Euro Sheds More Post-ECB Gains

The US dollar is mostly little changed against the major currencies. The euro is the main exception. After a halfhearted attempt to push above the $1.3600, the euro has been sold through yesterday’s lows.. With positioning assumed to be more balanced after the gyrations in the second half of last week, there is some pressure to […]

ECB Framework: BEEEP

Next week’s ECB meeting could very well prove to be among the most important events of the year.  It has taken ECB President Draghi’s leadership and increased risk of lowflation if not deflation to forge an apparent consensus at the central bank that more action is needed. While the “when” has been largely agreed upon […]

The Euro Area Needs a Growth Stimulus Package

For several months, the outlook for the euro area has improved thanks to the positive results that have been achieved over the national and European level.  Budget deficits have decreased considerably since 2011, particularly in the countries hardest hit by the crisis.  Trade deficits of these countries have disappeared through fiscal consolidation and structural reforms […]

Could Mario Draghi Implementing QE at the ECB Possibly Help Matteo Renzi Raise the Italian Deficit?

What a convoluted title! Still, the lack of formal elegance might just be compensated for by its communicative efficacy. The aim of the above header is to link two names in people’s minds, both of them Italian: Mario Draghi and Matteo Renzi. Naturally the idea is not original, the FT’s Peter Spiegel  recently published an […]

Revisiting Banking Union in a Single Currency Area (Part 2)

The current banking union framework remains far from ideal if the currency union dimension is taken into account. While decisions so far have been focusing on the moral hazard of banks, these measures fail to solve an additional market failure in the Euro area caused by the moral hazard of governments competing on funding costs, […]

Repo Comes Under the Microscope

Introduction On 29 January 2014, the EU Commission published a legislative proposal for a regulation on reporting and transparency of securities financing transactions[1] (SFTs) and associated FAQ document. The EU Commission is concerned that efforts to reform the structure of EU banks (in the form of the Liikanen proposals – see this blog post for […]

Revisiting Banking Union in a Single Currency Area (Part 1)

Evidence suggests that financial integration in the Euro area is retrenching at a quicker pace than outside the union. Home bias persists. Meanwhile, governments continue to compete on their funding costs via interventions to support ‘their’ banks, avoiding spill over effects on costs of public debt but so distorting the level playing field with massive […]

Liikanen Out of the Blocks

Introduction On 29 January 2014, the EU Commission published a legislative proposal and accompanying press release regarding a regulation on structural reform of the EU banking sector.  Recognising that the Bank Recovery and Resolution Directive will be unable to address the issue of “too-big-to-fail” in its entirety, and in furtherance of the political agenda to […]

Eurozone: Competitiveness Indicators and the Failure of Internal Devaluation

Measures of ‘international competitiveness’, for example those based on broad wage, unit labour cost and price parameters are approximations only[1].   Some are more relevant than others. The purpose of this short article is to review the progress of external account adjustment and internal devaluation in Eurozone countries Unit Labour Cost Comparison Unit labour cost-based measures […]