The Sound of Economics

In this Director’s Cut of ‘The Sound of Economics’, Guntram Wolff welcomes Bruegel research fellow Grégory Claeys to assess how the new Italian budget proposals measure up against the existing EU fiscal rules. Italy’s new budget proposals, together with projected deficit levels for the coming years, have put the EU as well as bond-market investors on alert. In the context of Italy’s already-high ratio of public debt to GDP, the coalition government’s plan to increase the budget deficit has prompted concerns that the country risks running afoul of the EU’s fiscal framework.  What are the means by which the EU can monitor and, if need be, administer sanctions on Italy, in the event of any contravention of its fiscal rules? Bruegel director Guntram Wolff takes this opportunity to discuss all the options facing the European Commission and Council, as well as the specific details of the Italian case and the forecasts underpinning the budget’s figures, with Bruegel research fellow Grégory Claeys.  For further reading, we recommend our full break-down of the EU’s options for response to Italy’s fiscal plans, written by Grégory Claeys and Antoine Mathieu Collin.  You can also hear more on Italy’s economic and political outlook in another of our podcasts, featuring Bruegel affiliate fellow Silvia Merler in discussion with Marcello Minenna, PhD lecturer at the London Graduate School and head of quants at Consob, and Lorenzo Codogno, visiting professor at the London School of Economics and Political Science. 

Bruegel senior fellow André Sapir welcomes Tamotsu Nakamura, dean of Kobe University’s Graduate School of Economics, and Maria Åsenius, head of cabinet to European trade commissioner Cecilia Malmström, for a discussion of the EU-Japan economic partnership in the context of heightening global trade tensions. The EU and Japan have signed a landmark trade deal this summer that will create the world’s largest open economic area. The economic partnership agreement will be the biggest bilateral trade agreement the EU has ever signed, permitting not only the dropping of tariffs but also regulatory cooperation, as well as a special focus to promote the interests of SMEs.    The trade-positive nature of this agreement goes against the grain of the numerous challenges made to the global multilateral system in recent times, best represented by the tariffs and counter-tariffs imposed by the US and China upon one another. To explore how this accord suits the EU and Japan, in terms of both the domestic and international interests of each side, Bruegel senior fellow André Sapir welcomes two guests for this edition of the Bruegel Backstage series – Tamotsu Nakamura, dean of Kobe University’s Graduate School of Economics, and Maria Åsenius, head of cabinet to European trade commissioner Cecilia Malmström.    If you are interested in reading more on this topic, we can recommend the research paper on the EU-Japan agreement that Bruegel has submitted to the European Parliament, by André Sapir, Sonali Chowdhry and Alessio Terzi.   You might also consider our previous podcast on EU’s options in the event of global trade war, featuring Bruegel director Guntram Wolff with Bernd Lange, member of the European Parliament and chair of the Committee on International Trade.   Tamotsu Nakamura and Maria Åsenius participated in one session of the Bruegel conference on international trade and the EU-Japan agreement.

Bruegel deputy director Maria Demertzis welcomes Financial Times commentator Martin Sandbu to explore the journey taken by the field of economics since the financial crisis struck 10 years ago, and discusses what new tools economics has now that it didn’t have then. In this Director’s Cut of ‘The Sound of Economics’, we trace the journey upon which the field of economics has embarked since the financial crisis, what lessons it has learnt and what it can do differently now with the benefit of hindsight. Economists and financial specialists failed to identify the burgeoning threat of financial imbalances, excessive risk-taking and housing bubbles that led to the crisis that first broke a decade ago. Can economics provide answers to the right questions – and in good time? Bruegel deputy director Maria Demertzis is joined by Martin Sandbu of the Financial Times to look at what new tools and approaches can help economists make a difference in the event that any similar such crisis strikes again. For further consideration we recommend another edition of the Director’s Cut podcast series, featuring a discussion between Maria Demertzis, Nicola Viegi – South African Reserve Bank professor of monetary economics at the University of Pretoria – and Frank Smets – director general of economics at the European Central Bank – on the topic of macroeconomics’ post-crisis reinvention and the flourishing of new models. FURTHER READING Rebuilding macroeconomics: Initial reflections on a major theory project The DSGE Model Quarrel (Again) Tales from a crisis: diverging narratives of the euro area

Guntram Wolff welcomes Bruegel affiliate fellow Silvia Merler to evaluate the Italian government’s planned budget for 2019, in this Director’s Cut of ‘The Sound of Economics’ Six months after its election, Italy’s coalition government reached an agreement on public spending. The key tenets of its first budget include a spending increase that will drive the budget deficit to 2.4% of GDP, tax cuts, a proposal for a minimal income for the unemployed, as well as cancellation of the plans to increase retirement ages. Though the new deficit budget fits into the EU’s limit of 3%, Italy’s debt of €2.3 trillion makes for a difficult case to increase spending. The news comes as a blow for the finance minister Giovanni Tria, who pushed for a more fiscally responsible budget, trying to limit budget deficit to 1.6% of GDP. The decision also received disapproval from Brussels, with EU Economics Commissioner Pierre Moscovici criticising Italy for “flouting the rules” and disregarding its large debt.  To discuss the potential consequences, Guntram Wolff welcomes Bruegel affiliate fellow Silvia Merler to this Director’s Cut of ‘The Sound of Economics’. For further reading, we recommend Guntram Wolff’s opinion piece on how to overcome the hurdles obstructing Italian growth, as well as Silvia Merler’s note comparing the capital flight from Italy in 2018 with similar such scenarios witnessed in 2011 and 2016.

Bruegel senior fellow Scott Marcus welcomes former European Regulators Group chairman Kip Meek to explore the consequences of Brexit for ICT policy-making in Europe. The divorce of the UK from the European Union will have far-reaching consequences for all sectors, but what will be the balance of continuity and disruption in the sphere of ICT regulation? With the terms of separation and the nature of the UK’s future relationship with the EU yet to be finalised, there are still many variables that could affect the final outlook. Nevertheless, we can explore the industry’s broader regulatory inclinations, as well as the areas that are most vulnerable to any serious disruption.  Reflecting on the most essential problems that Brexit will pose to the ICT industry, Bruegel senior fellow J. Scott Marcus is joined in conversation by Kip Meek, former chairman of the European Regulators Group.  For further reading, we recommend a blog post written by Scott Marcus on the question of whether mobile roaming arrangements can be maintained between the UK and EU post-Brexit.  Kip Meek appeared as a panellist at an International telecommunications Society conference in Trento, Italy in August 2018, in a session moderated by Scott Marcus.

Following a conference at Bruegel, at a critical moment for the global economic system, Bruegel director Guntram Wolff is joined by Zhang Weiwei, director at The China Institute of Fudan University, together with Bruegel senior fellow Alicia García-Herrero, for a discussion of EU-China trade relations. With the United States pursuing a policy of imposing trade tariffs on its international partners, the geopolitical landscape is poised for change. What room is there, then, for closer economic ties between China and Europe in a world where a multilateral trading system cannot be taken for granted? There are many points, political and economic, on which European and Chinese approaches diverge; nevertheless, there remains the opportunity to focus on common ground, establish a more mutually beneficial relationship, while also standing up for the multilateral system. US trade tariffs have driven China and Europe together more quickly than they might have met otherwise. How prepared China and Europe actually are for building closer ties remains an essential debate. This conversation assesses what problems still prevent a smoother integration of interests in both the Chinese and the European spheres. We invite you to peruse the audio and video recordings of our sessions from the event, ‘Perils and potential: China-US-EU trade relations’, where Bruegel welcomed a number of Chinese and EU trade experts. For further reading, consider the Bruegel research paper looking into European and Chinese trade competition in Latin America, written by Alicia García-Herrero with Thibault Marbach and Jianwei Xu. Also note our blog post analysing data on bilateral trade, services, investment and protectionism between Asia, Europe and the US in recent years, determining whether the nature of the global economy is Transatlantic, Transpacific or Eurasian.

Immigration is one of the most contentious policy matters currently facing the EU. In this Director’s Cut of ‘The Sound of Economics’ Bruegel director Guntram Wolff welcomes Ana Palacio, member of the Spanish council of state and former foreign affairs minister, as well as Bruegel visiting fellow Elina Ribakova for a constructive discussion as to which approaches will yield the best results. Joining Bruegel director Guntram Wolff for this Director’s Cut of ‘The Sound of Economics’ is Ana Palacio, member of the Spanish council of state and former foreign affairs minister, and Elina Ribakova, Bruegel visiting fellow at Bruegel, to discuss the exact nature of the migration challenges currently troubling the EU.  Previous agreement upon the creation of disembarkation centres on the north African coast constitutes only a policy step rather than a resolution. Still very little has been done to draw up a common European migration policy and consensus remains difficult while Member States continue to operate their own independent, broadly disparate policies. Separating the concept of migration and refugees is also key to improving the general understanding of the challenges; likewise, being clear that the number of arrivals in the EU is now significantly lower than in 2015.  There is also progress to be made in accepting that integration is a two-way street, and that legitimate concerns should not be written off without a hearing.  For further reading, consider the Bruegel Blueprint publication ‘People on the move: migration and mobility in the European Union’, which contains a wealth of research on the various challenges that immigration poses to Europe’s policymakers.  Also recommended is this blog post by Zsolt Darvas which illustrates that Europe’s population growth would now be negative if it were not for the inflow of immigrants.

In the first episode of the new Backstage series on ‘The Sound of Economics’, Bruegel senior fellow Nicolas Véron takes time out from the Bruegel Annual Meetings to discuss the immediate future of European banking and capital markets union with Jörg Kukies, state secretary at the German ministry of finance. The euro-area reform agenda hopes to prevent the repetition of problems that arose during the crisis at the beginning of this decade – to provide better protection for taxpayers and depositors and to avoid any perception of privilege for the banks of one country over those of another. Although there appears to be consensus on the necessity of completing banking union, the question remains open as to which elements are still missing.  On the matter of capital markets union (CMU), though the current European Commission has given great emphasis to progressing with the project, we are still quite far from consensus on the exact shape that a more integrated supervisory framework should take. This discussion gets into the details of the immediate challenges and the particular sticking points in negotiations over banking and capital markets union. For further reading, consider the Policy Contribution on making a reality of Europe’s capital markets union, co-written by Nicolas Véron, André Sapir and Guntram Wolff. Meanwhile, in a previous edition of the Director’s Cut podcast, Nicolas Véron discusses the importance of developing deposit insurance as a part of Europe’s broader banking union aspirations.

Bruegel senior fellow Zsolt Darvas joins Sean Gibson on ‘The Sound of Economics’ to expound on the themes of a Policy Contribution on the macroeconomic implications of healthcare systems, which he has co-written with Nicolas Moës, Yana Myachenkova and David Pichler. This episode is the first in a new Bruegel podcast series, ‘Deep Focus’, looking specifically at Bruegel research and elaborating on the insights contained therein, in conversation with the authors.  The effects that healthcare systems can impose upon economies are pronounced and far-reaching. The health sector alone accounts for a significant portion of output and employment in the EU, even before we look at the pharmaceutical companies conducting research and development towards healthcare. From a fiscal point of view, health is one of the most expensive items on a government’s list of expenses.  In this analysis, the scholars measured the efficiency of each EU healthcare system – and of several from beyond the EU’s borders. The results illustrate that improving healthcare outcomes is not as simple as investing more and more money in the system. In this podcast, we discuss some of the areas where real differences can be made both to the health of the general public and to the cost incumbent upon governments. For further reading, consider our blog post digging into the details of the ongoing lack of German public investment, written by Alexander Roth and Guntram Wolff.

Bruegel director Guntram Wolff welcomes Brad Setser, senior fellow at the Council on Foreign Relations, and Jean Pisani-Ferry, mercator senior fellow at Bruegel, to discuss the deterioration of Turkey's economy. Although a recent souring of relations with the US has provided the immediate prompt for Turkey's current crisis, the country's underlying economic malaise is more deeply rooted.  Headlines have tracked the plummeting value of the lira, while the trust of external investors has been challenged by recent policy decisions. Though Turkey's case bears some of the hallmarks of a textbook emerging-market meltdown, there are key divergences. Meanwhile, President Erdogan's previous refutation of IMF policy recommendation does not bode well for potential assistance in the event that Turkey needs help brokering extension agreements with its creditors.  In conversation with Brad Setser, senior fellow at the Council on Foreign Relations, and Jean Pisani-Ferry, Mercator senior fellow at Bruegel, Guntram Wolff assesses not only the nature of the crisis in Turkey but how the country might navigate its way back to safer economic waters. For further reading, consider the recent blog post written by Grégory Claeys and Guntram Wolff discussing how the EU might respond to the currency crisis unfolding in Turkey, including options for the EU to help Turkey in the absence of any agreed IMF assistance programme.