Newsletter April 2019
Newsletter with envelope icon
How to revive productivity growth?
In this issue:
  • EconPol/ZEW lunch debate: insolvency system for heavily indebted euro countries urgently needed
  • How to revive productivity growth?
  • Towards more feasible debt restructurings in the euro area
  • The design of sovereign debt restructuring in the eurozone: choices and trade offs
  • Applying nominal expenditure rules in the euro area
  • How big should government be?
  • The effects of macroeconomic, fiscal and monetary policy announcements on sovereign bond spreads
  • Upcoming events
  • Plus all the latest news from our partners
The second EconPol Europe and ZEW – Leibniz Centre for European Economic Research joint lunch debate was held in Brussels on 28 March. Participants were warned that Europe urgently needs an insolvency system for heavily indebted euro countries. When it comes to mapping out the details of such a system, participants heard, particular care should be taken. It is essential to take precautions to ensure that banks are no longer allowed to lend without limits to single euro states. The discussions were based around the central findings of a study conducted jointly by ZEW and EconPol.

Read the report.
POLICY REPORTS

How to revive productivity growth?

Providing financial incentives for companies to invest in productivity-enhancing technologies and practices is the key to productivity growth, according to this latest policy report by Cecilia Jona-Lasinio (ISTAT and LUISS Guido Carli), Stefano Schiavo (University of Trento) and Klaus Weyerstrass (Institut für Höhere Studien). Strong investment should also be made into training and workforce skills to exploit the productivity potential of new business models in the digital economy. Competition policy, although not directly related to productivity, is also emerging as an important tool to shape incentives and foster the efficient allocation of resources both across and within sectors and firms. The report analyses the recent trends in labour and total factor productivity in the EU and beyond and identifies factors that influence productivity.

Press release
EconPol policy brief 13
 

Towards more feasible debt restructurings in the euro area

Over the last year, exchanges that were initiated by the ZEW’s SEEK-conference on ‘regulating sovereign debt restructuring in the eurozone’ resulted in vivid discussions on more feasible sovereign debt restructurings in the euro area. This policy report, edited by Frederik Eidam and Friedrich Heinemann, summarizes these discussions by collecting several contributions on different aspects of the topic. Founded in different perspectives, contributors sometimes provide different conclusions, or highlight different choice options and their underlying trade-offs. However, common to all authors is the aim to increase the resilience of the European Monetary Union and to contribute on the debate on the European reform agenda.

EconPol policy report 12
 

The design of sovereign debt restructuring in the eurozone: choices and trade offs

This paper critically assesses several dimensions of a sovereign debt restructuring mechanism (SDRM) for the euro area, while abstaining from recommending one ideal model for a restructuring mechanism. Instead, authors apply a menu-type approach. For five key institutional SDRM dimensions, they discuss the underlying fundamental trade-offs and the pros and cons of different design choices. The analysis implies that there is no convincing reason to further taboo the search for a euro area SDRM, as there are ways to combine the opportunities of a credible SDRM with financial stability.

EconPol policy report 11
 
POLICY BRIEFS

Government debt in times of low interest rates:
the case of Europe

To what extent does the declining difference between interest rates and growth rates (r-g) also characterize the economic situation in Europe? The authors show that r-g has been positive on average but declining over the last decades in Europe. But r-g differs across considerably across European countries, and a continuation of current fiscal policies even under existing conditions would increase the debt ratios further in some countries. They conclude that the current low levels of r-g should be used to make progress in fiscal consolidation in countries with high debt levels. At the same time it would be desirable to benefit from the currently low interest rates to boost one time investment projects.

Press release
EconPol policy brief 16
 

Applying nominal expenditure rules in the euro area

In the debate on euro area fiscal governance, the current deficit rules of the EU have repeatedly been criticised to have a pro-cyclical effect, leading to overly lax fiscal policies in good times and a too restrictive regime in bad times. An analysis by EconPol researchers Clemens Fuest (ifo) and Daniel Gros (CEPS) shows that most major EU countries are over-spending at a level not compatible with spending rules for sustainable public finances.

Press release
EconPol policy brief 15
 
WORKING PAPERS

How big should government be?

How big should government be? António Afonso and Ludger Schuknecht link the recent findings of Data Envelope Analysis on public expenditure to the size of government. Their analysis of government performance indicators in relation to public expenditure finds the biggest expenditure categories have the highest savings potential.

Press release
EconPol working paper 23
 

The effects of macroeconomic, fiscal and monetary policy announcements on sovereign bond spreads: an event study from the EMU

In this EconPol working paper, the authors assess the impact of announcements corresponding to different fiscal and monetary policy measures on 10-year sovereign bond yield spreads. They find that the European Commission’s releases of excessive deficit procedure have a significant impact on the yield spreads. EC releases of higher debt and better budget balance forecasts contribute to the rise and decline of spreads, respectively.

Press release
EconPol working paper 22
 
ECONPOL EVENTS
CEPS-EconPol lunch meeting
Topic TBC
20.05.2019 | 13:15 – 14:00, CEPS, Brussels
Venice Summer Institute 2019
Taxation in the Digital Economy: Theory and Evidence
03.06.2019 | 9:00 – 14:00, San Servolo, Venice, Italy
NEWS FROM OUR PARTNERS
CEPII newsletter
CEPS latest publications
CERGE-EI latest news
CPB latest publications
IHS publications hub
Instituto Universitario de Economía Universidad Carlos III de Madrid – latest news
KOF Bulletin, January 2019
REM – Research in Economics and Mathematics Newsletter, February 2019
TSE news
Universita di Trento news
University of Oxford (Centre for Business Taxation) news and insights
VATT news
ZEW newsletter, January 2019
ABOUT ECONPOL EUROPE
EconPol Europe is a cross-border voice for research in Europe, providing research-based contributions aimed at promoting growth, prosperity and social cohesion in Europe and, in particular, the European and Monetary Union. Our mission is to contribute our research findings to help solve the pressing economic and fiscal policy issues facing the European Union, and to anchor more deeply the idea of a united Europe within member states.

Our joint interdisciplinary research covers:

    •    sustainable growth and best practice,
    •    reform of EU policies and the EU budget,
    •    capital markets and the regulation of the financial sector and
    •    governance and macroeconomic policy in the European Monetary Union.

If you would like further information about EconPol Europe, please contact Juliet Shaw at shaw@econpol.eu

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© EconPol Europe: European Network for Economic and Fiscal Policy Research – ifo Institute – Leibniz Institute for Economic Research at the University of Munich 2019.


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