EMU 2.0: Yes or No?

In the Summer of 2012 the Euro-crisis seemed to be at a turning point. First, an ambitious programme of institutional reforms of the EMU was launched aimed to the creation of a “Genuine Economic and Monetary Union” (EU Council, 2012). The founding idea of this ‘EMU 2.0’ is that there should be a clear, consensual […]

Austerity and Growth: Dispelling Confusion With Some Facts

A lot of confusion surrounds the quarrel about austerity and growth in and among the Euro-countries. [1] Confusion helps neither the assessment of the current policies nor the choice of the correct ones. Critics of austerity argue that it is mainly responsibile for the extent and persistence of low or negative growth rates after the […]

Sustainability vs. Credibility. Why ‘Austerity’ May Not (Did Not) Work

The “shock therapy” of front-loaded, “ambitious” fiscal consolidation plans, also known in Europe as “austerity”, hinges on the credibility approach. In this approach, governments are urged to announce and implement large fiscal adjustments that are rewarded with lower interest rate (e.g. Corsetti et al. (2010)). This is crucial. Even though austerity may have short-run negative […]

Popper in Brussels

The European Commission’s Directorate General for Economic and Financial Affairs (ECFIN) has recently released an Economic Brief  by Marco Buti and Nicolas Carnot whose aim is to assess the so-called “austerity policy” enforced by the Commission, and to dispel the main allegations of its critics. The allegations tackled by the authors are five. 1) Unnecessarily […]

Italian Austerity in the Polls: The Results

In my previous post before Italy’s general elections, I argued that the economic legacy of the Monti government was problematic, not so much in reason of the doses of austerity inflicted on the country as to the poor deliverables regarding the promises of “more equity and growth” and a reasonable perspective of recovery. Now we […]

Italian Austerity in the Polls

After four years since the beginning of the world Great Recession, and one year of the Monti-Merkel “austerity” therapy, Italy goes to the general elections. Here is an account of what happened, what has been done and with what results. GDP and growth: where do we stand? Table 1 offers summary statistics of the main […]

EMU 2.0 and the German Problem

The most common comment on the Brussels Agreements of June 29 concerning the reform of the European Monetary Union (EMU) is that they are the first step in the right direction, but sill insufficient. The market’s cautious reaction seems in the same tone. The direction is right, and corrects previous mistakes, for two reasons. First, […]

EMU Reform – Still Far From the Right Solutions

President Monti in his Asian roadshow has declared that the Euro zone crisis is over. This statement, which is unwarranted for the real economy according to all major forecasts, is overly optimistic with reference to the sovereign debt crisis. The so-called “Treaty (!) on Stability, Coordination and Governance in the economic and monetary Union” released […]

Can Italy Do Its Homework Alone?

The new Italian government of Prof. Mario Monti faces a deadly challenge with three formidable hurdles: the choice of the best economic policy strategy, the rapidly deteriorating context of  the economic and institutional Europe, the trembling loyalty of his unprecedented majority of “the unwilling”. Prior to addressing detailed measures, the government should choose a clear […]