EconPol Policy Briefs

Cover of EconPol Policy Brief 16

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

Clemens Fuest and Daniel Gros

In this paper we discuss to what extent the declining difference between interest rates and growth rates (r-g) pointed out recently by Olivier Blanchard (2019) for the case of the US also characterizes the economic situation in Europe. We show that r-g has been positive on average but declining over the last decades in Europe as well. 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. We 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.

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Cover of EconPol Policy Brief 15

Applying nominal expenditure rules in the euro area

Clemens Fuest and Daniel Gros

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.

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Cover of EconPol Policy Brief 14

Incentivising structural reforms in Europe?

A blueprint for the European Commission’s Reform Support Programme

Mathias Dolls, Clemens Fuest, Carla Krolage, Florian Neumeier, Daniel Stöhlker

How can a faster implementation of structural reforms fostering the process of economic convergence in Europe be achieved? In our latest policy brief, EconPol researchers discuss the rationale and potential adverse effects of providing financial incentives for structural reforms and present a proposal of national convergence roadmaps. Although these proposals deviate from the Commission proposal in some key dimensions, they reflect the fact that ensuring progress towards convergence targets is primarily a responsibility of the individual member states - not of the EU or European institutions and bodies like the European Commission and the Eurogroup.

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Cover of EconPol Policy Brief 13

Trump’s trade attack on China – who laughs last?

Gabriel Felbermayr and Marina Steininger

A modern general equilibrium trade model to simulate the effects of the Chinese-American trade dispute finds that both economies lose, but China loses absolutely and relatively much more. In our latest policy brief, the authors analyse the potential impacts of an escalating trade war and find that while the bilateral tade balance of the US with China improves, it deteriorates with the EU and forebodes further transatlantic conflict.

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Cover of EconPol Policy Brief 12

Hard Brexit ahead: breaking the deadlock

Gabriel J. Felbermayr, Clemens Fuest, Hans Gersbach, Albrecht O. Ritschl, Marcel Thum and Martin T. Braml

With negotiations between the EU and UK reaching deadlock, the only way forward seems to be a hard Brexit. In this policy brief, the authors suggest a model which will avoid a ‘no deal’ scenario and find that a minimum three-month extension is necessary in order to establish a European Customs Association.

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