The euro and the promise to end monetary profligacy
As the European Central Bank winds down its quantitative easing program, none of its future policy options look especially promising for the euro. While investors would welcome a more neutral monetary stance, that could spur political tensions in the euro area that could roil financial markets. Meanwhile, regulation is on the rise and growth could suffer, with unpleasant consequences for the single currency.
The false end of quantitative easing
In June, the European Central Bank made the fateful announcement that it would phase out its bond-buying program – called quantitative easing, or QE – by the end of this year. But putting an end to net bond purchases is not the same thing as ending the ECB’s ultra-lax monetary policy. By leaving the door open to rolling over its massive balance sheet of bonds as they mature, policymakers could keep oxygenating the euro area’s economy for years to come.
Shortsightedness and stubbornness are holding Europe back
As European leaders rail against “populism,” many of them are taking on populist positions themselves: they are taking a hard line on Brexit, refuse to implement commonsense solutions on public debt, and are bowing to pressure against GMOs. All this will hurt Europe in the long term and diminish its global position. It desperately needs leaders who are willing to follow a more pragmatic strategy.
Sudan’s president is running out of carrots and sticks
The lifting of United States sanctions on Sudan is a necessary but not sufficient condition for the country’s economic recovery. To achieve that, President Omar al-Bashir must strike a tricky balance between economic reforms, political openness, internal stability and international goodwill. These preconditions, however, may clash with his political ambitions.
Opinion: Ready for the next recession?
Economists enjoy delivering bad news. The current favorite being shared by academics and financial experts is that the world is headed for a recession, in 2020 or 2021 at the latest. But we regard this as unlikely, unless there is a major political accident – such as a trade war or turmoil in China. While a slowdown is always possible, especially in Western Europe, that does not make a recession.
Opinion: Venezuela nears the breaking point
What will happen to Venezuela after the government tries to steal an unconstitutional presidential election on May 20? Everything depends on the cohesion of the splintered opposition and the determination of the international community. If either fail, the Western hemisphere could be faced with its most severe humanitarian crisis in more than a decade.
The consequences of prolonged low interest rates in Europe
Monetary policymakers are becoming preoccupied with the risks of persistently low interest rates to Europe’s still fragile economic recovery. Ultra-easy credit is creating growing economic distortions and asset bubbles, while reviving volatility and risk in financial markets. The European Central Bank realizes it must “normalize” rates, but it worries that sudden tightening could precipitate a financial crisis that could be as bad or worse than 2008-2009.