European Doldrums

European economies are faltering.  The German economy contracted in the second quarter, as did those of France and Italy. Growth in Spain and the Netherlands was not enough to offset the slowdown in the Eurozone’s largest members.  An escalation in the confrontation with Russia would send shockwaves rippling from the Ukraine westwards that world worsen the situation. […]

Hard Work and External Help: How to Successfully Conduct Macroeconomic Adjustment With Official Assistance

What are the factors that ensure a successful and durable completion of a financial assistance programme? Past experience with IMF-supported adjustment programmes underlines the importance of external conditions but also of fiscal consolidation, financial repair and structural reforms. These findings vindicate the strategy pursued in recent adjustment programmes in the euro area: putting the fiscal […]

When Irish Eyes Are Smiling

In January, Moody’s bestowed investment grade status on Ireland. It is the first of the crisis-wracked countries who regained this coveted status from Moody’s which allows for wider participation in its bond market. Moody’s will review Ireland at the end of this week and there is a reasonably good chance that it revised its rating higher […]

Eurozone Sovereign Debt: All Quiet on the Southern Front

After a wild ride in 2011-2012, interest rates have settled down on European sovereign debt. For now. Yields on long-term government bonds, Jan 2009 to Nov 2013. Data source: Eurostat. Greek yields fell sharply following the PSI agreement in March 2012, a de facto default that ended up reducing the value of Greek’s debt by 20%. But as […]

Germany and the Euro-Surrealpolitik

This articles reviews the theory behind Optimum Currency Areas and the lack of willingness in the European Union and particularly of Germany to lead the process of political and fiscal unions. With Britain maintaining its euro-skeptical status and France and Italy immersed in political crisis, there remains little hope that the Eurozone will ever become […]

How to Resolve the Fiscal Problems of Southern Europe?

The Southern European fiscal mess has triggered the crisis on the continent. In January 2010, the European Commission discovered falsifications of the Greek budget statistics (Arganda and Caselli 2012). It undermined investors’ confidence in the country’s debt securities. A sharp increase in bond rates forced Brussels to rescue Greece from default. The Greek government received […]

Ireland Agrees on Repayment Deal with ECB, but Much More Is Needed

When Ireland’s banking crisis forced bailout assistance from the IMF/EU/ECB troika in 2010, the IMF was identified by the Irish public as the driver of harsh austerity measures. “IMF Out” placards were a common sight at protests around Dublin. Several years later the IMF has become Ireland’s strongest advocate for recovery, openly supporting relief for […]

The Year Ahead in the Eurozone: Lower Risks, Same Problems

Financial conditions in the eurozone have significantly improved since the summer, when eurozone risks peaked because of German policymakers’ open consideration of a Greek exit, and the sovereign spreads of Italy and Spain reached new heights. The day before European Central Bank President Mario Draghi’s famous speech in London in which he announced that the […]

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