The debt crisis has shaken the Eurozone to its foundations and revealed its structural weaknesses. However, reforms have ensured that the eurozone is now much improved and more stable.
The member states of the Eurozone are countering the economic impact of the Covid 19 pandemic with heavy spending. In response to this exceptional situation the rules of the Stability and Growth Pact have been temporarily suspended.
Germany and France have proposed a European Recovery Fund of € 500 bn based on large loans taken out by the EU to be transferred exclusively as grants to EU member states particularly affected by the corona crisis. The legal construction still has to be sufficiently clarified and, due to the resistance of some EU countries (Frugal Four), implementation in the proposed form does not appear certain.
Das IW richtete am 10. und 11. September 2018 in Paris gemeinsam mit dem angesehenen französischen Think Tank France Stratégie sowie in Kooperation und mit finanzieller Unterstützung des Pariser Auslandsbüros der Konrad Adenauer Stiftung einen zweitätigen Workshop zum Thema Zukunft der Europäischen Währungsunion (EWU) aus.
In the face of new inside and outside threats, intensive discussions are currently underway regarding the future of the European Union. The increasing pressure to reform should be used to substantially reorganize the EU budget. The recent proposals of the European Commission for the next Multiannual Financial Framework (MFF) still lack ambition in this respect.
The study of non-performing loans (NPLs) is highly relevant when looking for a solution to the ongoing structural weaknesses in the Euro area banking sectors, especially in light of the planned completion of the banking union and the introduction of a European Deposit Insurance System (EDIS).
The big banks in the Eurozone are still sitting on non-performing loans worth over half a trillion Euros. Especially in Cyprus, Greece and Italy bank failures are likely, as shown in a study of the German Economic Institute (IW). If the banks were to be made fit for the introduction of the planned European Deposit Insurance Scheme, then a great deal of money would have to be spent on their restructuring.
An EU working group presented yesterday a feasibility study for sovereign bond-backed securities. These bonds are designed to reduce the vulnerability of the European banking sector to sovereign debt crises. The problem, however: Should there be any disruptions in the markets for these securities in the event of a crisis, the European Central Bank (ECB) would have to step in.
Will the sovereign debt of Italy, Spain and Portugal remain viable even if interest rates rise again and a moderate recession occurs? This debt sustainability analysis which comprises three relatively realistic scenarios and extends to 2022 comes to a differentiated conclusion.
The Cologne Institute for Economic Research (IW Köln) and the German Institute for International and Security Affairs – Stiftung Wissenschaft und Politik (SWP) are kindly inviting you to a jointly organised expert exchange on the on-going negotiations for a new trade agreement between the EU and Mercosur.
Emmanuel Macron's proposals for euro area reforms go well over the target. They are unrealistic and over-ambitious with regard to the outcome of the German elections. The euro area needs a common understanding of the fundamental issues of the Eurozone.
Senior Economist for European Integration
Tel+49 221 4981-762
Head of the Research Unit International Economics and Economic Outlook
Tel+49 221 4981-754