Prospects for two-tiered banking regulation in Europe
The European Union’s complex and lengthy set of rules for banks is putting a burden on small lenders, which often form the backbone of a country’s banking sector. The solution, some propose, is to have a two-tiered system in which the banks that are “too big to fail” must follow the most stringent regulations, while simpler, less complicated rules apply to the smaller players. Such a system is already being used in the United States. Could Europe follow?
Orderly failure: The EU’s Bank Recovery and Resolution Directive
After the 2008-2009 financial crisis, governments are wary about bailing out distressed banks with taxpayer money. But the bail-in procedures implemented in 2016 by the European Union, while helping minimize some risks, have their own drawbacks. If new proposals are adopted to give resolution authorities more preemptive powers, they will give technocrats unprecedented control over the banking industry.
The end of the Greek bailout program: What comes next?
As the Greek bailout program reaches its scheduled end in August 2018, the country’s government and international community must decide what comes next. Some reforms have been implemented, and the public budget even runs a surplus. But the economy remains vulnerable. The EU could dig in and insist Athens reimburses at least part of its debt, or it could cancel it altogether. The latter option is preferable – and more likely – but the EU will have to be ready to stand up to some tough criticism about the precedent it would set.
Opinion: Mario Centeno’s useful ambiguities
New Eurogroup Chairman Mario Centeno is known as a socialist, but despite his “anti-austerity” reputation, he slashed government spending and deficits while he was finance minister of Portugal. This earned him trust on both sides of the fiscal policy divide, and will allow him either to keep the Eurogroup as a low-profile talking shop, or to help it raise its stature to eurozone policymaking body.
Opinion: Putting Europe back on track
These days, it is easy to forget that European integration is a huge success. The founders were right that the free movement of goods and people would bind the continent together and promote peace. But national governments and centralizing democrats have spoiled a good idea through their own timidity and ambition. If the European Union is to play a global role, it must return to its roots.
The Swiss franc 2.0
The Swiss economy is doing remarkably well. Though it is growing only slowly, its companies are competitive, unemployment is virtually absent, inflation is close to zero and public debt is under control. One would therefore expect the Swiss National Bank to abstain from taking an active role in monetary policy or manipulating interest rates and exchange rates. Yet, last June the SNB announced that it intends to play an active role, and that it will expand its money supply to enhance growth and avoid deflation. These explanations are not convincing – the key is somewhere else: bruised Swiss manufacturers.
Opinion: Britain and Germany – should we expect a Brexit war?
As Europe gears up for Brexit negotiations, the lines in the sand are already being drawn. Germany is bent on making Britain pay a heavy price for leaving the European Union, while the United Kingdom is hoping for a soft divorce. While the German position looks strong on paper, too much hostility could backfire. Tensions between Berlin and London are likely to be short-lived. A compromise will probably be reached after the German elections this year.
The future of euroskepticism
While Europe’s populist parties identify the euro as the root of most evils, exiting the common currency won’t solve their country’s economic woes – in fact, the solutions they propose will probably make them worse. Voters have recognized this. But anti-immigration sentiment remains a powerful weapon in their arsenal, and Brussels seems unwilling to take the necessary measures to address it.
GIS Dossier: The strangely resilient euro
The euro has been remarkably stable during its 15-year existence as a major currency. That has not always been a good thing for the European economy. But the real concerns for the single currency hinge on politics and survival.
Frailty, thy name is Europe
The EU is in profound crisis, caused by years of shallow leadership. Only a radical change in its leaders’ performance can salvage the European project now. Managing structural problems instead of resolving them, trying to shame the rebellious public into accepting business as usual and blaming the United States for Europe’s dangerously weak security position is a road to self-destruction.