The financial stability risks of ultra-loose monetary policy. Bruegel Policy Contribution Issue 2015/03

Ultra-loose monetary policies, such as very low or even negative interest rates, large-scale asset purchases, long-maturity lending to banks and forward guidance in central bank communication, aim to increase inflation and output, to the benefit of financial stability. But at the same time, these measures pose various risks and might create challenges for financial institutions. • By assessing the theoretical literature and developments in the United States, United Kingdom and Japan, where very expansionary monetary policies were adopted during the past six years, and by examining the euro-area situation, we conclude that the risks to financial stability of ultra-loose monetary policy in the euro area could be low. However, vigilance is needed. • While monetary policy should focus on its primary mandate of area-wide price stability, other policies should be deployed whenever the financial cycle deviates from the economic cycle or when heterogeneous financial developments in the euro area require financial tightening in some but not all countries. These policies include micro-prudential supervision, macro-prudential oversight, fiscal policy and regulation of sectors that pose risks to financial stability, such as construction.

Promoting the agenda for a social Economic and Monetary Union: Attention, credibility and coalition-building. Bruges Political Research Paper No. 37, November 2014

In the aftermath of the crisis, new instruments of economic governance have been adopted at the EU level. Until recently, these have been strongly dominated by what I assume to be the ECFIN coalition. However, at least since 2011, this coalition’s supremacy has been challenged by the competing coalition’s (EPSCO) willingness to rebalance the economic governance so that social concerns are better taken into account. Hence, drawing on the agenda-setting literature in the EU context, this working paper aims at retracing the process that has led to put this issue of the social dimension of the EMU on to the EU political agenda. Three hypotheses are made concerning the rise of this issue, the strategies employed by agenda-setters, and the policy subsystem of the economic governance. First, this study shows that the interest in this issue has been gradually fostered ‘from below’, at the level of the European Parliament and the European Commission. Second, due to its ‘high politics’ nature, this issue could only be initiated ‘from above’ (European Council) and then expanded to lower levels of decision-making (Commission). Specifically, DG EMPL has managed to attract attention to this issue and to build its credibility in dealing with it by strategically framing the issue and directing it towards the EPSCO venue. Finally, I analyze the outcome of this agenda-setting process by assessing to what extent the two new social scoreboards which form part of this social dimension have been taken into account during the 2014 European semester. The result of this analysis is that the new economic governance has not been genuinely rebalanced insofar as its dominant policy core remains that of the ECFIN coalition.

Greece & the European Agenda: EU Enlargement and European Monetary Union. CES Germany & Europe Working Papers, No. 08.2, 1998

In the decade to come, the European Union will embark on two new projects, each destined to transform it in fundamental ways: (i) Eastern enlargement, and (ii) economic and monetary union. Neither of these projects will affect all members equally or in the same way. But Greece will, for two reasons, be affected in a manner qualitatively different to all other member states. First, Greece is the only country physically affected by the Luxembourg Summit's decision to begin accession negotiations with some, but not all, Central and Eastern European applicant countries: as a result of this decision, she will continue, for at least another eight to ten years, to be the only member country not to share a common border with another member state, with all the consequent implications in economic and geostrategic terms. Second, when the European Council meets in early May to select those member states that are deemed to have met the convergence criteria, it will find that Greece is the only member state falling short of those criteria. This development may create additional difficulties for her economy during the transitional period of derogation. It will also pose new risks to Greece, insofar as she will be absent during the initial-and crucial-years of establishing a common monetary policy.

Creating Stability: National Preferences and the Origins of European Monetary System. CES Germany & Europe Working Papers, No. 00.9, December 2000

This essay compares the preferences of France, Italy, and Britain on the creation of the European Monetary System in 1978-1979, especially the Exchange Rate Mechanism, which stabilised nominal exchange rates. My claim is that the different conclusions reached by the governments (France and Italy in, Britain out) cannot be explained by economic circumstances or by interests, and I elaborate an intervening institutional variable which helps explain preferences. Deducing from spatial theory that where decisionmakers `sit' on the left-right spectrum matters to their position on the EMS, I argue that domestic constitutional power-. sharing mechanisms privilege certain actors over others in a predictable and consistent way. Where centrists were in power, the government's decision was to join. Where left or right extremists were privileged, the government's decision was negative. The article measures the centrism of the governments in place at the time, and also reviews the positions taken by the national political parties in and out of government. It is intended to contribute to the growing comparativist literature on the European Union, and to the burgeoning literature on EU-member-state relations.

European Monetary Union: between the stakeholder and the stockholder models of capitalism. CES Germany & Europe Working Papers, No. 01.3, 2001

From the mid-1980s on a new attitude towards self-determination appeared in Western European integration. With the Maastricht Treaty of 1992 and, later, with theAmsterdam Treaty of 1997 the member countries of the European Community manifested their determination to be active players in the new international order. Accepting and instituting the single market and monetary union constituted, however, a challenge of compatibility between the traditional model of welfare European capitalism and the impositions coming from globalization under the neo-liberal model of Anglo-Saxon capitalism. This issue is examined here under two perspectives. The first reviews the implications which globalization has had on the European model of capitalism and the second the complications for monetary management as Europe moves from a nationally regulated to a union regulated financial structure.