Dealing with Public Debt in the Post-Covid Euro Area

ZEW and EconPol Research Seminar: Coping with Post-Covid Sovereign Debt Levels in the Euro Area | Call for Papers: 9th UECE Conference on Economic and Financial Adjustments
Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment; Corruption and Economic Growth: Does the Size of the Government Matter? Incentives for Accelerating the Production of Covid-19 Vaccines in the Presence of Adjustment Costs; Do Financial Markets Reward Government Spending Efficiency?
What are the options and scenarios for dealing with public debt in the post-Covid euro area? This question will be at the heart of our virtual seminar, jointly organized by ZEW Mannheim and EconPol Europe. Join the discussion with Cinzia Alcidi (CEPS Brussels), Friedrich Heinemann (ZEW Mannheim) and Volker Wieland (Goethe University Frankfurt) on 28 April, 12 – 1.30pm (CET). Register to take part.
Call for Papers: The 9th UECE Conference on Economic and Financial Adjustments will be held in Lisbon (on campus and online) on 30 July 2021. Researchers are invited to submit proposals before 25 June. Call for papers and more information.
In their working paper Jouko Verho, Kari Hämäläinen and Ohto Kanninen challenge the hypothesis that universal basic income might remove welfare traps for the unemployed. Analysing data from Finland’s unique basic income experiment carried out between 2017 and 2018 they find that it led to only a small increase in employment.
Delays in the availability of vaccines are costly as the pandemic continues but existing fixed price contracts provide no incentives for producers to speed up delivery. Covid-19 vaccines delivered early should command a higher price, according to research from Daniel Gros and Claude Gros. In their EconPol policy brief they draw a clear conclusion: An optimal contract aligns the time paths of the price with that of the social value of a vaccination.
Corruption has a negative effect on the economy – specifically on the level and growth of GDP - and large governments register less benefit from reducing corruption than small governments. However, in their working paper António Afonso and Eduardo de Sá Fortes Leitão Rodrigues  find that government size alone does not explain the influence of corruption on economic activity sufficiently. Also the level of economic development and the level of effectiveness of public services play a crucial role.
Do financial markets reward government spending efficiency? The answer is clearly yes, according to this latest EconPol Working Paper. Analysing a sample of 34 OECD countries over the period 2007–2018, the authors find that increased public spending efficiency is indeed rewarded by the Big Three rating agencies with higher sovereign credit ratings. And these in turn naturally imply lower funding costs for governments in capital markets – an important policy implication to consider in times of scarce budgetary resources.
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