Stefan Collignon

FISCAL POLICY RULES AND THE SUSTAINABILITY OF PUBLIC DEBT IN EUROPE

In this paper, the sustainability of public debt is interpreted as the result of the interaction of fiscal policy with the economic environment, and not as a statistical concept as in most of the recent literature. If debt must not explode over time, policy makers have to respond to the changing conditions in the macroeconomic environment. This paper defines the conditions which will ensure compliance of fiscal policy with the intertemporal budget constraint in the context of Europe’s fiscal policy rules. The empirical part of the paper reveals that European public debt is sustainable in this respect, but questions regarding liquidity remain.

Is Europe going far enough? Reflections on the EU's economic governance

Europes economic governance is not only highly complex, but also increasingly inefficient and therefore unsustainable in the long run. This conclusion is reached from the theory of collective action and the difficulties in democratic legitimacy. The solution would be the creation of a European government accountable to European citizens.

Monetary stability in Europe

1. Why Stable Money Matters or: the Loss of Paradise 2. After Bretton Woods: the World of Bloc Floating 3. International Consequences of Bloc Floating 4. The Instability of the Bloc Floating Regime 5. A Fresh Look at Optimum Currency Area Theory 6. Is EMU Sustainable? 7. Sustaining Price Stability 8. Monetary Policy and Structural Unemployment

The Lisbon Strategy, Macroeconomic Stability and the Dilemma of Governance with Governments (Or Why Europe Is Not Becoming the World’s Most Dynamic Economy)

Due to collective action problems, the Eurozone is stuck in a sub-optimal macropolicy mix of too expansionary fiscal policy and too restrictive monetary policy. Although the Lisbon strategy pays lip service to macroeconomic policy coordination, no mechanisms, institutions or effective rules are established in order to overcome the collective action problem. Empirically, the failure is demonstrated by comparing the Eurozone policy mix with the US policy mix and attributing it to the low investment performance which resulted in low average GDP growth and low average productivity growth – contrary to the aims of the Lisbon strategy to make the EU the worlds most dynamic economy. The paper also argues that in order to overcome these difficulties, a proper government for the EU is needed. More delegation to the European level is legitimate only if European citizens can exert their democratic rights.

Macroeconomic imbalances and competitiveness in the euro area

This article challenges the new revisionist consensus, whereby current account imbalances have caused the euro crisis. In a monetary union, current accounts are not useful indicators for macroeconomic imbalances, because a currency area is not a fixed exchange rate system. It is a payment union and it is therefore more appropriate to analyse the flow of funds and payments between sectors and Member States. Applying the analysis, it turns out that excessive lending in the north has financed the borrowing in the south, thereby contributing to unequal development in the euro area. To remedy this situation, incentives for competitive investment need to be adjusted. The article describes an innovative approach for determining equilibrium unit labour costs as a benchmark for stable and fair wage setting. It then discusses policy implications and recommends better wage coordination between European trade unions.

The Three Sources of Legitimacy for European Fiscal Policy

Fiscal policy has remained under the authority of national governments in “Euroland,” while monetary policy is unified in the hands of the European Central Bank. This arrangement does not produce optimal results. This article looks at the normative foundations of fiscal policy in the European Union, by mapping the allocative function, stabilization, and redistribution policies onto three models of legitimacy: the problem-solving European Union, the communitarian model, and the European Republic.

Europe’s Debt Crisis, Coordination Failure, and International Effects

This paper gives an overview of the causes of the European debt crisis and the consequences for the external relations. It finds that political mishandling has increased uncertainty, which has contributed to a tendency for the euro to become weaker.

The ECB's Monetary Dialogue with the European Parliament: Efficiency and Accountability during the Euro Crisis?

The monetary dialogue between the European Parliament and the European Central Bank (ECB) is a key component for the democratic accountability of the independent central bank. We provide new evidence for the efficiency of the dialogue and present the results of a survey conducted amongst the members of the parliaments ECON (economic and monetary affairs) committee. We find that while the monetary dialogue may have had little or even a negative impact on financial markets, it plays a significant role in informing and involving members of parliament and their constituencies. Amidst an intensifying debate about the communication and transparency of the ECB, these findings shed new light on the current state of affairs of ECB accountability and its alleged need for enhancement.

Adjusting the U.S. Current Account Deficit: What Role for the Dollar, Euro and Yen?

ABSTRACT The world economy is characterised by a three-polar structure between the United States of America, Europe and Asia and fundamental disequilibria, revealed by the accumulating current account deficit of the United States. What role can exchange rate policies play in stabilizing the world economy? This paper argues that the stable exchange rates between Asian currencies and the U.S. dollar have made an important contribution to Asias rapid economic growth. Reducing volatility has lowered risk and uncertainty for investors and the undervalued real exchange level has increased the profitability of Asian investments. But the need to correct the U.S. current account may require policies, which put this successful arrangement into question-with far-reaching consequences for growth worldwide. As a solution to this problem emerging Asian economies, including China, may want to consider re-pegging their currencies to a basket, which contains mainly the Euro and the Yen. This would preserve the benefits of stable exchange rates for Asia and avoid an excessive appreciation of the Euro, while giving the United States of America the flexibility to adjust its external imbalance. Such a choice is facilitated by the relative weight of Europe, Asia and the United States in Asian trade flows.

How (not) to reform the Euro Area’s economic governance

European monetary union presents a paradox. On the one hand, despite three years of continuous battering and pounding, the euro still exists. On the other, the crisis has revealed serious flaws in the governance of the Euro Area and it has become clear that the old system of managing the euro macroeconomy is not sustainable. This article attempts to explain this apparent contradiction and how to resolve it.