EU policies

Jan Pieter Krahnen, Jean Pisani-Ferry, Philippe Martin, Lucrezia Reichlin, Beatrice Weder di Mauro, 22 April 2021

The financial crisis of 2007-2012 was the first wake up call to the inadequacy of the euro area architecture when facing a large systemic crisis. This column explains why the Covid crisis will leave a deeper impact on the European policy system, and re-introduces the Vox debate on Europe’s economic architecture in the context of the transformations that we have witnessed over the past year. Contributions to the debate are welcome.

Olivier Blanchard, Álvaro Leandro, Jeromin Zettelmeyer, 22 April 2021

The EU’s fiscal rules are currently suspended. If reinstated, they will need to be modified to account for the higher levels of debt. This column, part of the Vox debate on euro area reform, argues that simple fiscal rules provide a crude and unsatisfactory assessment of debt sustainability and proposes that they be replaced with fiscal standards. In particular, it calls for qualitative prescriptions that leave room for judgement together with a process to decide whether the standards are met. This proposal envisages a larger surveillance role for independent fiscal councils and/or the European Commission, as well as a judicial body for adjudication over disputes. 

Mathias Dewatripont, Lucrezia Reichlin, André Sapir, 16 April 2021

The existing European resolution framework, an essential part of the European banking union, is still largely deficient. National resolution authorities often bypass the European framework, with the result that, since its creation in 2015, the Single Resolution Board has adopted only one resolution decision. This column argues that two aspects of the European resolution framework are particularly in need of reform – the bail-in regime and the resolution mechanism for cross-border banks – and proposes a reform of both.

Ethan Ilzetzki, Jason Jia, 10 March 2021

Debates have emerged recently on central banks’ role in mitigating climate change, or at least on increasing their awareness of their environmental impact. The February 2021 CfM-CEPR survey asked members of its European panel of experts about measures the ECB could take to address the environmental impact of its bond-purchasing policies. The majority of the panel supports active measures to use the ECB’s bond-purchasing programme to either exclude industries with negative environmental impact or bias its portfolio towards green investments. An additional 30% of the panel believes that the ECB should rebalance its portfolio to correct its current bias in favour of polluting industries. However, a majority also believes it would be inappropriate to change the ECB’s mandate to reflect green objectives.

Niels Thygesen, Roel Beetsma, Massimo Bordignon, Xavier Debrun, Mateusz Szczurek, Martin Larch, Matthias Busse, Mateja Gabrijelcic, Laszlo Jankovics, Stefano Santacroce, 08 March 2021

National governments and EU institutions enacted unprecedented budgetary measures to mitigate the economic and social impact of the Covid pandemic, a truly exogenous shock. While everyone agrees that a forceful response was needed, the pandemic magnified a number of pre-existing challenges and vulnerabilities in public finances, which need to be addressed in the coming years. This column discusses this year’s conference of the European Fiscal Board on 26 February, at which a prominent line-up of speakers had an open and inspiring exchange on the future of the EU fiscal framework. 

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