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

GREECE: CLOSER TO THE ABYSS

Tsipras calls a referendum for 5 July, asking Greeks to reject creditor conditions for further loans to Greece.

Eurogroup finance ministers react by ending talks about bailout extension, which will thus expire 30 June.

ECB freezes ELAS at €89bn, potentially forcing Greece to close banks or impose capital controls soon.

Greece enters a dangerous and highly instable grey area which could lead to either political change in Athens read more

THE COSTS OF POPULISM

Words matter. By shaping expectations, they can move markets and economies a lot. On the positive side, ECB president Draghi ended the systemic euro crisis on 26 July 2012 when he declared that the ECB would finally step up to the plate and do „all it takes“ to keep all countries in the euro that respect the rules. Rarely have a few words done so much good. read more

REMEMBER THE DEFLATION SCARE?

What a difference eight weeks can make. Until late January, international observers seemed to be worried stiff about the risk of Eurozone deflation. Now, the subject hardly comes up any more in discussions. What has changed?

It can’t be the actual inflation data. After a -0.6% print for January, headline inflation still came in at -0.3% yoy in February. In a technical sense, the Euroztone is actually read more