Happy to announce my new book, published with Routledge. From the publisher’s website:
“Understanding the New Global Economy: A European Perspective argues that globalisation is facing economic and political headwinds. A new global economic geography is emerging, cross-border relationships are changing, and global governance structures must come to terms with a new multipolar world.
This text is an accessible guide to the contemporary world economy, suited to students of international economics, political economy, globalisation, and European studies. It will also be valuable reading for researchers, professionals, and general readers interested in economics, politics, and civil society.”
My editorial (jointly written with Joscha Beckmann and Stefanie Kleimeier) presents the papers in a broader context, highlighting “the importance of bringing the finance and macroeconomic literature closer together in order to gain deeper insights into to effects of financial spillovers.”
In this paper “we examine the impact of the existence on an explicit deposit insurance (DI) scheme and its design features on bilateral cross‐border deposits (CBD) in a gravity model setting. We find that both the absolute quality of a country’s DI and its relative quality vis‐à‐vis other countries’ DI generally affect depositor behavior. However, during systemic banking crises, cross‐border depositors primarily seek countries with the best DI schemes. Similarly, during the 2008–2009 great financial crisis, the emergency actions taken by the governments, which supply and maintain these safe havens, have led to substantial relocations of CBD.”
Deposit insurance systems are a common feature of the financial systems of most countries. Their rationale is twofold: to protect bank depositors in case of a bankruptcy and, even more importantly, to avoid widespread bankruptcies as a consequence of bank runs in the first place. However, in times of globally mobile capital, customers might look for safe(r) havens for their deposits abroad, especially when countries are experiencing a financial crisis. This can lead to a global competition for providing the best safety and, hence, destabilize the financial system of a crisis country even further. In a new policy paper, published inIfo’s DICE Report, written jointly with Stefanie Kleimeier, Shusen Qi and myself review our recent research (forthcoming in Economic Inquiry) and argue that there is a strong case for global and regional coordination. Our research therefore also lends support for establishing a common European Deposit Insurance System (EDIS) to make the Euro area more resilient to future crises.
On 18 February 2019 I participated in a panel discussion on “The Future of Global Trade“, organized by SCOPE and Studium General of Maastricht University. It was insightful for me to debate controversial current trade (policy) issues with a panel of experts from different areas of expertise. Moreover, it was good to see so many young people in the audience, participating actively.
In my Jean Monnet keynote lecture on the International Conference on Banking and Finance at the University of Warsaw on 10 July 2017, entitled “Whatever it takes: Retail Banking Market Integration and Financial Stability in the Eurozone”, I have highlighted the role of retail banking market integration for turning a still incomplete European Monetary Union into a more stable currency union.
The main message of the lecture is that retail banking market integration goes some way to provide more urgently needed risk sharing in the Eurozone, yet this might not be enough for two major reasons. First, the Banking Union is still incomplete. In particular, a single European fiscal backstop for the single resolution mechanism and the still lacking European deposit insurance is required. Secondly, given the empirical evidence on the reluctance of retail banking markets to integrate, additional public risk sharing is needed. Ultimately some fiscal solidarity in the Eurozone is necessary to make the monetary union sustainable.
European financial markets are already betting on the victory of centrist French presidential candidate Emmanuel Macron in the country’s May 7 second-round election.
Are investors right to believe that the eurozone – the monetary union of countries that have incorporated the euro as their national currency – will gain new momentum with Macron in the Élysée Palace?
In this piece, written for The Conversation, I argue that Macron will have better chances to reform the Eurozone by pushing for a rebalancing of Eurozone governance rather than advocating “to set up a common eurozone treasury with a single finance minister”.
Instead, while in some areas centralization is needed to ensure stability, in particular with respect to a central bank that can effectively backstop financial crises and a full banking union, it might be advisable to renationalize fiscal policy.
The reasons are twofold: First, the political chances to install a European finance minister are minimal. Therefore, there is a high risk that Mr. Macron might achieve little or no progress in his term, eventually increasing the chances for populist in the next presidential election. Second, giving back full control over the budget to the national authorities also means transferring back the responsibility for solid finances and replacing the various fiscal pacts, which never have really worked.
Of course, this may require to reduce the debt overhang of the past. But by doing it, this would give more room for a sustained Eurozone recovery and – eventually – even more widespread support for new Eurozone-wide fiscal mechanism for burden sharing. Read more…
Finally, good news from the Eurozone. Unemployment rates fell to 9.5% in February 2017. According to Eurostat, this is the lowest rate since May 2009. The 19 countries that have adopted the common currency are thus returning back to the unemployment level they experienced before the outbreak of the Eurozone crisis. In the last 12 months, the Eurozone recovery has lifted 1.25 million people out of unemployment.
This long-awaited decrease in unemployment is highly welcome; every person back in work is good news, even though it took nine years to recover. Yes, many economists believe that the recovery could have been faster with much less pain if there had been less initial emphasis on austerity and less reluctance “to do what it takes” at the ECB before Mario Draghi made that move in 2012. But that said, the Eurozone must now look forward.
So, is the worst over? Is wealth and prosperity – the ultimate promise of the EU to its citizens – finally coming back to the Eurozone? And is the fragility of the Eurozone that brought the crisis and the dramatic rise in unemployment a thing of the past?
In this piece, written for LSE EUROPP, I will argue that much more needs to done to return to the pre-crisis level and to make the European Monetary Union waterproof against future shocks. Read more…