The Sound of Economics

COVID-19 has triggered a severe recession and policymakers in European Union countries are providing generous, largely indiscriminate, support to companies. As the recession gets deeper, a more comprehensive strategy is needed. This should be based on four principles: viability of supported entities, fairness, achieving societal goals, and giving society a share in future profits. The effort should be structured around equity and recovery funds with borrowing at EU level. In this episode we discuss the proposal for a recovery plan outlined in a recent paper by Julia Anderson, Simone Tagliapietra and Guntram Wolff which can be read here https://www.bruegel.org/2020/05/rebooting-europe-a-framework-for-a-post-covid-19-economic-recovery/  Participating to this episode: Maria Demertzis, Deputy Director, Bruegel Giuseppe Porcaro, Head of Outreach and Governance, Bruegel Simone Tagliapietra, Research Fellow, Bruegel Guntram Wolff, Director, Bruegel 

The first country to be hit by the current pandemic, China has been at the forefront of the fight against COVID-19. What have been its impacts on the Chinese economy? What does it represent, more broadly, to the global economy? Are global supply chains really starting to be put into question? Today, Giuseppe Porcaro is joined by Alicia García-Herrero and Yiping Huang, Professor of Economics and Finance at the Peking University. This podcast is a member of the Europod network. 

The German Constitutional called today on the ECB to justify its bond-buying program. What does today's ruling of the German Constitutional Court mean for the ECB's QE program? Could such a decision open a precedent when it comes to contesting EU law? Today, Giuseppe Porcaro and Guntram Wolff are joined by Franz Mayer, chair of Public Law at the University of Belefield, to analyse the German Constitutional Court's ruling. This podcast is a member of the Europod network. 

Without a robust healthcare system and lack of medical equipment, emerging market economies are vulnerable to the current COVID-19 pandemic. How can developed countries help tackle the issue? Is international cooperation more needed than ever? This week, Giuseppe Porcaro and Guntram Wolff are joined by Barry Eichengreen to discuss the impact of COVID-19 on emerging markets.

On April 23, EU leaders met virtually to try to come to an agreement for a common European response to the COVID-19 pandemic. What were the measures taken? Will they be sufficient? Did Europe come together for a coordinated response to the crisis? Or did the meeting further highlight the cracks between member states? This week, Guntram Wolff and Giuseppe Porcaro are joined by Maria Demertzis and André Sapir to comment on the EU Council meeting.  This podcast is a member of the Europod network. 

In this episode of The Sound of Economics Live, we discuss European coordination, national responses, and local effects in moving on the next phase of containment of the COVID-19 pandemic Maria Demertzis, Deputy Director Thomas Hale, Associate Professor in Global Public Policy, Blavatnik School of Government; Fellow of St Antony's College, University of Oxford Jean Pisani-Ferry, Senior Fellow Giuseppe Porcaro, Head of Outreach and Governance  Additional speakers to be confirmed

After its longest meeting ever, the Eurogroup reached an agreement yesterday evening. What does the agreement say? What does it mean in terms of the emergency reaction to the economic fallout of the COVID-19 pandemic? What does it mean, more broadly, for the future of Europe? This week, Giuseppe Porcaro is joined by Maria Demertzis, André Sapir and Guntram Wolff to discuss whether the Eurogroup can save the day. This podcast is a member of the Europod network.  The podcast started by the participants giving their view on the deal that was closed last night by the Eurogroup. Guntram Wolff noted that is was good to have a deal, even if it is small in his view. André Sapir also expressed reserved satisfaction for the deal. He was however not surprised, as more could only come from the heads of state and that it is part of the Eurogroup’s habits to increase firepower over time. Maria Demertzis found it is surprising that the longest ever Eurogroup meeting led to such a small result and though this was a bad signal. She did agree with her co-panellists that some agreement was better than no agreement in this case.     Jumping into the debate, the panellists were asked to reflect on what the measures meant in more detail. André Sapir started by mentioning that of the €540 billion announced, about half (€240 billion) would be provided by the European Stability Mechanism (ESM), each Member State would have access to a credit line equivalent to 2% of their GDP. He added that it was clear however that not all Member States would use the ESM credit line making the €240 billion a maximum rather than the actual amount deployed. Guntram Wolff agreed with this and noted that the ESM was after all a stopgap in case borrowing from the markets became less accessible for a certain country. He added that the ESM package also reflected a movement towards a larger role for fiscal policy in the Euro Zone which was positive. In addition, he noted that it was still the ECB, which through its interventions, is keeping the yields of countries like Italy down and allows them to implement ambitious economic support packages. On the same line, Maria Demertzis agreed and stated that while countries like the Netherlands and Germany do not need ESM credit lines, even countries such as Italy or Span might not use them, as they do not which to be subjected to the conditionality that is attached to it.    Afterwards, the panel went on to discuss the other measures that were part of the package agreed upon by the Eurogroup. Maria Demertzis expressed her satisfaction about the common unemployment insurance, temporary Support to mitigate Unemployment Risks in an Emergency (SURE), which putting aside its relatively small size, is a step in the right direction. Indeed, it provides an automatic stabilizer and could set a good precedent. André Sapir expressed more reservation about whether SURE would one day become a permanent tool, given that its temporary nature is clear in the text. Guntram Wolff agreed that SURE was a good tool as it operates through credit guarantees and through the Commission’s budget. This means that money could be better directed at countries that need it the most.    The panellists followingly discussed issues related to the Italian economy and whether this would lead to debt sustainability issues. Guntram Wolff mentioned that the economic downturn in Italy is likely to be huge, not so much because it was badly affected by the pandemic, but because tourism represents a large share of its economy. He did not think, however, that Italian debt would become unsustainable, at least not as long as yields remained low thanks to the ECB. He therefore argued that Italy should have a large economic support programme. Maria Demertzis was less convinced that Italy did not run any debt sustainability risks due to the current crisis. She noted that while yields mattered, the stock of debt and economic growth were also key determinants of debt sustainability. While the ECB would have to roll over Italian debt indefinitely and probably further expand its Italian debt holdings, low growth could still lead to a bad equilibrium. She called for a deeper reflection into options to monetize debt in order to keep it sustainable. Guntram Wolff agreed and added that the real limits were political and legal in this discussion.    The panellists were asked to conclude with some final thoughts. André Sapir noted that it was important to keep in mind the needs of non-Euro Zone EU Member States, even if they appeared less affect by the pandemic for the moment. Maria focused on a quote from the final text of the agreement that she was positive about: “a response commensurate with the size of crisis”.  She explained that it was reflective of the new awareness of the Eurogroup about the urgency of the situation. Guntram Wolff concluded with two final remarks. First, that one should not only look at the size of the Eurogroup’s package but rather at the size of fiscal support at a national level. Second, although the idea of a federal Europe seems desirable it remains distant, but it is in the interest of all Eurozone countries to help struggling neighbours and this should be reflected by the politics as well. 

Economics seems to be full of myths that are hard to debunk. Will robots take our jobs? Are trade deficits bad? Is China such a big economy simply because of the size of its population? This week, Nicholas Barrett, Maria Demertzis, Marta Domínguez-Jímenez and Niclas Poitiers put on the detective cap and become Bruegel's own economic mythbusters. Disclaimer: this podcast was recorded on the 3rd of March 2020, before the COVID-19 lockdown was put in place in Europe and the US. Hence, some parts of it are no longer applicable. This podcast is a member of the Europod network.

From the European Stability Mechanism (ESM) to "coronabonds", the EU seems to be struggling to find an appropriate mechanism to tackle the economic crisis created by the COVID-19 pandemic. What is really the best option? And how do we ensure that, once the pandemic is over, we return to sustainable debt levels and competitive economies? This week, Giuseppe Porcaro is joined by Lucrezia Reichlin, professor of Economics at the London Business School, Grégory Claeys and Guntram Wolff to discuss the macroeconomic policy response to the COVID-19 crisis. This podcast is a member of the EuroPod network. 

The current pandemic is shaking the financial system. How can banks react ? Is a consolidation of the financial system in Europe needed in order to respond to this crisis ? Will our economies suffer from this pandemic as much as they did in 2008 ? This week, Giuseppe Porcaro is joined live by Guntram Wolff and Nicolas Véron to discuss banks and loan losses in the pandemic turmoil. This podcast is a member of the EuroPod network.