Cancelling ECB-held sovereign debt would harm not help

2021 ◽  
Keyword(s):  
European Commission ◽  
Euro Area ◽  
Sovereign Debt ◽  
Government Debt ◽  
Economic Recovery ◽  
Member States ◽  
Content Type ◽  
Debt Cancellation

Significance The debate is timely, as in the next two months the European Commission will review the fiscal programmes of member states amid calls for further stimulus to boost economic recovery. Impacts The safest and surest way to cut sovereign debt in the most highly-indebted EU states will be by implementing growth-oriented investments. Further calls to cancel government debt will further fuel uncertainty at a time when consensus between euro-area states is most needed. Debt cancellation is highly unlikely because of opposition from euro-area countries with the lowest government-debt-to-GDP ratios.

EU state aid plans will concern some trade partners

2020 ◽  
Keyword(s):  
Competitive Advantage ◽  
European Commission ◽  
Euro Area ◽  
State Aid ◽  
Economic Recovery ◽  
Content Type ◽  
Eu Countries ◽  
Foreign Takeover ◽  
Trade Partners ◽  
Trade And Investment

Subject EU state aid. Significance The European Commission has approved more than EUR2.1tn (USD2.4tn) in state aid since March. This significant relaxation of state aid rules -- aimed at preventing businesses from collapsing and protecting them from foreign takeover -- could last for another year or two. At the same time, the Commission is preparing to bolster its scrutiny of aid by non-EU states which gives their firms a competitive advantage over EU ones. Impacts After aviation, those sectors most in need of state aid are other transport sectors, hospitality and tourism. Richer EU countries’ ability to provide much more state aid to its firms will fuel a disjoined economic recovery across the euro-area. The EU’s crackdown on foreign subsidies will likely make it more difficult to reach a trade and investment partnership with China.

London is in strong position to keep euro-clearing

2017 ◽  
Keyword(s):  
New York ◽  
European Commission ◽  
International Business ◽  
Euro Area ◽  
Member States ◽  
Content Type ◽  
Eu Member States ◽  
Strong Position ◽  
The Law ◽  
The Eu

Subject London euro-clearing post-Brexit. Significance The European Commission released draft legislation on June 13 proposing the European Securities and Markets Authority (ESMA) supervise non-EU-based clearing houses that are deemed systemically important, in effect giving the EU the power to insist euro-clearing remains in the bloc after Brexit. On June 23, the ECB proposed a “significantly enhanced” role for the ECB in euro-clearing. Forcing euro-clearing into the euro-area shows the bloc puts protecting its own interests before globalisation, also suggesting that the post-Brexit EU may increasingly prioritise political imperatives over economic ones, and become less open to international business. Impacts The draft law will affect New York and Tokyo, which will gain from London if European finance becomes more fragmented. If passed, the law will give the ESMA strong powers to determine the geography of EU finance. Such political direction could cause tensions as not all EU member states are likely to welcome it.

Eurobonds: Three Lessons from China’s “Debt Centralization/Decentralization” Experience

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Zhiyong An
Keyword(s):  
Moral Hazard ◽  
Euro Area ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Budget Constraint ◽  
Sovereign Debt Crisis ◽  
The European Union ◽  
Member States ◽  
Institutional Mechanism ◽  
Previous Series

Abstract Eurobonds, dubbed as Coronabonds in the context of the current coronavirus crisis, are being hotly debated among the euro area member states amid the COVID-19 pandemic. The debate is in many ways a retread of the euro area sovereign debt crisis of 2011–2012. As China’s “debt centralization/decentralization” experience is comparable with the introduction of Eurobonds in the European Union (EU) in terms of institutional mechanism design, we review our previous series of studies of China’s “debt centralization/decentralization” experience to shed some light on the Eurobonds debate. We obtain three key lessons. First, the introduction of Eurobonds in EU is likely to soften the budget constraint of the governments of the euro area member states. Second, it is also likely to strengthen the moral hazard incentives of the governments of the euro area member states to intentionally overstate their budget problems. Finally, the magnitudes of the moral hazard effects generated by the introduction of Eurobonds in EU are likely larger than their respective counterparts in China.

Syriza may be troika's best hope for Greek deal

2015 ◽  
Keyword(s):  
Stock Market ◽  
European Commission ◽  
Financial Market ◽  
Euro Area ◽  
The Political ◽  
Costs And Benefits ◽  
Content Type ◽  
Political Left ◽  
Unexpected Outcomes ◽  
Market Exuberance

Subject Unexpected outcomes in the Greece-troika imbroglio. Significance Negotiations between Greece and its 'troika' of official-sector creditors (the European Commission, ECB and IMF) are taking place amid two meetings of the euro-area finance ministers and one summit of EU leaders before the end of February. While it is impossible to know now what the result will be, it is possible to speculate on the costs and benefits of any given scenario. Impacts If Syriza fails to achieve meaningful debt reduction, it could discredit the political left as well as the notion of EU solidarity. Greek sovereign yields and the Greek stock market are likely to react extremely positively to any deal between the troika and Greece. Financial market exuberance towards Greece will be unwound as the implications of Greece's continuing high debt load become clearer.

US rates may rise but economic risks are rising faster

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Sovereign Debt ◽  
Emerging Market ◽  
Content Type ◽  
Political Risks ◽  
Bond Yield ◽  
Treasury Bond ◽  
The Face ◽  
Equity Index

Subject Global equity market trends. Significance The four main US stock market indices began March at record highs, including the benchmark S&P 500 index at 2,400. Driven by expectations of stimulative and pro-business policies under the new US administration, equity markets are flying in the face of signals from the Federal Reserve (Fed) that interest rates will rise three times this year. The probability of a hike at the Fed’s March 14-15 meeting has risen above 80% on growing price pressures and stronger economic data, buoyed by hawkish comments from several Fed governors, including those who were previously dovish. Impacts Despite the post-election US bond market sell-off, around one-third of the stock of euro-area sovereign debt remains negative yielding. The gap between the two-year US Treasury bond yield and its German equivalent has widened to a record, a sign of rising monetary divergence. The euro lost 2% against the dollar in February as political risks escalated in the euro-area, centred around the French election. The emerging market MSCI equity index is 8.6% up this year, after losing 4.5% from November 9 to end-2016, a sign of higher confidence.

Prospects for the euro-area in 2020

2019 ◽  
Keyword(s):  
Supply Chains ◽  
Eastern Europe ◽  
Euro Area ◽  
Central And Eastern Europe ◽  
Social Economic ◽  
Member States ◽  
Content Type ◽  
Area Growth ◽  
Main Factors ◽  
Export Industries

Subject Prospects for the euro-area in 2020. Significance The main factors that could weaken euro-area growth in 2020 include further damage to Germany’s export industries, which would hit the extensive supply chains and jobs across many smaller and less resilient member states, especially in Central and Eastern Europe, as well as specific social, economic and political challenges in individual countries.

Euro-area economic recovery will support prices trend

2015 ◽  
Keyword(s):  
Euro Area ◽  
Economic Recovery ◽  
Content Type

Headline EURO-AREA: Economic recovery will support prices trend

Draft budget will increase Greek taxpayers' burden

2016 ◽  
Keyword(s):  
Euro Area ◽  
Financial Assistance ◽  
Economic Recovery ◽  
The Political ◽  
Tax Revenue ◽  
Unequal Distribution ◽  
Content Type ◽  
The Third ◽  
Private Households ◽  
Political Backlash

Significance Clearing state arrears to the private sector depends on the quartet of international creditors' timely disbursement of financial assistance tranches. The finance ministry is in no position to generate additional tax revenue or cut expenditure. Thus, it is vital to conclude the second review of the third programme and disburse the next 2.8-billion-euro (3.1-billion-dollar) tranche. Impacts The political backlash from angry taxpayers may just be an election away. No euro-area country has achieved economic recovery after seven years of recession on the back of excessive taxation. The 2017 budget draft only increases the unequal distribution of the rising tax burden for private households and corporates.

EU comitology reform could politicise regulation

2017 ◽  
Keyword(s):  
Member State ◽  
European Commission ◽  
Interest Group ◽  
European Parliament ◽  
Member States ◽  
Content Type ◽  
Eu Regulation ◽  
Regulatory Decisions ◽  
The Eu ◽  
Final Reform

Subject Proposed reform of the EU comitology procedure. Significance The little-known ‘comitology’ procedure plays a key role in EU regulation. In recent years, this process has been breaking down as member-state expert representatives in comitology committees often abstain from voting, forcing the European Commission to take controversial decisions on its own (and accept any blame for them). In response, the Commission has proposed reforms that would pressure member states to take a position on (and hence political ownership of) controversial regulatory decisions. Impacts Government representatives, interest-group representatives and corporate lobbyists will be most affected by comitology reform. Despite adding transparency and avoiding blame-shifting to Brussels, the reforms would probably not help the EU’s image with citizens. The European Parliament might demand -- as part of any final reform package -- an increase in its involvement in the comitology process.

Further EU integration will be uneven and incremental

2017 ◽  
Keyword(s):  
United Kingdom ◽  
European Integration ◽  
European Commission ◽  
Member States ◽  
Content Type ◽  
Eu Integration ◽  
The United Kingdom ◽  
The Future ◽  
The Eu

Significance The celebration came just days before the United Kingdom is set to begin the withdrawal process. Precisely what path the EU will take over the next decade remains uncertain and the European Commission has kicked off a process of dialogue on various scenarios for its future. Impacts Debates about the future of the EU will occur simultaneously with Brexit negotiations and be coloured by them. EU leaders will be keen to continue to demonstrate their commitment to press forward with European integration despite Brexit. Brexit will not lead to an unravelling of the EU and thus far has served to enhance support for the Union in other member states. Yet Brexit will not lead to any sudden deepening of integration.

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