Marco Buti, Philipp Jaeger, Karl Pichelmann, 03 December 2019

A full understanding of the political economy roots of the major economic, social, and political divides that have emerged in our societies is essential to devise the right policy responses and to properly calibrate them in an environment of possibly protracted economic weakness. This column summarises the proceedings of DG ECFIN’s Annual Research Conference 2019, which zoomed in on some of the most pertinent challenges economic policymakers face today: (i) bringing productivity to people and places; (ii) making markets work for all, not just the few; (iii) future-proofing fiscal policies when going green and digital; and (iv) safeguarding Europe’s role in the global economy.

Riccardo Crescenzi, Mara Giua, 26 November 2019

Despite the European Commission’s claims that its Cohesion Policy has had a positive impact on beneficiary regions, some member states argue that it is not fit for purpose and have called for a renationalisation of the policy. This column suggests that while there have been some positive effects on regional growth and jobs across the EU as a whole, these have been concentrated in the beneficiary regions of Germany and the UK, and structural problems in the South of Europe remain largely untouched. This uneven distribution of regional impacts along national lines suggests that individual member states have significant responsibilities for the local success (or failure) of the policy.

Cinzia Alcidi, Daniel Gros, 23 May 2019

The relationship between high public debt and low interest rates is once again at the forefront of debate. This column shows that countries with high debt levels pay a risk premium. This creates the potential for self-reinforcing loops of high debt and high risk premia, which can become explosive. 

Marco Buti, Oliver Dieckmann, Björn Döhring, Bertrand Marc, Andreas Reuter, 07 May 2019

The sharper-than-expected economic slowdown in the euro area last year was driven by a confluence of weaker export demand and sector- and country-specific factors within the euro area. This column introduces the European Commission’s Spring 2019 Forecast, which projects a moderate rebound over the course of this year as global demand bottoms out and some temporary negative factors fade. This will depend on domestic demand holding up despite the stark slowdown in manufacturing, however, and the baseline scenario is subject to downside risks, some of which could be triggered by misguided economic policies. Economic policy should therefore stand ready to react to a sharper and more protracted slowdown should it occur. 

Semih Akcomak, Bastiaan Overvest, 22 March 2019

The European Commission plans to spend about €120 billion on research and innovation under mission-oriented programmes between 2021 and 2027. This column shows that planned spending is small both relative to the total R&D spending of individual EU countries and relative to previous missions. In addition, there is a lack of clarity on how missions will be determined, designed and governed. Experiences in other countries suggest that the Commission should find new ways of increasing funding to missions and increase clarity on the implementation of mission-oriented policies.

Marco Buti, Björn Döhring, 08 November 2018

GDP growth has become more uneven globally, and has shifted into a lower gear in Europe. So it is unsurprising that commentators have started warning about a more severe downturn. The Commission's autumn 2018 European Economic Forecast is no exception in highlighting an unusual amount of uncertainty clouding the economic outlook. The predominance of downside risks implies that macroeconomic outcomes could ex post be worse than our central scenario. This column discusses, on the basis of concrete examples, different types of uncertainty surrounding the still benign forecast baseline. Prudence requires economic policy to prepare for the eventuality of worse outturns. 

Alexandre de Cornière, Greg Taylor, 15 August 2018

A general challenge facing competition authorities in the digital era is learning how to apply the traditional tools of competition policy in multi-sided platform environments. This column argues that the Google Android case offers a great example of the need to consider the implications of the market's two-sidedness. It also argues that bundling can, in fact, be profitable by virtue of its effect on competition once one accounts for some of the key features of mobile app markets.

Hal Varian, 14 August 2018

The European Commission’s case against Android has been hailed as a “milestone” in antitrust enforcement. This column, written by Google’s Chief Economist, argues that the case is more of a millstone than a milestone for not just Google, but the entire Android ecosystem of equipment manufacturers, carriers, app developers, and end users.

Cristina Caffarra, Oliver Latham, Matthew Bennett, Federico Etro, Pierre Régibeau, Robert Stillman, 27 July 2018

The European Commission’s decision to fine Google €4.34 billion for abuse of market power has been accused of being politically motivated and of risking higher prices for consumers. This column argues that the Commission’s decision has economic merit and falls within established legal precedent. As mobile search is the key gateway to access information, we should be concerned about dominance in this market for its potential distortionary effects on innovation and consumer outcomes across multiple other markets.

Moreno Bertoldi, Paolo Pesenti, Hélène Rey, Petr Wagner, 20 July 2018

Ten years after the global crisis, transatlantic relationships are at a crossroads. This column summarises a conference jointly organised by the New York Fed, the European Commission, and CEPR at which the participants discussed the strength of current growth prospects and the likelihood of inflation remaining subdued in advanced economies, and whether the current regulatory and policy frameworks are well suited to supporting financial stability and growth. One conclusion was while an escalation in trade tensions between the US and EU would have significant economic consequences on both sides of the Atlantic, this is not a foregone conclusion and there is room to uphold and strengthen the transatlantic relationship.

Marco Buti, András Chabin, Björn Döhring, João Leal, 13 July 2018

Next week, after ten days of swift, flat riding, the Tour de France reaches the Alps. The European economy, meanwhile, has been pedalling uphill since the beginning of this year. 2017 was easy riding as strong global growth boosted domestic investment, but economic growth has had to move into lower gear in the first half of 2018 as this transmission is no longer working properly, and escalating trade conflicts could derail it. This column presents the European Commission’s Summer 2018 Interim Forecast, which suggests that a tightening of global financial conditions could add to the headwinds, though central banks' balance sheets will remain large for a long time, and domestic fundamentals in the euro area remain strong. 

Thomas Wieser, 21 May 2018

The proposals on fiscal frameworks and rules in the recent CEPR Policy Insight on euro area reform showcase the multiple dimensions of the fundamental dilemmas we are confronted with in the governance of the euro area. This column, part of the VoxEU debate on Euro Area Reform, looks at the challenges to the central role of the Commission that have arisen as the rules-based fiscal framework has been severely compromised.

Marco Buti, Reuben Borg, 04 May 2018

It is ten years since the crisis started and Europe is at the cusp of new and different challenges. This column presents the European Commission's spring forecast and the challenges ahead that policymakers should address. The baseline scenario for the European economy over the next two years is one of continued expansion. However, the assessment of risks to the forecast has changed, and the nuances have become more critical. Domestic upside risks have broadly diminished and downside risks to the global outlook have increased significantly in both the short and the medium term.

Marco Buti, Björn Döhring, José Leandro, 08 February 2018

The outlook for the euro area economy depends to a large extent on whether the impact of the crisis will turn out to be permanent or transitory. This column attempts to chart out the path ahead, starting from what different narratives of the 'atypical recovery' imply about the further trajectory of GDP and inflation. In view of remaining slack, and barring an exogenous shock or policy mistakes, there is scope for solid GDP growth above potential for some time. The factors that should eventually drive an increase in core inflation are gaining force, but only gradually.  The current supportive policy mix is thus appropriate for the euro area as a whole, but reforms that raise productivity and increase the economy's resilience to shocks should be accelerated.

Marco Buti, Björn Döhring, 09 November 2017

The Eurozone economy is growing at its fastest rate in a decade, but the recovery remains incomplete. This column presents the European Commission’s autumn forecast, and derives some policy considerations. Accommodative macroeconomic policies are still appropriate for now. The column also highlights the need for structural policies to increase the potential for growth and help to share the benefits more fairly.

Marco Buti, Servaas Deroose, José Leandro, Gabriele Giudice, 13 July 2017

Despite much being done to strengthen the Economic and Monetary Union, it remains incomplete and this is one of the main reasons for the Eurozone's lacklustre economic performance in the recent years. While there are still diverging views on how to "cross the river", there is also a political and economic window of opportunity to complete the EMU architecture. This column discusses the ideas presented in a new European Commission Reflection Paper aimed at relaunching the debate on how to move forward, with a focus on bridging the differences between the member states that stress responsibility and risk reduction and those calling for solidarity and risk sharing.

Marco Buti, José Leandro, Katia Berti, 12 May 2017

As the recovery in the Eurozone approaches its fifth year, this column presents the latest economic forecast from the European Commission, which projects a continuation of the recovery at a steady pace (1.7% in 2017 and 1.8% in 2018). Nevertheless, over the next two years, wage growth is expected to remain constrained, the investment gap is expected to persist, the current account surplus is forecast to remain high, and core inflation to stay subdued. This suggests that there is still scope for higher growth without triggering inflationary pressures, and the Spring forecast shows that maintaining the current supportive macroeconomic policy environment is the right approach, while implementing comprehensive and productivity-enhancing structural reforms. The main immediate priority should be cleaning up the banking sector.

Charles Wyplosz, 17 February 2017

The IMF has just released its self-evaluation of its Greek lending, in which it admits to many mistakes. This column argues that the report misses one important error – reliance on the Debt Sustainability Analysis – but notes that the IMF’s candour should be a model for the other participants in the lending, namely, the European Commission and the ECB.

Paul Hünermund, Georg Licht, 08 July 2016

European countries are increasingly coordinating their national research and development policies. However, supra-national R&D programmes entail problems from a governance standpoint. This column discusses the problem of cross-subsidisation between participating countries. European joint programming initiatives are usually designed to avoid international transfer payments. Empirical evidence suggests that doing so comes at the price of decreased efficiency. 

Fabienne Ilzkovitz, Adriaan Dierx, 19 June 2016

Firms with greater market power can behave monopolistically, and recent research suggests that declining market competitiveness is driving income inequality. While competition authorities already measure the overall impact of their interventions by using customer savings, these measurements do not account for indirect effects of intervention. This column introduces a DSGE model to model competition policy interventions as a negative mark-up shock. Competition policy has a significant and positive impact on growth and jobs, and impacts richer and poorer households differently. Interventions have important redistributive effects that benefit the poorest in society.

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