Ethan Ilzetzki, 10 June 2021

Fiscal rules were enshrined in the founding documents of the European Monetary Union. This column presents the latest CfM-CEPR survey, in which the panel of experts on the European economy were nearly unanimous in agreeing that the existing EU fiscal rules require revision. Most panel members would opt for some combination of fiscal councils; more flexible, countercyclical, or expenditure-based rules; and increased fiscal capacity at the EU level. A smaller share of panelists would scrap fiscal rules altogether, leave fiscal policy to national authorities, and provide greater clarity that the EU would not bail out countries facing debt problems. A single panel member called for stricter rules with greater enforcement.

Alessandro Giovannini, Carl-Wolfram Horn, Francesco Paolo Mongelli, 10 January 2021

The economic fallout from the COVID-19 crisis has been asymmetric across euro area countries, leaving room for risk-sharing channels to operate. This column studies income risk-sharing in the euro area and finds that while it has so far been low, it was resilient throughout the crisis. Initial portfolio investment reverted quickly and intra-euro area cross-border portfolio investment exhibited low volatility. Only cross-border public flows have been limited. This suggests that the provision of unprecedented policy support has prevented private risk-sharing channels from collapsing, reducing the risk of a sudden stop in cross-border financial flows and a further exacerbation of the crisis.

Plamen Nikolov, Paolo Pasimeni, 11 December 2019

If properly designed, even a small fiscal capacity can maximise its stabilisation effect. The column studies the macroeconomic stabilisation provided by the federal budget in the US as an example for monetary unions. Corporate income tax, on the revenue side, and social security, on the spending side, are the two most effective items. The key is to collect revenues based on the income of the most mobile factor, and to provide support to the income of the least mobile factor. 

Mike Wickens, 07 June 2016

European Monetary Union was designed to promote economic growth, price stability, full employment, and political integration. It can be argued that so far, it has achieved none of these and has in fact made things worse.  The Five Presidents' Report contained a set of proposals for making the single currency sustainable, based on giving up more national independence. This column – the first in a two-part series asking whether future crises might be avoided through market forces without the need for the sort of procrustean proposals offered in the Report – examines the causes of the Eurozone Crisis.

David Vines, 04 June 2010

David Vines of Oxford University talks to Viv Davies about the vulnerability of Europe's monetary union and the need for a rules-based international monetary system. He argues that due to an unprecedented show of cooperation and worldwide coordination of fiscal and monetary policies, an all-out collapse has been prevented: the same level of cooperation and coordination will be needed to address the global savings-investment imbalances that continue to pose a threat to global stability. The interview was recorded in June 2010.

Gilles Saint-Paul, 05 May 2010

As world markets continue to raise concerns about Eurozone countries, this column argues that the euro has been a failure. Why should money be poured into Greece to "save the euro"? Besides the moral hazard effects of the intervention, it makes little sense to prolong a monetary regime which is actually one of the reasons why these Eurozone countries are in trouble.

Michele Lenza, Lucrezia Reichlin, Domenico Giannone, 15 January 2009

This column argues that the introduction of the euro has not changed the historical pattern of member countries’ business cycle correlations. The IMF outlook for economic activity over the next few years implies that the current recession will not change it either.

Gilles Saint-Paul, 24 December 2008

This column surveys evidence describing the brain drain from Europe to the US. Europeans living in the US are exceptional – they are more educated, earn higher wages, are more likely to be employed, and more entrepreneurial than their American or European counterparts. Europe's growth prospects may be dramatically reduced by its best and brightest living in the US.

Barry Eichengreen, 14 January 2008

Earlier efforts to draw parallels between the European Monetary Union (EMU) and past monetary unions are more likely to mislead than offer useful insights. The author of CEPR DP6642 argues that there is no historical precedent for Europe’s monetary union and where history is useful, it is not in drawing parallels but in pinpointing differences and highlighting what is distinctive about EMU.


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