European Central Bank
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.
Global Outlook 2018: Dangerous waters ahead for the world economy
All around, the wind seems to have filled the sails of the world economy. From consumer spending to investment to stock market indices, the sailing seems smooth. But some dangerous currents, including debt-fueled liquidity and low productivity, are converging below the surface. Without an effort by the captains of the world economy to right the ship, it could be pulled under.
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.
Helmut Kohl and the European ideal
If the European Union wants to survive and thrive, it should pay attention to the legacy of Dr. Helmut Kohl. The former German Chancellor, who died last week, belongs to a line of giants including Charles de Gaulle and Konrad Adenauer. What they understood is what today's European leaders are getting wrong.
Macron and the German project
After Brexit, the European Union is composed of two sorts of countries – those willing to recognize German leadership, and those reluctant to do so. With the project of an ever-closer union now defunct, the EU’s internal debate has shifted to what Germany wants and how much it is willing to compromise. A lot depends on the position of France and its new president.
Opinion: The day Europe goes bankrupt
You may not be able to see it, but Europe’s biggest economies have piled up enormous amounts of pension debt. The European Central Bank’s policy of target credits and quantitative easing has only made things worse. With politicians seemingly determined not to notice, a systemic implosion may be inevitable.
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.