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2. The Macroeconomic Imbalance Procedure and Germany: When is a current account surplus an 'imbalance'?
- Author:
- Daniel Gros and Matthias Busse
- Publication Date:
- 11-2013
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- The Macroeconomic Imbalance Procedure (MIP) was designed to prevent the emergence of imbalances like the large and persistent current account deficits that occurred in Spain and Ireland. But within this mechanism, a current account surplus is also viewed as a source of concern. Indeed, last year's Alert Mechanism Report (AMR), issued by the European Commission signalled an excessive current account surplus for the Netherlands and Luxembourg, while Germany just barely scraped by with a 5.9% surplus, marginally evading the 6% threshold (over a 3-year average). With the most recent report, however, Germany's status has changed. Along with the Netherlands and Luxembourg, it too has now been singled out as a euro-area country with a surplus above the upper threshold.
- Topic:
- Economics, International Trade and Finance, Markets, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe and Germany
3. A simple model of multiple equilibria and sovereign default
- Author:
- Daniel Gros
- Publication Date:
- 07-2012
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies
- Abstract:
- This paper presents a simple model that incorporates two types of sovereign default cost: first, a lump-sum cost due to the fact that the country does not service its debt fully and is recognised as being in default status, by ratings agencies, for example. Second, a cost that increases with the size of the losses (or haircut) imposed on creditors whose resistance to a haircut increases with the proportional loss inflicted upon them.
- Topic:
- Debt, Economics, International Trade and Finance, Markets, and Financial Crisis
- Political Geography:
- Europe
4. A European Deposit Insurance and Resolution Fund - An Update
- Author:
- Daniel Gros and Dirk Schoenmaker
- Publication Date:
- 09-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- Cross-border banking is currently not stable in Europe. Cross-border banks need a European safety net. Moreover, a truly integrated European level banking system may help to break the diabolical loop between the solvency of the domestic banking system and the fiscal standing of the national sovereign.
- Topic:
- Economics, International Trade and Finance, and Markets
- Political Geography:
- Europe
5. Macroeconomic Imbalances in the Euro Area: Symptom or cause of the crisis?
- Author:
- Daniel Gros
- Publication Date:
- 04-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- Lax financial conditions can foster credit booms. The global credit boom of the last decade led to large capital flows across the world, including large movements of resources from the Northern countries of the euro area towards the Southern part. Since the start of the crisis and more markedly after 2009, these flows have suddenly stopped, creating severe adjustment pressures. This paper argues that, at this point, the common monetary policy can only try to mitigate the unavoidable adjustment by maintaining overall financial stability. The challenge is to strike a delicate balance between providing liquidity for solvent institutions while keeping the overall pressure on for a rapid correction of the imbalances.
- Topic:
- Economics, Markets, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe
6. The Spanish Hangover
- Author:
- Daniel Gros and Cinzia Alcidi
- Publication Date:
- 04-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- Spain faces high unemployment and slow growth. This paper focuses on an important source of those problems, namely its housing market. While some adjustment has occurred since Spain's housing bubble burst in 2008, the authors find that house prices and construction need to decrease more to slow Spain's unsustainable accumulation of foreign debt.
- Topic:
- Debt, Economics, Markets, and Financial Crisis
- Political Geography:
- Europe and Spain
7. 'Grexit': Who would pay for it?
- Author:
- Daniel Gros, Cinzia Alcidi, and Alessandro Giovannini
- Publication Date:
- 05-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- What would be the cost if Greece were to exit from the eurozone? This much-debated question cannot be answered with a single number. The consequences of Greece's exit would depend decisively on the exact circumstances of events in the country itself as well as the general state of financial markets in the eurozone.
- Topic:
- Debt, Markets, Regional Cooperation, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe and Greece
8. Europe's Recurrent Employment Problems
- Author:
- Daniel Gros
- Publication Date:
- 05-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- As the euro crisis continues and unemployment climbs to new heights, the clamour calling for Europe to 'do something' is getting louder. But the real question is: can Europe, or rather the EU, do 'something' that would actually have a real impact on unemployment? In other words, does a European plan or employment strategy make sense?
- Topic:
- Economics, Markets, Labor Issues, and Financial Crisis
- Political Geography:
- Europe
9. A Sovereign Wealth Fund to Lift Germany's Curse of Excess Savings
- Author:
- Daniel Gros and Thomas Mayer
- Publication Date:
- 08-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- For most of the time since the early 1950s, national savings in Germany have tended to exceed national investment, resulting in a current account surplus. Most of these excess savings have been intermediated by the domestic banking system, which has had difficulties investing these German surpluses abroad given that it is prohibited by law from taking any exchange rate risk. This tended to keep the surplus within limits most of the time (less than 1- 2% of GDP). With the advent of the euro, however, German surpluses could become much larger and seem now to have become structurally engrained at 6% of GDP, or over one-quarter of savings. Since the start of the euro crisis, German private savers have repatriated their investments – effectively unloading their exposure onto the public sector as German banks have deposited hundreds of billions of euro at the Bundesbank. These funds are being lent by the ECB to banks in the euro area periphery (at 75 bps) – ensuring effectively a negative real return.
- Topic:
- Economics, International Trade and Finance, Markets, and Sovereign Wealth Funds
- Political Geography:
- Europe and Germany
10. Can Italy and Spain survive rates of 6-7%?
- Author:
- Daniel Gros
- Publication Date:
- 07-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- The sentiment that the euro is now in real danger is based in large part on the widespread conviction that interest rates of 6-7% are simply unsustainable for both Italy and Spain., After taking a closer look at the fundamentals, however, Daniel Gros concludes in this new Policy Brief that both countries should be able to live with this level of interest rates for quite some time, but only if they mobilize domestic savings, which remain strong in both countries. For Spain, some debt/equity swaps are also needed.
- Topic:
- Debt, Economics, Markets, and Financial Crisis
- Political Geography:
- Europe, Spain, and Italy