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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.
For years, observers of the European Central Bank (ECB) have been hearing the same line from its former President, Jean Claude Trichet: “We have one needle in our compass, and that is price stability.” This precept should contribute to understanding the central bank’s policy stance: When price stability is assured, there is no need to [...]
Despite the repeated warnings of commentators too numerous to mention, Europeans have declined to elect ultra-nationalist, anti-establishment majorities in their parliaments and hasten a repeat of 1930s era fascism or communism. This does not mean that the continent is without political problems as the next European elections approach, however. For reasons I will explain below, [...]
The International Monetary Fund (IMF) released the latest update of its data on the Currency Composition of Official Foreign Exchange Reserves (COFER) at the end of March, with data through the end of 2012. From the end of 2010 through the end of 2012, the quantity share (adjusted for the effects of changes in exchange [...]
A few weeks ago Reuters reported that the French finance Minister, Pierre Moscovici, fell asleep during the final late night negotiations over the Cypriot bank bailout on March 24. It apparently fell to the International Monetary Fund (IMF) managing director, Christine Lagarde—a former French finance minister herself—to wake him up. No doubt the grueling round-the-clock [...]
A little noticed fact about the economic turmoil in southern Europe is that Portugal and Italy, two of the countries struggling the most, had minimal growth even during the seven good pre-crisis years of 2001–07.1 The most overlooked common problem of the four Southern European countries—Portugal, Spain, Italy, and Greece—is that they are all hampered [...]
Installation of a new government in Italy and the first effects of the newly approved bailout in Cyprus provide some modestly optimistic data points for an otherwise weak euro area outlook. For Italy, a Fresh Start, a Youthful Team, but No Guarantees of Success In Italy, Enrico Letta has taken office as the prime minister, [...]
The European Central Bank’s first Household Finance and Consumption Survey (HFCS) for the euro area generated an unusual amount of attention and outrage earlier this month. Some controversy surrounded the timing of the release, which came after the German Bundesbank published part of the data in late March, at the time of the final negotiations [...]
European short-term economic growth prospects remain weak because of rampant fiscal consolidation, private sector deleveraging, and the temporary unsettling effects of structural reforms. But European leaders continue to take important and constructive decisions on bailouts and the banking union, suggesting that recovery will eventually get on track. At least three such decisions occurred at the [...]
The next euro country in possible need of an international stabilization program is not Italy but Slovenia. It is suffering from a moderate banking crisis. Newly appointed center-left Prime Minister Alena Bratusek argues that an international assistance program might not be necessary. She might be right, but only if the Slovenian government acts hard and [...]
Just as suddenly as it arose, the Cyprus financial crisis has passed by. The banks have opened and so has the stock market without undue panic. A few steps remain in the euro crisis, but this crisis is abating, and however messily Europe has handled it. Today, the questions are what we have learned, and [...]