Spain’s “Good” Deflation?

Spain’s domestic economy is booming, or so the story goes, and in no small part this boom comes thanks to the arrival of what is being termed the “good kind of deflation”, the sort everyone would like to have, a world where prices fall, real incomes rise, jobs are created, and everyone gets to live […]

The deal that may make or break the eurozone

It is no secret that the top priority of the new Greek government will be to negotiate a reduction in the country’s debt – as well as to broker softer terms on the austerity conditions forced by its creditors. Until as recently as the wee hours of Thursday, I thought that this would be unethical. Here is the […]

Time to Scrap the Stability and Growth Pact

Today’s Eurozone fiscal discipline is the amalgamation of reforms implemented over ten years, with the latest and largest changes agreed in crisis settings. This column argues that the result fosters neither growth nor stability since actual fiscal policy has been powerfully procyclical. The focus on intermediate targets has distracted attention from the final objectives – […]

Europe’s Great Divide

In our previous post (here), we described post-electoral Europe’s stalemate in a European version of the  “Impossible Triplet” sketched by Dani Rodrik to describe the dilemmas of globalization. We drew a triangle given by the three constitutive dimensions of the EU: “European integration”, “National sovereignty”, “Democratic consensus”. Each one is incompatible with the other two.  […]

Eurocrisis Round Two, Blame the Germans Edition

“What strikes me, also, is the extent of intellectual confusion that remains.” – Paul Krugman, Europanic 2.0 “The problem is that Germany has continued to maintain highly competitive labor costs and run huge surpluses since the bubble burst — and that in a depressed world economy, this makes Germany a significant part of the problem.” […]

The European Crisis – ‘Financial Poker’ Games!

Reviewing the borrowing costs of European nations, a visiting intelligent alien may conclude that the European economic crisis is over and rehabilitation complete. 10-year government bond rates for Spain, Portugal, Ireland and Greece are 2.20%, 3.12%, 1.67% and 6.15% respectively. Equivalent rates for Germany, France and Italy are 0.97%, 1.31% and 2.39%. Comparable rates for […]