THE POLITICS OF BREXIT: A GERMAN VIEW

For once, let me start with the disclaimer: I am a German who has spent half of his adult life in London. That may colour my perspective. I am amazed by the current German backlash against the ECB, the only central bank that has ever‎ delivered a prolonged period of price stability for Germany. In the same way, I am amazed by some English views of the read more

BRITAIN BEWARE: THE POWER OF TRADE DIVERSION

How would the UK fare outside the EU? Nobody knows for sure. A divorce can be smooth, causing only modest damage. Or it can be messy, inflicting serious pain on everybody except the lawyers. It would all depend on the policy choices taken by both sides following a hypothetical vote for Brexit on 23 June 2016.

But history offers a stark lesson. From 1958 to 1972, the read more

THE VAROUFAKIS EFFECT

Rarely has a new government done so much damage in just one year. And rarely has a finance minister done so well for himself after having harmed his own country so badly within just six months in office. One year ago, the radical left swept to power in Athens. With the Syriza party and its leader Alexis Tsipras, the economist Yanis Varoufakis surged to global prominence as read more

SEVEN REASONS WHY WE ARE NOT HEADING FOR RECESSION

Economic upswings don’t die of old age. They end because a cleansing recession is needed after the exuberance of a boom or because an external shock deals a devastating blow to the system. Across the Western world, we find no convincing evidence of serious excesses that would have to be corrected by a downturn soon. Last year, the major Western economies expanded roughly at their trend rates read more

CHINA AND OIL: NO NEED TO PANIC

Seven years after the post-Lehman crisis, memories of the disaster are still fairly fresh. Whenever things get wobbly, many scarred market participants are still inclined to sell first and ask questions later. We’ve seen this in the euro crisis hysteria of 2011-2012 as well as in some other corrections thereafter. As economists, we cannot call the peaks and bottoms of such market swings. But we can assess read more

MIGRATION: NOTES ON THE POTENTIAL IMPACT ON EUROPE

Looking for safety and a job. The rise in immigration has become a major issue in Europe. To some extent, the pictures of migrants trying to make their way north after having crossed the Mediterranean or Aegean Sea also illustrate an age-old truth: on top of fleeing war, unrest and often destitution back home, migrants also want to work. In Europe today that mostly means going to read more

GREEK DEBT HAIRCUT: THE BIG FAT RED HERRING

What debt relief does Greece need? Once again, this has turned into a hot topic. Some excitable pundits even worry that a dispute between the IMF (“Greece needs a lot of debt relief”) and the Eurozone majority (“only a modest re-profiling of Greek debt”) could scupper the deal that Greece struck with its Eurozone creditors on Monday morning.

THE BASICS
As a general rule, the further the observers read more

TOUGH LOVE AT WORK: EUROZONE BASICS

Grexit or not, the Greek saga has already turned into a tragedy for Greece. Within less than six months, a radical left government has aborted the Greek recovery of 2014, pushed the economy back into a deepening recession and driven capital worth almost €60bn out of the country. Prime minister Tsipras now has to make the final choice: perform a radical U-turn and accept the rules of read more

GREECE: POLITICS AFTER THE REFERENDUM

REFERENDUM: A CLOSE CALL
Will the common sense of the euro trump the charisma of Tsipras? The outcome of the Greek referendum on Sunday is stilL too close to call. But the political future of Greece’s prime minister seems more obvious. Chances are that he will no longer be prime minister by the end of the year. 74-81% of Greeks want to keep the euro according to read more

THE GREEK CHOICE: EUROS OR BOLIVARS ?

Greek voters face a simple choice this Sunday: do they want euros – or Venezuelan-style bolivars? Forget what Tsipras is saying about needing a “no” to strengthen his bargaining position. As in January, he may be trying to mislead his voters. The institutions in charge of the euro are adults: they can take “no” for an answer. A “no” to the euro probably means no euros. Let read more