Lorenzo Codogno, Giancarlo Corsetti, 18 September 2020

The EU Recovery Plan agreed upon in July 2020 supports investment activity through grants and loans to member states at close-to-zero interest rates. This column suggests that its implementation could give a substantial boost to the economy and fiscal revenues under very conservative assumptions on multipliers. In addition, as the ECB is keeping interest rates and government bond yields low, also through its asset purchase programmes, if it refrains from reacting forcefully to potential upward pressures on prices caused by the massive fiscal stimulus, even a gradual and delayed ‘normalisation’ of interest rates would not undermine debt sustainability. 

Volker Nocke, Michael D. Whinston, 26 August 2020

Concentration measures such as the post-merger Herfindahl-Hirschman index as well as the merger-induced change in the index are usually key determinants in the review of horizontal mergers by competition agencies and courts. This column studies whether the magnitude of the efficiencies required for a merger not to hurt consumers may be related to the change and the level of the Herfindahl-Hirschman index. On the basis of theoretical analysis substantiated by empirical evidence, it finds that while the critical level of efficiencies depends on the change in the index, it is independent of level of the index. Hence current guidelines should be changed so as to emphasise the change more and the level less.

Sebastian Blesse, Massimo Bordignon, Pierre C Boyer, Piergiorgio Carapella, Friedrich Heinemann, Eckhard Janeba, Anasuya Raj, 18 August 2020

The ongoing Covid-19 crisis has the potential to change the institutional design of the European Union (EU). This column analyses survey data asking parliamentarians from France, Italy, and Germany about their stances on a broad range of reform issues covering fiscal and monetary policies as well as EU governance mechanisms. It finds that in general, party membership is quantitatively more important than nationality in determining political stances. Further, while national parliaments still differ on many policies, a broader consensus emerges for reforms on EU institutions such as providing the EU parliament with the right of proposing new legislation.

Giancarlo Corsetti, Joao B. Duarte, Samuel Mann, 07 August 2020

A persistent challenge for the ECB has been meeting the various needs and demands of euro area member states. This column provides empirical and quantitative evidence suggesting that the transmission of the ECB’s monetary policy varies significantly across member states. For variables such as those related to housing and labour markets, the dispersion of responses to a monetary shock is twice as large as the average response. The results also suggest that the disruption to market integration brought about by the COVID-19 crisis may create further challenges to conducting monetary policy in the euro area.

Marcin Wolski, Patricia Wruuck, 05 August 2020

The COVID-19 crisis has had a substantial impact on labour markets throughout Europe. This column uses new data sources based on Google Trends reports in order to investigate the speed of transmission of the crisis into individuals’ concerns about becoming unemployed. The results indicate that this transmission is linked to corporate resilience. A stronger financial position of firms to withstand liquidity shortfalls may have helped to cushion the deterioration in job market sentiment during the outbreak of the pandemic, suggesting the importance of bolstering liquidity as a way of sheltering jobs. 

Joshua P. Meltzer, 05 August 2020

The Court of Justice of the European Union recently delivered its verdict in the Schrems II case, ruling that the EU-US Privacy Shield is invalid. This column addresses the implications for adequacy and standard contractual clauses as well as the broader issue of how to balance national security and privacy goals. It concludes with observations about the potential impact of the decisions for the US and beyond and suggests some ways forward.   

Carlo Altavilla, Refet Gürkaynak, Roberto Motto, Giuseppe Ragusa, 03 August 2020

Mapping the impact of central bank policy communications onto yield curve changes  is important but challenging. This column studies policy communications of the ECB and maps these communications onto yield curve changes by studying the information flow on days when a monetary policy decision is communicated. Using the now publicly available Euro Area Monetary Policy Event-Study Database,it finds that different monetary policy measures affect different segments of the interest rate term structure, with policy rate changes mostly influencing the short end of the curve, quantitative easing measures more the long end, and forward guidance policies affecting intermediate maturities. 

Thorsten Beck, 27 July 2020

Fabiano Schivardi, Guido Romano, 18 July 2020

The COVID-19 crisis has induced a sharp drop in cash flow for many firms, possibly pushing solvent but illiquid firms into bankruptcy. This column presents a simple method to determine the number of firms that could become illiquid, and when. The authors apply this method to the population of Italian businesses and find that at the peak, around 200,000 companies (employing 3.3 million workers) could become illiquid due to a total liquidity shortfall of €72 billion euros. It is essential that policymakers shelter businesses by acting quickly, especially if there is a ‘second peak’ after the summer.

Marco Buti, 13 July 2020

Both the severity of the recession in Europe in 2020 and the subsequent bounce back of economies are likely to differ markedly across member states. Avoiding that the current crisis risks will be remembered as the Great Fragmentation is a key goal of the EU strategy. This column looks at the lessons learned during the financial crisis, and argues that a more consensual narrative, the lower risks of moral hazard and the rising political awareness that Europe has to count on ‘indigenous’ growth drivers provide a better chance of adopting an ambitious EU policy response. Whether it will also lead to deeper political integration, will depend on finalising long-lasting open institutional 'chantiers' such as Banking Union and Capital Markets Union.  

Alina Kristin Bartscher, Sebastian Seitz, Sebastian Siegloch, Michaela Slotwinski, Nils Wehrhöfer, 18 June 2020

In the absence of viable medical responses to combat the ongoing Covid-19 pandemic, policymakers have appealed to the social responsibility of their citizens to comply with social distancing rules. This column explores how regional differences in social capital can affect the spread of Covid-19, focusing on seven European countries. The results suggest that areas with high social capital registered between 12% and 32% fewer Covid-19 cases from mid-March until mid-May. A case study of Italy validates the independent role of social capital, showing a consistent reduction in excess deaths and documenting a reduction in mobility prior to the lockdown as a mediating channel.

Juan C. Palomino, Juan Gabriel Rodríguez, Raquel Sebastian, 16 June 2020

Enforced social distancing and lockdown measures to contain COVID-19 restrict economic activity, especially among workers in non-essential jobs who cannot ‘telework’. These have implications for inequality and poverty. This column analyses the capacity of individuals in 29 European countries to work under lockdown and the potential impact of a two-month lockdown on wages and inequality levels. There will be substantial and uneven wage losses across the board and poverty will rise. Inequality within countries will worsen, as it will between countries although to a lesser extent.

Thomas Plümper, Eric Neumayer, 11 June 2020

Is Covid-19 a ‘rich man’s disease’, as many citizens in poorer countries believe it to be? This column descibes how in Germany, infections began with individuals returning from skiing holidays. In the first phase of the pandemic, infection rates were higher in richer areas and lower in more socially deprived districts. In the second phase, the ability to socially distance oneself mattered more – an ability that is itself socioeconomically stratified. Richer districts are now seeing fewer new infections, and the initial safety advantage of more socially deprived districts has disappeared.

Francesco Fasani, Tommaso Frattini, Luigi Minale, 09 June 2020

The COVID-19 pandemic has brought to light how much societies rely on migrants for key labour while highlighting the vulnerabilities of already weaker groups. Easing the socio-economic integration of migrants is beneficial to both migrants and host countries; yet, many European countries ban asylum seekers from legal employment upon arrival. This column examines the effect of such employment bans. The bans have large and lasting negative effects on refugees’ future labour-market integration and constitute an economic loss for the host country. Allowing early labour market access is an easily implementable and financially costless policy that effectively accelerates refugee integration.


US economists on the economic impact of the crisis and policy developments in the US and Europe.

* Adam S. Posen, The Peterson Institute for International Economics
* Vivien A. Schmidt, Boston University
* Jeffry Frieden, Harvard University
* Michael Landesmann, Vienna Institute for International Economic Studies (wiiw)

The following questions will be addressed:
* How does the unfolding Covid-19 crisis compare so far between the US and Europe?
* How does the EMU/EU governance structure constrain monetary and fiscal responses compared to the US?
* Which failures in policy can be/could have been avoided?
* Which social and political outcomes do you expect on both sides of the Atlantic?
* How will the US and European responses affect global economic and political relations?

Giancarlo Corsetti, Aitor Erce, Antonio Garcia Pascual, 14 May 2020

Prominent voices propose financing the European Recovery Fund using joint perpetual debt. This column argues that there are gains from using European borrowing and lending as two separate policy levers. In a world of ultra-accommodative monetary policy, financing the Fund issuing debt at shorter maturities and passing those low interest rates onto member states through loans with low margin and with very long maturities is financially cheaper. Supporting the recovery through this maturity transformation would reinforce debt sustainability across the EU.

Sophia Chen, Deniz Igan, Nicola Pierri, Andrea Presbitero, 11 May 2020

The COVID-19 pandemic and the associated lockdowns have led to unprecedented economic costs around the world. Using high-frequency indicators, this column shows that while COVID-19 is a global shock, European countries and US states with larger outbreaks have suffered significantly larger economic losses. The impact of COVID-19 is mostly captured by changes in people’s observed mobility whereas, so far, there is no robust evidence supporting additional impact from the adoption of non-pharmaceutical interventions, especially in the US. The results indicate a crucial role for communication and trust-building.

Sergio Torrejón Pérez, Marta Fana, Ignacio González-Vázquez, Enrique Fernández-Macías, 09 May 2020

The COVID-19 economic crisis is having a huge impact on employment in the EU, calling for swift policy action targeting the most affected sectors and countries. This column makes an assessment of the labour market impact of the confinement measures put in place by EU governments. It finds that these restrictions are likely to have a very asymmetric effect across EU labour markets, with the most negative employment impact concentrating in the most vulnerable countries and categories of workers.

Francesco Fasani, 05 May 2020

‘Key workers’ are performing these crucial tasks on the front line of Europe's COVID-19 response. This column describes how migrant workers are playing a critical role in performing basic functions in EU societies hit by the COVID-19 epidemic. In addition, low-educated migrants, not just high-skilled ones, are employed in occupations that are key for their host societies, which suggests the need to reconsider, once the crisis has passed, a migration policy debate which is currently almost entirely focused on the importance of attracting high-skilled migrants to the EU.

Almut Balleer, Britta Gehrke, Brigitte Hochmuth, Christian Merkl, 01 May 2020

In response to the COVID-19 crisis, the EU has implemented the SURE programme which provides loans up to €100 billion to member states for the support of short-time work systems. In order to obtain the maximum unemployment stabilisation with these funds, this column argues that the SURE loans should be used to support rule-based short-time work systems that require workers’ consent and that are aligned with national short-term unemployment benefit systems. During the COVID-19 crisis, additions to these rules may be appropriate.



CEPR Policy Research