Europe is not a major contributor to global macro imbalances but it could be deeply affected by sudden shifts. Today’s imbalances are quite unlike those during the previous episode in the 1980s.
National foreign-exchange reserves have grown massively over the past ten years. Is this growth unexpectedly large? And is it driven by insurance motives, or does it result from competitiveness-boosting currency manipulation?
Allegations of “social dumping” are often used to justify calls for protectionist measures against developing-nation exports. Economic research suggests that such calls are based in on a series of misconceptions.
Formal criteria don’t define the limits of Europe; they only delay the membership of determined applicants. The true limit is the EU’s capacity to absorb newcomers. Eastern enlargement challenged this capacity, but the forthcoming institutional reforms that allow the EU27 to function will – quite inadvertently – make it easier to enlarge the EU further. EU42 anyone?
Pension Funds are by now the largest institutional investors in international financial markets. Better regulations are needed to guarantee a growth enhancing development of the pension fund industry. They concern both accounting and disclosure requirements, default options as well as the internal structure of pension funds. These regulations are more effective when accompanied with reforms of public pensions and labour markets.
That the EU needs a new treaty is clear from two strands of evidence: the data showing a marked slowdown in EU decision-making since the May 2004 enlargement, and evidence based on ‘revealed preference’ reasoning.
Empirically, women’s labour supply elasticity is higher than men’s so basic principles of optimal taxation suggest that women’s income tax rates should be lower. Moreover, equal treatment in some areas (taxation) for those who are not treated equally in many other areas is hardly fair.
Germany’s potential growth rate may have risen but Germany is not the Eurozone. A Greenspan-like gamble on growth would be premature for the ECB.