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Tag Archives: public debt

European fiscal rules require a major overhaul

In this Policy Contribution prepared for the French Conseil d’Analyse Économique, the authors assess current European fiscal rules and propose a major simplification. They recommend substituting the numerous rules with a new simple one, which would help reconcile fiscal prudence and macroeconomic stabilisation of the economy. This Policy Contribution was prepared for the French Conseil d’Analyse Économique. The reconsideration of the complex set of European fiscal rules should be...

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Director’s Cut: The Italian government budget proposal for 2019

Guntram Wolff welcomes Bruegel affiliate fellow Silvia Merler to evaluate the Italian government’s planned budget for 2019, in this Director’s Cut of ‘The Sound of Economics’ By: The Sound of Economics Date: September 28, 2018 Topic: European Macroeconomics & Governance Six months after its election, Italy’s coalition government reached an agreement on public spending. The key tenets of its first budget include a spending...

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The higher yield on Italian government securities could soon be a burden for the real economy

The increase in the spread between Italian (BTP) and German (Bund) government securities is directly an additional burden for Italy public finance, and thus for tax payers. But it could soon also become a burden for the real economy, as the increased yield on Italian government securities could pull up the cost of bank loans for Italian firms, thus imparting a deflationary impact onto the economy. The Italian economy has been burdened for decades by a very heavy debt, whose cost crowds...

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High public debt in euro-area countries: comparing Belgium and Italy

This Policy Contribution looks at the evolution of public debt in Belgium and Italy since 1990 and uses the debt dynamics equation to explain the contrasting evolution in the two countries in the run-up to the introduction of the euro, during the early years of the euro and since the beginning of the crisis, arguing that the euro could have been used also by Italy to undertake sufficiently large fiscal adjustment. By: André Sapir Date: September 6, 2018 Topic: European...

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Italian populism calls for hard choices

The economic agenda of Italian populists is likely to exacerbate rather than alleviate Italy’s longstanding problems. But the piecemeal, small-step approach followed by European and national ruling elites, while perhaps tolerable for countries under normal economic conditions, is insufficient for an Italy stuck in a low-growth-high-debt equilibrium. If defenders of the European project want to regain popularity, they will need to present a clear functioning alternative to setting the house on...

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Italy’s pension spending: Implications of an ageing population

The Italian debate on the pension system predominantly focuses on short-term aspects, neglecting relevant longer-term fundamentals. Based on long-term economic and demographic projections, this blog post calls for more awareness about the balance of risks that lie ahead. During the euro-zone sovereign crisis, Italy – in line with other stressed countries – introduced a major pension overhaul, known as the ‘Fornero reform’, aimed at tackling the revealed unsustainability of the system....

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Clouds are forming over Italy’s elections

While the prospect of a gridlock reassured investors about the short-term risk of an anti-establishment government, Italy still needs a profound economic shake-up and is in no position to afford months or years of dormant governments. By: Alessio Terzi Date: February 28, 2018 Topic: European Macroeconomics & Governance For the first time since the end of the euro-zone crisis, Italians will be heading to the polls on March 4....

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Debt resolution: moving on after the crisis

An excess of indebtedness is constraining economic growth in many economies. Indeed, the deleveraging since the financial crisis is exceptionally slow. Why is this the case, and what can be done about it? In this episode of The Sound of Economics, we discuss the issue of indebtedness and debt resolution with Carmen Reinhart, Professor of the International Financial System at the Harvard Kennedy School. Professor Reinhart highlights the scale of the debt overhang in many advanced...

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Internationalising the currency while leveraging massively: the case of China

This paper reviews the steps that China has taken towards financial reform with a particular focus on capital account liberalisation and internationalisation of the use of the renminbi. After a slowdown in reform momentum during the global financial crisis, there is a clear push towards reform, especially in terms of RMB internationalisation. During the same period, though, China’s debt has doubled, reaching levels that are clearly above those of most emerging markets. This increases the...

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The global debt overhang

What’s at stake: Seven years after the financial crisis, recovery is still weak in most parts of the global economy. The general debt overhang across sectors, which was not reduced in the last years, has often been cited as as the main factor weighing on global growth and inflation. How big of a problem? McKinsey published a report titled “debt and (not much) deleveraging”, which raises the point that seven years after the bursting of the global credit bubble, debt continues to grow. In fact,...

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