The 2024 Stability and Growth Pact reforms entrench austerity and stifle investment.
How to fight inflation without subsidizing bankers at taxpayer’s expense
Central banks are paying billions in interest to commercial banks through remunerated reserves.
Green money without inflation
Funding an ecological transition in Europe via ‘green money’ bonds would be economically justifiable. To what extent can the money created by the central bank be used to finance investments in the environment? This is a question often asked today. The green activists respond with enthusiasm that the central bank—and, in particular, the European Central […]
Why Russia Is Politically And Militarily Strong But An Economic Dwarf
Last week I saw a surprising statistic: the GDP of Russia is of the same order of magnitude as the combined GDP of Belgium and the Netherlands. In 2017 Russian GDP was 1,469 billion dollars (according to the International Monetary Fund). Belgium had a GDP of 491 billion dollars and the Netherlands 824 billion dollars; […]
Bitcoin Is Not The Currency Of The Future
There seems to be no end in sight for the Bitcoin bubble. This comes close to the great bubble developments that we have known in history, including the tulip bulb bubble in sixteenth century Holland, the South Sea bubble in the eighteenth century, and many others. These bubbles and today’s Bitcoin bubble are always driven […]
Why Facebook Should Be Taxed And How To Do It
The new information technologies have created a whole range of companies that have become extremely profitable. The most successful ones are in the list of the top ten most valuable companies in the world. Valuable here means the monetary value of all outstanding shares of these companies; their capitalization as economists call it. Alphabet (better […]
Catalonia And Brexit: The Same Nationalism
The British Prime Minister, David Cameron, will not enter the history books as an enlightened leader. However, when in 2014 he had to decide to allow the Scottish referendum, he used his brain and opened the door for the referendum. It took place on October 14, 2014. Only 45% of the Scots voted for independence. […]
Brexit Creates Window Of Opportunities For The EU
The British government has officially started the “divorce” procedure from the European Union. This procedure must be completed within two years. In April 2019 the UK will cease to be a member of the EU. Most divorces are painful affairs mainly because an agreement has to be found on who pays whom. The same will […]
How Far Should We Push Globalisation?
The discussions about CETA, the trade agreement between Canada and the European Union, have focused almost exclusively on two questions. They are important but certainly not the most fundamental ones. In this article I first discuss these two questions and then turn to the more fundamental question of how far we should push globalization. The first […]
How To Prevent Brexit From Damaging The EU
The mandate of Theresa May’s government, as she stated when taking over as the UK’s Prime Minister, is to “make a success of Brexit”. Although the detail of what success here means is unclear, there can be no doubt about what it means in general. It should be interpreted as keeping access to the EU […]
The EU Should Take The Side Of The Losers Of Globalization
How should the European Union react to the decision of the British people to withdraw from the union? This is the question that is at the center of the political debate in Europe. The starting point in trying to answer this question is the observation that the European Union has a very negative image today, […]
The ECB Grants Debt Relief To All Eurozone Nations Except Greece
It looks like Greece may get some debt relief. There is as yet no certainty about this because some German politicians continue to conduct rear-guard battles to prevent it. What is certain, however, is that all Eurozone countries, with the exception of Greece, have been enjoying debt relief since early 2015. That may seem surprising to the […]
Why The European Union Will Benefit From Brexit
The discussions about Brexit have centered around the question of whether it is in the national interest of the United Kingdom to remain in the EU or to leave it. It appears today that the British public is split about this question, so that the outcome of the referendum remains highly uncertain. The question of […]
The UK’s Renegotiation: Keeping Up Appearances
How far does the UK’s draft renegotiation proposal go in reforming the country’s EU membership? Paul De Grauwe writes that the deal is largely an exercise in keeping up appearances, with most of the agreed terms making little substantive difference to the UK’s terms of membership. He argues that rather than pretending to have achieved real reform, […]
Quantitative Easing (QE) And Public Investment
Since the start of this year the ECB has been applying “quantitative easing” (QE), i.e. a program injecting large amounts of money into the economy. Every month the ECB is buying 60 billion euros of government bonds and in so doing injects the same amount of money into the economy. Up to today the total […]
The Euro And Schengen: Common Flaws And Common Solutions
What do the Euro and Schengen have in common? Both are projects that have the same flaw: they’re unfinished business. And therefore they risk falling apart. The Eurozone is a monetary union, with one currency, the euro circulating in the Union and managed by one central bank, the European Central Bank. What’s wrong with that? […]
Are Creditors Pushing Greece Deliberately Into Default?
The Greek drama has entered its endgame. The Greek government has to repay loans to the IMF and other public institutions in the near future but does not have the cash to do so. The lenders refuse to come forward in providing liquidity as long as the Greek government does not accept the conditions they […]
The Greek Election 2015 – Revolt Of The Debtors
The Greek debt crisis that erupted in 2010 is back and again threatens the stability of the Eurozone. That crisis was the result of two factors. First, an unbridled spending drift of both the private and the public sectors in Greece during the boom years of 2000-2010, which led to unsustainable levels of debt. Second, […]
Stop Structural Reforms And Start Public Investment In Europe
Slow growth in the Eurozone has become endemic since the start of the sovereign debt crisis in 2010. This is made very clear in Figure 1, which contrasts the growth experience of the Eurozone with the non-Eurozone EU-member countries since the start of the financial crisis in 2007. What is striking is that up to […]
Why The ECJ Should Reject The German Constitutional Court’s Ruling
Despite having a positive effect on the economic situation within the Eurozone, the European Central Bank’s Outright Monetary Transactions (OMT) program has proved controversial, with the German Constitutional Court in Karlsruhe recently deeming it illegal under EU law. Paul De Grauwe argues that the ruling reflects a serious misunderstanding of central banking on the part of the […]