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Tag Archives: euro area

How have the European Central Bank’s negative rates been passed on?

Negative rate cuts are not that different from ‘standard’ rate cuts. Like them, they reduce banks’ margins, but this effect does not appear to be amplified below 0%. Since the global financial crisis, several central banks have deployed negative policy rates, after exhausting conventional easing measures. The European Central Bank introduced its negative interest rate policy (NIRP) in June 2014 when it cut its deposit facility rate below 0% for the first time, to -0.1%. Since then, the rate...

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Inflation!? Germany, the euro area and the European Central Bank

There is concern in Germany about rising prices, but expectations and wage data show no sign of excess pressures; German inflation should exceed 2% to support euro-area rebalancing but is unlikely to do so on sustained basis. By: Guntram B. Wolff Date: June 9, 2021 Topic: European Macroeconomics & Governance Public inflation scare? An inflation scare has erupted – at least in some countries. Interest in the term ‘inflation’ as measured by Google searches has hit a high in the...

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Emergency Liquidity Assistance: A new lease of life or kiss of death?

Use of Emergency Liquidity Assistance to prop up euro-area banks needs to be more transparent; available evidence suggests its use has not always been within the rules. The Eurosystem, headed by the European Central Bank (ECB), provides liquidity to banks, and through them to the entire economy, through five channels. One, the Marginal Lending Facility, has always been small and has practically disappeared since 2008, when the ECB greatly increased the size of its operations. Two of the other...

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Europe must fix its fiscal rules

The pandemic has shown that the EU’s spending framework reflects an outdated economic orthodoxy.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...

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A stronger euro comes with more responsibility

By: The Sound of Economics Date: May 19, 2021 Topic: European Macroeconomics & Governance European strategic autonomy is probably the single most used watchword in European circles, if only because of lack of consensus about what it entails. US bashing for some, a more confident and independent EU for others, the concept has well and truly moved out of the security and defence area into every area of EU policy. This is most apparent in the debate around the international role...

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When and how to unwind COVID support measures to the banking system?

Study of regulatory measures and supervisory practices that have supported public guarantee schemes and moratoria in euro-area countries prepared for the ECON committee of the European Parliament. By: Alexander Lehmann Date: March 9, 2021 Topic: European Macroeconomics & Governance This paper was prepared for the European Parliament’s Committee on Economic and Monetary Affairs (ECON). This in-depth analysis is available on the European Parliament’s online database,...

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Euro area accession countries in the context of the pandemic

Testimony before the European Parliament on the subject of euro area accession. By: Zsolt Darvas Date: November 19, 2020 Topic: European Macroeconomics & Governance On November 19th, 2020 Bruegel senior fellow Zsolt Darvas gave a presentation and participated in the discussion with MEPs on ‘Euro area accession countries in the context of the pandemic’, at the meeting of the Euro Accession Countries Working Group of the European Parliament’s Committee on Economic and Monetary...

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Politics, not economics, demands a strengthened international role for the euro

Not just the EU but also other countries, particularly China, need a defence against weaponisation of the dollar. Since the launch of the euro, much attention has been focused on the international role it might play. Seen from the outside, a single European currency should have become a rival to the dollar. From the inside, though, the notion of the euro becoming a major reserve currency was not a stated European objective. Market forces would be left to decide its fate. Two decades on,...

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Banking regulation in the Euro Area: Germany is different

Despite progress in recent years towards a single banking policy framework in the euro area – a banking union – much of the German banking system has remained partly sheltered from uniform rules and disciplines that now apply to nearly all the area’s other banks. The resulting differences in regulatory regimes could generate vulnerabilities in the still-incomplete banking union, which is being tested in the context of the COVID-19 pandemic. Two reports published in early 2020 shed new light...

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