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  • Author: Paul De Grauwe, Yuemei Ji
  • Publication Date: 01-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper finds evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios, and was the result of negative market sentiments that became very strong since the end of 2010.
  • Topic: Economics, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Greece, Spain, Portugal, Ireland
  • Author: Daniel Gros, Cinzia Alcidi
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper describes four key drivers behind the adjustment difficulties in the periphery of the eurozone: The adjustment will be particularly difficult for Greece and Portugal, as two relatively closed economies with low savings rates. Both of these countries combine high external debt levels with low growth rates, which suggest they are facing a solvency problem. In both countries fiscal adjustment is a necessary condition for overall sustainability, but it not sufficient by itself. A sharp cut in domestic consumption (or an unrealistically large jump in exports) is required to quickly establish external sustainability. An internal devaluation (a cut in nominal wages in the private sector) is unavoidable in the longer run. Without such this adjustment in the private sector, even continuing large-scale provision of official funding will not stave off default. Ireland's problems are different. They stem from the exceptionally large losses in the Irish banks, which were taken on by the national government, leading to an explosion of government debt. However, the Irish sovereign should be solvent because the country has little net foreign debt. Spain faces a similar problem as Ireland, although its foreign debt is somewhat higher but its construction bubble has been less extreme. The government should thus also be solvent, although further losses in the banking system seem unavoidable. Italy seems to have a better starting position on almost on all accounts. But its domestic savings rate has deteriorated substantially over the last decade.
  • Topic: Economics, International Trade and Finance, Financial Crisis
  • Political Geography: Spain, Ireland
  • 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: Namkee Ahn
  • Publication Date: 03-2005
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: We document in this paper the financial consequences of widowhood using both cross-section and panel data from the European Community Household Panel. The research reveals that there are large differences across countries. For example, widowed persons in Greece and Portugal have the lowest income – less than a half that of those widowed in Austria. Cross-country differences decrease somewhat if we consider household income net of housing costs, owing to the higher share of home ownership in low-income countries. Further, the income reduction upon widowhood is generally larger for widows than it is for widowers. The difference in income between the genders is largest in Denmark, Spain, Austria and Finland, where widower s enjoy an income that is more than 30% higher that of widows. The main culprit of the differences in income between widows and widowers lies in pension regulations. As today's elderly women an d those approaching old age spent their working years in an era where women worked at home, raised children and did not participate in the labour market, many depend mostly on survivorship pensions as their main source of income. Yet in most countries this kind of pension tends to be much lower than the applicable old-age pension, owing to the prevailing pension laws. Consequently, the financial situation of widows is unlikely to improve in the medium term unless pension regulations change.
  • Topic: International Relations, Demographics, Economics
  • Political Geography: Europe, Finland, Greece, Denmark, Spain
  • Author: Francesca di Mauro
  • Publication Date: 04-2001
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Economic integration between the EU and the CEECs has proceeded at high speed over the 90's, with the main channels of such integration being trade and FDI. Some authors believe that the 'commercial transition' is now complete and that a new, deeper phase of integration has started, with growing flows of FDI in the region. Following a gravity-type approach, in this paper I tackle two difficult issues surrounding the EU-CEECs integration: has FDI in the CEECs region substituted EU exports, therefore harming employment at home? Has FDI in the CEECs region been redirected away from similarly attractive countries, such as Spain and Portugal? By using a unique database on FDI broken down by country and by sector, which allows more detailed qualifications than possible in previous work, the answers to these two questions appear to be negative.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: Europe, Spain, Portugal
  • 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