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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
The eurozone’s divergences can be traced back to a moment in the last decade when political behavior in Italy, France, and Germany took very different paths. I use Real Effective Exchange Rate (REER) data in both their forms (consumer price index [CPI]-based and unit labor cost [ULC]-based, as provided by the European Central Bank) to [...]
Observers of the Italian economy have split between two radical camps: emphatic doomsayers and ardent optimists. Both attitudes are symptoms of an understandable difficulty in comprehending the contradictory developments of the Italian economy and society in the last two decades: Italy has a surprisingly solid fiscal structure. But it is worryingly weak over the longer [...]
The emergency loan package offered to Greece in March from the International Monetary Fund (IMF) and Greece’s European partners was conceived as a “bridge” over troubled financial waters, buying time for the Athens government to carry out a severe fiscal correction. In order to receive this help, the Greek government has committed itself to reducing [...]
In the next few days, Greece’s Prime Minister, George Papandreou, will meet Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France in what will likely become the defining moment for a crisis that is shaking Europe. What they decide is also likely to shape the future of the euro area and transform its [...]
The eurozone faces a grave risk of divergent economic growth patterns in the next 10 years, according to a recent analysis by Martin Wolf1 in the Financial Times. Although the whole of the euro area’s current account is in broad balance with the rest of the world, the differences in the external position of single [...]
Greece faces the most difficult situation that has ever confronted a eurozone country since the birth of the common currency in 1999. Without draconian measures by the Athens government the fiscal situation of the country will soon become unsustainable. A failure to pay off its debt, though remote, cannot be completely ruled out with risks [...]
Europeans may find several historical and theoretical reasons why a political government for the euro area would be desirable. But after the global crisis there are technical reasons why it is more than desirable. That conclusion is a necessity in light of three increasingly important aspects of current monetary developments in Europe: (1) the lack [...]
The agreement to coordinate global economic strategies was one of the most impressive achievements by the G-20 in Pittsburgh and at the IMF meeting in Istanbul. But without credible agreements on currency policies, that project could turn out to be very vulnerable, or even a Trojan horse allowing politically stronger countries (China and the United [...]
The need for a new equilibrium in global current account and trade imbalances has compelled American policymakers to urge Germany to change its model from that of an export-led economy to one based more on domestic consumption. This would be in keeping with the message delivered in July at the Peterson Institute for International Economics [...]