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High public debt ratios resulting from the Covid-19 crisis should be considered a potential source of problems, even in an environment of low interest rates. This is the key conclusion of a policy paper by Daniel Gros (EconPol, CEPS), which will be presented at EconPol’s annual conference. “A key but often overlooked legacy of the Covid-19 crisis is increased uncertainty,” Gros explains. In his paper, he points out that what makes increased uncertainty more important is that the cost of public debt goes up more than linearly with higher debt ratios.
EconPol Europe Survey: Europeans Very interested in Community Renewable Investments Run by Local Cooperatives
European citizens prefer investments in community renewable energy (CRE) projects that are administered by local community organizations rather than by utility companies. This is one key result of a recent survey by the research network EconPol, leading to a clear policy recommendation: if EU member states facilitate the setup of local cooperatives, i.e. by helping to navigate bureaucratic and regulatory burdens, CRE projects could become a crucial stepping-stone in reaching the EU’s newly set target of producing 40 percent of energy from renewable sources by 2030.
The implementation of recovery funds under the EU’s Covid-19 recovery program NextGenerationEU should be aligned with business cycle phases to ensure that financial support will have the most even and efficient impact across regions. This is a conclusion derived from a recent EconPol study that analyzed the impact of the European Structural and Investment Funds on regional development over the period 1986–2018.
Pillar 1 of the latest OECD tax reform will affect only 78 of the world’s 500 largest companies. This is a key finding of the most recent EconPol Policy Brief. The authors estimate the total allocation at USD 87 billion. Around 45 percent of this total (USD 39 billion) will be generated by technology companies. The largest US tech giants – Apple, Microsoft, Alphabet, Intel, and Facebook – alone will generate around USD 28 billion.
EconPol: Flexibility in Monetary Policy and Fiscal Rules Makes European Monetary Union More Resilient to Shocks
The EMU should create monetary and fiscal mechanisms to safeguard its irreversibility in exceptional situations. This is one of the lessons learned from past crises, as shown in a recent study by the research network EconPol. “The financial crisis and the coronavirus crisis have shown that either monetary policy or fiscal policy, or both, should be aimed at keeping the monetary union together,” the authors argue. Alternatively, member states should include an explicit exit clause in the treaties.