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  • Author: Daniel Gros
  • Publication Date: 03-2014
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The EMS crisis of the 1990 s illustrated the importance of a lack of confidence in price or exchange rate stability, whereas the present crisis illustrates the importance of a lack of confidence in fiscal sustainability. Theoretically the difference between the two should be minor since, in terms of the real return to an investor, the loss of purchasing power can be the same when inflation is unexpectedly high, or when the nominal value of government debt is cut in a formal default. Experience has shown, however, that expropriation via a formal default is much more disruptive than via inflation.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Italy
  • Author: Ana-Maria Fuertes, Elena Kalotychou, Orkun Saka
  • Publication Date: 06-2014
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Paul De Grauwe ' s fragility hypothesis states that member countries of a monetary union such as the eurozone are highly vulnerable to a self – fulfilling mechanism by which the efforts of investors to avoid losses from default can end up triggering the very default they fear. The authors test this hypothesis by applying an eclectic methodology to a time window around Mario Draghi ' s " whatever it takes " (to keep the eurozone on firm footing) pledge on 26 July 2012 . This pledge was soon followed by the announcement of the Outright Monetary Transactions (OMT) program me (the prospective and conditional purchase by the European Central Bank of sovereign bonds of eurozone countries having difficulty issuing debt) . The principal components of eurozone credit default swap spreads validate this choice of time frame . An event study reveals significant pre – announcement contagion emanating from Spain to Italy, Belgium, France and Austria. Furthermore, time – series regression confirms frequent clusters of large shocks affecting the credit default swap spreads of the four eurozone countries but solely during the pre – announcement period. The findings of this report support the fragility hypothesis for the eurozone and endorse the Outright Monetary Transactions programme.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Financial Crisis
  • Political Geography: Europe, France, Belgium, Italy
  • Author: Daniel Gros
  • Publication Date: 03-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper describes the key economic variables and mechanisms that will determine the adjustment process in those euro area countries now under financial market pressure. (Greece, Ireland, Portugal, Spain and Italy = GIPSY) The key finding is that the adjustment will be particularly difficult for Greece (and Portugal) because these are two relatively closed economies with low savings rates. Both of these countries are facing a solvency problem because they combine high debt levels with low growth and high interest rates. Fiscal and external adjustment is thus required for sustainability, not just to satisfy the Stability Pact. By contrast, Ireland and Spain face more of a liquidity than a solvency problem. Italy seems to have a much better starting position on all accounts. Fiscal adjustment alone will not be sufficient to ensure sustainability. Without significant reductions in labour costs, these economies will face years of stagnation at best. Especially in the case of Greece, it is imperative that the cuts in public sector wages are transmitted to the entire economy in order to restore competitiveness, and thus ensure that export growth can become a vital safety valve. Without an adjustment of wages in the private sector, the adjustment will become so difficult that failure cannot be excluded.
  • Topic: Debt, Economics, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Greece, Spain, Italy, Portugal, Ireland
  • Author: Paul Brenton, Anna Maria Pinna
  • Publication Date: 12-2001
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: As in other industrialised countries, the manufacturing sector in Italy has recently experienced a substantial increase in the use of skilled relative to unskilled workers — skill upgrading. In this paper we estimate a model, based upon the notion of outsourcing, of the relative demand for skilled labour which allows identification of the roles of technological change and trade, the two main culprits, in skill upgrading. Compared to previous studies of Italy the model is applied to highly disaggregated industrial data and in addition the impact of trade is more precisely measured through the separate identification of import flows from low-wage labour abundant countries and those from OECD partners. Furthermore we also introduce a measure of trade variability. Our results show firstly that economic variables played little or no role in determining the relative demand for unskilled workers in the 1970s in Italy, reflecting the nature of Italian labour market institutions in the period. Subsequently, in the 1980s and 1990s, following some labour market reforms, we find that international competition, in terms of import penetration and the variability of trade prices, had a significant effect on the relative demand for blue-collar workers in Italy in skilled intensive sectors. In unskilled intensive sectors, such as textiles and clothing, where the impact of imports from low-wage countries might be expected to be more pronounced, we do not find a significant effect from imports but rather that the most important role has been played by technological change. The result is consistent with previous studies that indicate that Italian textile and clothing firms have remained internationally competitive by increasingly switching to high quality segments of the industry.
  • Topic: Economics, Government, Human Rights, International Trade and Finance, Migration, Political Economy
  • Political Geography: Europe, Italy
  • Author: Nuria Diez Guardia
  • Publication Date: 02-2000
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This report analyses the European consumer credit markets and their regulation at European level. Its findings are as follows: European consumer credit markets are characterised by deep national differences and strong market segmentation. The report finds no generalised model of consumer credit from the analysis of statistical data. An Anglo-Saxon consumer credit model cannot be identified. The weight of consumer credit is far higher in the US economy than in the EU countries, including the UK. In the US, the share of consumer loans made by banks is much lower, securitisation of consumer credit assets is very developed and the share of revolving credit is much greater than in the EU countries. Nor is it possible, on account of the large differences in the use of consumer credit observed across EU countries, to identify a European model of consumer credit. Consumer credit is very widely used in Sweden, whereas it is underdeveloped in Greece and Italy. The use of consumer credit reaches comparatively high levels in Germany and the UK and an intermediate level in France and Spain. Lending to consumers is carried out through bank intermediation, crossborder provision is non-existent.
  • Topic: Economics, Political Economy
  • Political Geography: United States, United Kingdom, Europe, Greece, France, Germany, Spain, Italy