerted counter-efforts. While efforts to advance the European economic architecture are desirable and useful, can Europe realistically attempt to integrate further on the basis of such little trust?
By:
Maria Demertzis
Date: February 9, 2018
Topic: European Macroeconomics & Governance

Current efforts to reform and advance European integration are stalled by a ‘lack of trust’. And while the issue of trust is not necessarily seen and understood in the same way by all, I believe that this deficit in trust in Europe refers to (at least) two specific issues: lack of trust between countries, and countries’ lack of trust in European

Populist shocks in the UK and US threaten the multilateral order on which the EU depends. What lies behind these earthquakes, and what does it mean for Europe? Withdrawing from the world is no solution to geo-political upheavals, but Europe needs to reassess the future of globalisation.
By:
Maria Demertzis
Date: November 7, 2017
Topic: European Macroeconomics & Governance

European integration, the ‘ever closer union’ of Europe’s states and economies, has faced a very difficult 10 years. Even as growth finally re-emerges, the legacy of the financial crisis is far from resolved. Meanwhile, poorly managed migration and refugee pressures saw huge population flows into and around the continent from the South and South-East. For

Europe’s post-crisis recovery has been disappointing in comparison with the USA. But lower rates of inequality are staving off populism and bolstering support for globalisation. With the USA an increasingly unpredictable partner, the EU must address internal imbalances and build alliances to defend the multilateral order.

The legacy of the financial crisis has left a different trail in the EU economy by comparison to that of the US. Almost a decade after the start of what was undoubtedly the worst financial crisis in the last 50 years, the US has managed to restore financial stability and deliver a convincing path back to growth. The EU, by contrast, has not achieved a credible return to economic vigour. It is true that Europe has seen some renewed growth recently, but it remains

In an unexpected move, the Federal Reserve Chair Janet Yellet has recently brought up the issue of raising the inflation target. This blog argues that an increase in inflation targets may prove to be beneficial in achieving price stability in the long run. This would increase the credibility of central banks in achieving inflation goals and stave off the distortionary effects of deflation.
By:
Maria Demertzis
Date: June 22, 2017
Topic: European Macroeconomics & Governance

The discussion on raising the inflation target to 4% has just gotten a new impetus after the Fed Chair, Janet Yellen, urged in a recent press conference to rethink the issue. Ms Yellen, asked for more research to be done to understand what this would

An important guiding principle in resolving non-performing loans (NPLs) should be to ensure that viable debt remains serviced, while non-viable debt gets resolved. We present here a framework to approach the issue.

The attempt to address the problem of non-performing loans in the EU should tackle both sides of credit creation at once.  On the demand side, new credit is not picking up as long as the problem of the debt overhang, namely the disincentive of undertaking new investments and consumption while old debts are prohibitively high, remains.  This, hinders the creation of new productive capacity, necessary to absorb factors formerly misallocated to sectors hit by the crisis. By implication, as long as private debts remain at high levels, economic activity will struggle to pick up. On the supply side of credit, progress has been slow in resolving impaired loans, which persist in banks’ balance sheets. This is problematic for both their overall health but also the creation of new credit.
Figure 1: Gross non-performing debt instruments, % of total gross debt instruments

Source: ECB, Note: peak year to 2016Q1

And while a number of countries (namely the Baltics) have managed to decisively resolve bad debts to the benefit of new credit creation, others have made less progress and some have even been unable to make any (Figure 1).

After a sharp increase in corporate bond issuance following the ECB’s announcement in March this year, corporates continue to respond to the Corporate Sector Purchase Program.

Corporate bond issuance is continuing to pick up for a third month on a trot. We are interpreting this to mean that companies are responding to the ECB’s Corporate Sector Purchase Program. There still remains to be seen what companies do with the cash obtained, to be able to evaluate the effectiveness of this new program.

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