EconPol Policy Briefs

The rise of China in the world economy and its growing importance as investor in industrialised and developing countries has raised concerns of policy makers in some countries. Contrary to the trade situation between China and the US, trade between the euro area aggregate and China is almost balanced. On an individual country level, Germany, Ireland and Finland record trade surpluses with China. As trade between the euro area and China is balanced, there is no need for policy action to address any imbalance, however, European markets should only be opened for Chinese companies and investment if this is reciprocated.

Video: Current Account Development Between the Euro Area and China, Klaus Weyerstrass

Bank loans continue to be the main source of external financing for small and medium-sized enterprises (SMEs), in both the Netherlands and other European countries. Businesses are using those loans for expansion, innovation or as working capital.  But Dutch SMEs are applying for fewer bank loans, and those applications are often rejected by the banks. How does SME bank financing in the Netherlands relate to other European countries, and what are the reasons for the differences?

Industrial production in the German car industry dropped by 9.4% in the third quarter of 2018, creating an immediate impact on its main trading partners and causing global and sectoral losses. The decline is mainly due to problems with the implementation of the new Worldwide Harmonized Light-Duty Vehicles Test Procedure (WLTP). As the car producing industry is the most important sector for the German economy and is deeply integrated into international value-added chains, this policy report presents estimated sectoral and
global impacts due to this sharp drop. 

The recent financial crisis and subsequent global recession have been followed by a wave of macroprudential measures in the housing market. At the same time, governments have a long tradition of conducting tax policies which encourage households to acquire owner-housing. These tax advantages may be at least partly responsible for the need to regulate borrowing. In terms of policy, the goal should be to identify instruments that reduce the negative effects of household leverage while minimizing the welfare costs to households. This EconPol policy brief examines the joint effects of the tax system and credit regulation.

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.