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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 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 [...]
Everywhere you look, the survival of the euro seems to be an idea whose time has come. In France, a limited measure of progress occurred when the country’s social partners agreed to some labor market reforms. Chancellor Angela Merkel’s party lost a German regional election, with no dire consequences for its commitment to save the [...]
Several people have asked me in recent days about my assertion that a Spanish government and indeed the euro area as a whole would benefit from seeking a lending lifeline from European authorities, including the European Stability Mechanism/European Financial Stability Facility (ESM/EFSF) and the European Central Bank’s new Outright Monetary Transactions (OMT) facility. Arguments opposed [...]
Duly prodded by the accelerating financial-market rout across the euro area, political leaders have begun positioning themselves for what should—indeed must—be the final stage of the euro area political response to the sovereign debt crisis due to be launched at the upcoming EU Summit in December. Europe is getting close to having its “second TARP [...]
The economist Thomas Schelling began his 2005 Nobel Prize lecture with a famous declaration. “The most spectacular event of the past half century is one that did not occur,” he said. “We have enjoyed 60 years without nuclear weapons exploded in anger [pdf].” In the same way, the imminent collapse of the euro area will [...]
A letter to Christine Lagarde, Managing Director of the International Monetary Fund (IMF) Dear Madame Lagarde, Europe is in deep trouble, possibly on the verge of catastrophe, and as a consequence so might be the world. You represent that world and you need to act quickly and decisively, and I am afraid somewhat solitarily. You [...]
In what could turn out to be a pivotal moment in the European debt crisis, the German Constitutional Court has upheld the constitutionality of German participation in the original Greek rescue package and its innovative twin rescue tools, the European Financial Stabilization Facility/European Stabilization Mechanism, or EFSF/ESM. As expected, the Karlsruhe Court—so named because it [...]
One of the most memorable quotes of the financial crisis was delivered by German Chancellor Angela Merkel in May 2010, when she declared that "in a way, it is a struggle between politics and the markets. We must re-establish the primacy of politics over the markets." Though unusually stark, this formulation echoes a widespread perception [...]
As euro area members jockey over who will pay to keep Greece afloat in the next two years, political grandstanding by elected leaders is to be expected. A lively display of those tactics is under way ahead of the euro area and European Union (EU) meetings later this month, from June 20 to 24. So [...]
The euro area sovereign debt crisis is gradually turning into the best thing that has happened to European Union politics and European economies since the launch of the Single Market in the mid-1980s. The crisis has shattered the fake ten-year political and economic equilibrium between core and periphery countries that followed the initial shock of [...]