nep-eec New Economics Papers
on European Economics
Issue of 2014‒12‒29
twenty papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Doom-loops: The Role of Rating Agencies in the Euro Financial Crisis By Heather D. Gibson; Stephen G. Hall; George S. Tavlas
  2. The impact of diverging economic structure on current account imbalances in the euro area By Ehmer, Philipp
  3. Balance of payments or monetary sovereignty? In search of the EMU’s original sin – a reply to Lavoie By Sergio Cesaratto
  4. Public Debt & Sovereign Ratings - Do Industrialized Countries Enjoy a Privilege? By Bernd Bartels; Constantin Weiser
  5. Real Exchange Rates and Sectoral Productivity in the Eurozone By Berka, Martin; Devereux, Michael B; Engel, Charles M
  6. Is unemployment structural or cyclical? Main features of job matching in the EU after the crisis By Alfonso Arpaia; Aron Kiss; Alessandro Turrini
  7. Interactions between eurozone and US booms and busts: A Bayesian panel Markov-switching VAR model By Monica Billio; Roberto Casarin; Francesco Ravazzolo; Herman K. van Dijk
  8. Financial frictions in the Euro Area and the United States: a Bayesian assessment By Stefania Villa
  9. The persistence of real exchange rates in the Central and Eastern European countries By Ahmad Zubaidi Baharumshah; Siew-Voon Soon; Stilianos Fountas; Nurul Sima Md. Shariff
  10. Unemployment in the Great Recession: A Comparison of Germany, Canada and the United States By Florian Hoffmann; Thomas Lemieux
  11. Saving the Euro: self-fulfilling crisis and the ‘Draghi Put’ By Miller, Marcus; Zhang, Lei
  12. The Economic Impact of Digital Structural Reforms By Dimitri Lorenzani; Janos Varga
  13. Adjusting the budget balance for the business cycle: the EU methodology By Gilles Mourre; Caterina Astarita; Savina Princen
  14. Volatile Top Income Shares in Switzerland? Reassessing the Evolution Between 1981 and 2009 By Foellmi, Reto; Martínez, Isabel Z.
  15. A model to estimate macroeconomic parameters for growth in EU By Albu, Lucian Liviu
  16. Market Perceptions of US and European Policy Actions Around the Subprime Crisis By Theoharry Grammatikos; Thorsten Lehnert; Yoichi Otsubo
  17. Analysis of aggregated inflation expectations based on the ECB SPF survey By Oinonen, Sami; Paloviita, Maritta
  18. Trends in Income Inequality and its Impact on Economic Growth By Federico Cingano
  19. Spain : growth with jobs By Escudero, Verónica; Milasi, Santo; Pignatti, Clemente; Silvander, Johanna
  20. Bad banks in the EU: the impact of Eurostat rules By Christopher Gandrud; Mark Hallerberg

  1. By: Heather D. Gibson; Stephen G. Hall; George S. Tavlas
    Abstract: During the euro-area financial crisis, interactions between sovereign spreads and credit ratings appeared to have led to self-generating feedback loops. To examine the interaction between spreads and ratings, we estimate a simultaneous two-equation model in which spreads and ratings are endogenous. Using a panel of 5 euro-area countries, we construct time series comprising the ratings of its sovereigns determined by the three major rating agencies. We find that, controlling for the economic and political fundamentals, spreads and ratings strongly interacted with each other during the crisis, producing effects well-beyond those of the fundamentals, and with the interactions demonstrating high persistence.
    Keywords: euro area financial crisis, sovereign spreads, rating agencies
    JEL: E63 G12
    Date: 2014–12
  2. By: Ehmer, Philipp
    Abstract: The measures implemented to reduce current account deficits within several euro area econ-omies are aimed at boosting competitiveness to raise exports. Due to low industrial capacities in Greece, Portugal and Spain, for instance, it is questionable, however, whether exports can contribute much to the required turnaround of the current account. The existing literature on current account determinants ignores the impact of economic structure. However, as industrial goods are more tradable than services, a specialisation on manufacturing industries should ceteris paribus lead to an improved current account. The empirical analysis of this paper con-firms a significant impact of the sectoral focus on the current account within the euro area. Hence, the turnaround in crisis-hit economies has to be accomplished mostly through imports. As can be observed, this brings about severe recessions - more severe than in manufacturing-based economies which use the exports channel to a larger extent. Within a currency union where there is no depreciation which facilitates the adjustment economies should aim at har-monising their economic structure regarding export capacity.
    Keywords: euro area,current account imbalances,current account determinants,savings rate, economic structure,sectoral focus,optimum currency area
    JEL: E21 F32 F41 L16 O14
    Date: 2014
  3. By: Sergio Cesaratto (University of Siena)
    Abstract: In a recent paper Marc Lavoie (2014) has criticized my interpretation of the Eurozone (EZ) crisis as a balance of payments crisis (BoP view for short). He rather identified the original sin “in the setup and self-imposed constraint of the European Central Bank”. This is defined here as the monetary sovereignty view. This view belongs to a more general view that see the source of the EZ troubles in its imperfect institutional design. According to the (prevailing) BoP view, supported with different shades by a variety of economists from the conservative Sinn to the progressive Frenkel, the original sin is in the current account (CA) imbalances brought about by the abandonment of exchange rate adjustments and in the inducement to peripheral countries to get indebted with core countries. An increasing number of economists would add the German neo-mercantilist policies as an aggravating factor. While the BoP crisis appears as a fact, a better institutional design would perhaps have avoided the worse aspects of the current crisis and permitted a more effective action by the ECB. Leaving aside the political unfeasibility of a more progressive institutional set up, it is doubtful that this would fix the structural unbalances exacerbated by the euro. Be this as it may, one can, of course, blame the flawed institutional set up and the lack an ultimate action by the ECB as the culprit of the crisis, as Lavoie seems to argue. Yet, since this institutional set up is not there, the EZ crisis manifests itself as a balance of payment crisis.
    Keywords: Socialist Marxian Sraffian, Central banks and their policies, Current account adjustment, International lending and debt problems, Macroeconomics issues of monetary unions.
    JEL: B51 E58 F32 F34
    Date: 2014–12
  4. By: Bernd Bartels (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany); Constantin Weiser (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)
    Abstract: In this paper, we explore the institutional investors' assessment of relative creditworthiness across selected country groups with a special focus on the impact of public debt on the perception of sovereign risk. Our results show that general government debt is among the most important determinants of credit risk in industrialized countries and emerging markets alike. When using a multivariate framework, we further find that the inuence of debt on ratings do es not differ between both groups. Also, our results point towards a rating penalty for highly-indebted advanced countries when their debt ratio is associated with a growing one. By contrast, a high debt level alone does not lead to an additional rating decline. Finally, we show that peripheral euro area economies (GIIPS) received a rating privilege before the financial crisis that turned into a penalty after 2008.
    Keywords: Sovereign Risk, Public Debt, European Monetary Union, Debt Sustainability
    JEL: E62 F34
    Date: 2014–11–29
  5. By: Berka, Martin; Devereux, Michael B; Engel, Charles M
    Abstract: We investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the Eurozone. Real exchange rate patterns closely accord with an amended Balassa-Samuelson interpretation, both in cross-section and time series. We construct a sticky price dynamic general equilibrium model to generate a cross-section and time series of real exchange rates that can be directly compared to the data. Under the assumption of a common currency, estimates from simulated regressions are very similar to the empirical estimates for the Eurozone. Our findings contrast with previous studies that have found little relationship between productivity levels and the real exchange rate among high-income countries, but those studies have included country pairs which have a floating nominal exchange rate.
    Keywords: Balassa-Samuelson; Eurozone; Real Exchange Rates; Total Factor Productivity; Unit Labor Cost
    JEL: F31 F41
    Date: 2014–10
  6. By: Alfonso Arpaia; Aron Kiss; Alessandro Turrini
    Abstract: The paper sheds light on developments in labour market matching in the EU after the crisis. First, it analyses the main features of the Beveridge curve and frictional unemployment in EU countries, with a view to isolate temporary changes in the vacancy-unemployment relationship from structural shifts affecting the efficiency of labour market matching. Second, it explores the main drivers of job matching efficiency, notably with a view to gauge whether mismatches became more serious across skills, economic sectors, or geographical locations and to explore the role of the policy setting. It emerges that labour market matching deteriorated after the crisis, but with a great deal of heterogeneity across EU countries. Divergence across countries increased. Matching deteriorated most in countries most affected by current account reversals and the debt crisis. The lengthening of unemployment spells appears to be a significant driver of matching efficiency especially after the crisis, while skill and sectoral mismatches also played a role. Active labour market policies are associated with a higher matching efficiency and some support is found to the hypothesis that more generous unemployment benefits reduce matching efficiency.
    JEL: J23 J24 E32
    Date: 2014–09
  7. By: Monica Billio; Roberto Casarin; Francesco Ravazzolo; Herman K. van Dijk
    Abstract: Interactions between eurozone and United States booms and busts and among major eurozone economies are analyzed by introducing a panel Markov-switching VAR model. The model is well suitable for a multi-country cyclical analysis and accommodates changes in low and high data frequencies and endogenous time-varying transition matrices of the country-specific Markov chains. The transition matrix of each Markov chain depends on its own past history and on the history of other chains, thus allowing for modelling the interactions between cycles. An endogenous common eurozone cycle is derived by aggregating country-specific cycles. The model is estimated using a simulation based Bayesian approach in which an efficient multi-move algorithm is defined to draw time-varying Markov-switching chains. Using real and financial data on industrial production growth and credit spread for all countries, our main empirical results are as follows. Recession, slow recovery and expansion are empirically identified as three regimes with slow recovery becoming persistent in the eurozone in recent years differing from the US. US and eurozone cycles are not fully synchronized over the 1991-2013 period, with evidence of more recessions in the eurozone, in particular during the 90’s. Larger synchronization across regions occurs at beginning of the financial crisis but recently more heterogeneity takes place. Cluster analysis yields a group of core countries: Germany, France and Netherlands and a group of peripheral countries Spain and Italy. Reinforcement effects in the recession probabilities and in the probabilities of exiting recessions occur for both eurozone and US with substantial differences in phase transitions within the eurozone. Finally, credit spreads provide accurate predictive content for business cycle fluctuations. A credit shock results in statistically significant negative industrial production growth for several months in Germany, Spain and US. Our empirical result may serve as important information for the specification of a coordinated policy between the eurozone and the US and within the eurozone.
    Keywords: Bayesian Modelling, Panel VAR, Markov-switching, International Business Cycles, Interaction mechanisms
    JEL: C11 C15 C53 E37
    Date: 2014–11
  8. By: Stefania Villa (KU Leuven; University of Foggia)
    Abstract: This paper assesses the empirical relevance of financial frictions in the Euro Area (EA) and the United States (US). It provides a comprehensive set of comparisons between two models: (i) a Smets and Wouters (2007) (SW) model with financial frictions originating in non-financial firms à la Bernanke et al. (1999) (SWBGG); and (ii) a SW model with frictions originating in financial intermediaries, à la Gertler and Karadi (2011) (SWGK). Proved that the introduction of financial frictions in either way improves the models' fit compared to a standard SW model, the empirical comparisons reveal that the SWGK model outperforms the SWBGG model both in the EA and the US. Two main factors explain this result: first, the magnitude of the financial accelerator effect; and second, the role of the investment-specific technology shock in affecting financial variables.
    Keywords: Financial frictions, DSGE models, Bayesian estimation.
    JEL: C11 E44
    Date: 2014–12
  9. By: Ahmad Zubaidi Baharumshah; Siew-Voon Soon; Stilianos Fountas (Department of Economics, University of Macedonia); Nurul Sima Md. Shariff
    Abstract: This paper investigates the mean reversion in real exchange rates for Central and Eastern European countries. In contrast to previous studies, we use the local-persistent model to measure the half-life. We find that the adjustment to purchasing power parity is more rapid after accounting for structural breaks, taking less than 18 months to be cut in half. The empirical evidence shows that there is no clear-cut difference in the speed of adjustment to shocks between the transition economies and the larger member countries of the European Union. The narrow confidence intervals for the half-lives that accord with the standard sticky-price models provide strong support for purchasing power parity. The purchasing power parity puzzle does not seem to hold in these transition countries. The practical implication of our findings is that the transition countries have successfully adopted trade policies that mimic those of the European Union, with a view to alignment in readiness for European Union membership..
    Keywords: half-lives; local persistence; structural breaks; real exchange rate; PPP puzzle; transition economies.
    JEL: C0 F21 F36
    Date: 2014–11
  10. By: Florian Hoffmann; Thomas Lemieux
    Abstract: This paper investigates the potential reasons for the surprisingly different labor market performance of the United States, Canada, Germany, and several other OECD countries during and after the Great Recession of 2008-09. Unemployment rates did not change substantially in Germany, increased and remained at relatively high levels in the United States, and increased moderately in Canada. More recent data also show that, unlike Germany and Canada, the U.S. unemployment rate remains largely above its pre-recession level. We find two main explanations for these differences. First, the large employment swings in the construction sector linked to the boom and bust in U.S. housing markets can account for a large fraction of the cross-country differences in aggregate labor market outcomes for the three countries. Second, cross-country differences are consistent with a conventional Okun relationship linking GDP growth to employment performance. In particular, relative to pre-recession trends there has been a much larger drop in GDP in the United States than Germany between 2008 and 2012. In light of these facts, the strong performance of the German labor market is consistent with other aggregate outcomes of the economy.
    JEL: J21 J64
    Date: 2014–11
  11. By: Miller, Marcus; Zhang, Lei
    Abstract: European markets for sovereign bonds have been prone to panic as investors fly to safety whenever they think others will. Calvo (1988) had warned of the possibility of multiple equilibria in bond markets; and argued for official action to limit interest rate rises so as rule out a self-fulfilling default equilibrium. Until recently, however, it appeared that the ECB was not able to act as necessary. But in August 2012, the ECB announced a policy of Outright Monetary Transactions which promised intervention to put a ceiling on rates for sovereigns willing to accept further fiscal stringency; and we use Calvo’s framework to illustrate how this policy of a ‘put’ for sovereigns can work. In addition to unilateral action by the ECB, some have proposed the consolidation of sovereign debt into Eurobonds backed by a supranational agency. Specifically, we propose the creation of a Special Purpose Vehicle (SPV) which issues Eurobonds and holds both plain vanilla sovereign debt and newly created state-contingent bonds. This offers, we believe, a desirable complement to the ‘Draghi put’.
    Keywords: Creditor panic; debt consolidation; sovereign illiquidity and insolvency
    JEL: F34 F42
    Date: 2014–05
  12. By: Dimitri Lorenzani; Janos Varga
    Abstract: This work aims to contribute to the policy debate on how to spur "digital growth" in Europe in the context of the crisis, by assessing the potential economic impact of structural reforms efforts either already undertaken or imminently foreseen in the field of European digital markets. Namely, this is done by analysing the growth effect of European reforms in the areas of radio spectrum, professional e-skills, eCommerce, and fixed broadband take-up. Each policy area is analysed separately, in the first place by hypothesizing and econometrically testing specific “transmission channels”, i.e. the direct impact of selected reform variables on intermediate economic outcomes, such as prices and productivity. In the second place, the price and productivity shocks estimated on the basis of the actually observed change in the reform variable (as a proxy for the countries’ reform effort) are fed into QUEST III to simulate macroeconomic impacts on GDP. Despite their heterogeneity, the importance of analysing these reforms together lies in the possibility of shedding light on the overall economic impact of fostering specific aspects of the Digital Single Market in the EU. Indeed, summing up the simulated macroeconomic impacts for different policy areas shows that the long-run growth impact of the already observed digital reform effort is above 1%, and that further efforts in line with the Digital Agenda for Europe targets would entail additional 2.1% of GDP growth over the baseline. From a methodological point of view, the findings highlight the importance to test the adequate functioning of the microeconomic transmission channels through which digital structural reforms could exert their overall macroeconomic impact.
    JEL: C33 E17 F15 L51 L96
    Date: 2014–09
  13. By: Gilles Mourre; Caterina Astarita; Savina Princen
    Abstract: The cyclically-adjusted budget balance (CAB) is the backbone of the EU framework of fiscal surveillance, both in its preventive and corrective arms. The concept corresponds to the budget balance prevailing if the economy was running at potential. After correcting for the one-off and temporary measures, it is called structural budget balance and used to assess the fiscal policy stance. This paper presents the EU methodology for computing the CAB. It derives the new value of the budgetary semi-elasticities following the recent revision of individual revenue and expenditure elasticities by the OECD and shows the effect of the revised elasticities on the CAB.
    JEL: E32 E61 H3 H6
    Date: 2014–11
  14. By: Foellmi, Reto; Martínez, Isabel Z.
    Abstract: We study the recent evolution of top incomes in Switzerland, analyzing both social security data on labor incomes and tax data on total income. The results show that in the last 20 years, the share of top incomes has risen, and the top 0.01 percent’s share even doubled, putting Switzerland similar to European countries for the top 1 percent group but closer to the U.S. for higher top incomes. However, top incomes also exhibited large variations over the business cycle. Besides documenting the recent evolution of total top incomes, we close the gap in the data between 1993 and 2003, exploiting the fact that the Swiss cantons changed their tax system at different points in time. We compare the results with social security data on top labor incomes for which the top shares can be measured precisely over the whole time span. The comparison suggests that labor incomes have become more important among top income earners in Switzerland. This is in line with findings for other developed countries: especially in the U.S., but also in European countries like Germany or the Netherlands, labor incomes have been playing a major role in top incomes in recent decades.
    Keywords: Income inequality; Labor income; Pareto interpolation; Switzerland; Tax data; Top income share
    JEL: C81 D31 H24 N33
    Date: 2014–06
  15. By: Albu, Lucian Liviu
    Abstract: A main problem for macroeconomic studies continues to be the estimation of capital stock and some derived indicators like coefficient of capital, depreciation rate, etc. In this way we are proposing a simple and intuitively model in order to estimate such basic macroeconomic indicators but avoiding to knowing the amount of capital stock. By applying a simulation model in case of European Union data for a set of periods, we obtained some relevant result. One of them is referring to the negative impact of last global crisis on the coherence of a classic type model. Such model is adequate mostly for a period of continuous increasing in GDP as it was for EU during the period 2000-2007.
    Keywords: growth rate, investment, capital stock, coefficient of capital, depreciation
    JEL: C61 C65 E24 E27 E32
    Date: 2013–10
  16. By: Theoharry Grammatikos (University of Luxembourg (E-mail: theoharry.; Thorsten Lehnert (University of Luxembourg (E-mail:; Yoichi Otsubo (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: This paper explores the impacts of key policy actions by US and European authorities on stock returns of systemically important banks in Europe and US around the subprime crisis. We find that the US policy announcements had a stronger impact on the European and US banking industry than the European policy announcements. In particular, the announcements of monetary policies by the US authorities were accompanied by higher abnormal returns compared to related announcements of European authorities. We also find that the policy announcements, regardless of which side of the Atlantic the news arrived from, has increased the return volatility during the crisis. We further analyze the reactions of implied volatility. The findings suggest that the currency swaps had a non-negligible effect in reducing future uncertainty.
    Keywords: Event study, Policy announcement, Subprime crisis
    JEL: G01 G14 G18 G21 G28
    Date: 2014–11
  17. By: Oinonen, Sami (Bank of Finland Research); Paloviita, Maritta (Bank of Finland Research)
    Abstract: This paper examines aggregated inflation expectations based on the ECB Survey of Professional Forecasters (ECB SPF). We analyse possible impacts of changing panel composition on short and long term point forecasts and forecast uncertainties using approach, which is based on a set of sub-panels of fixed composition. Our results indicate that the unbalanced panel data do not cause systematic distortions to aggregated survey information. However, micro level analysis of expectations would also be useful, especially in times of wide disagreement across forecasters and high levels of inflation uncertainty.
    Keywords: survey data; expectations; changing panel composition
    JEL: C53 E31 E37
    Date: 2014–12–01
  18. By: Federico Cingano
    Abstract: In most OECD countries, the gap between rich and poor is at its highest level since 30 years. Today, the richest 10 per cent of the population in the OECD area earn 9.5 times the income of the poorest 10 per cent; in the 1980s this ratio stood at 7:1 and has been rising continuously ever since. However, the rise in overall income inequality is not (only) about surging top income shares: often, incomes at the bottom grew much slower during the prosperous years and fell during downturns, putting relative (and in some countries, absolute) income poverty on the radar of policy concerns. This paper explores whether such developments may have an impact on economic performance.<P> Drawing on harmonised data covering the OECD countries over the past 30 years, the econometric analysis suggests that income inequality has a negative and statistically significant impact on subsequent growth. In particular, what matters most is the gap between low income households and the rest of the population. In contrast, no evidence is found that those with high incomes pulling away from the rest of the population harms growth. The paper also evaluates the “human capital accumulation theory” finding evidence for human capital as a channel through which inequality may affect growth. Analysis based on micro data from the Adult Skills Survey (PIAAC) shows that increased income disparities depress skills development among individuals with poorer parental education background, both in terms of the quantity of education attained (e.g. years of schooling), and in terms of its quality (i.e. skill proficiency). Educational outcomes of individuals from richer backgrounds, however, are not affected by inequality.<P> It follows that policies to reduce income inequalities should not only be pursued to improve social outcomes but also to sustain long-term growth. Redistribution policies via taxes and transfers are a key tool to ensure the benefits of growth are more broadly distributed and the results suggest they need not be expected to undermine growth. But it is also important to promote equality of opportunity in access to and quality of education. This implies a focus on families with children and youths – as this is when decisions about human capital accumulation are made -- promoting employment for disadvantaged groups through active labour market policies, childcare supports and in-work benefits.<BR>Dans la plupart des pays de l'OCDE, le fossé entre riches et pauvres est à son plus haut niveau depuis 30 ans. Aujourd'hui, dans la zone de l'OCDE, les 10% de la population les plus riches gagnent 9,5 fois le revenu des 10 % les plus pauvres; dans les années 1980, ce ratio s'élevait à 7: 1 et il a augmenté de façon continue depuis. Toutefois, la hausse de l'inégalité de revenu n'est pas (seulement) relative à la flambée de la part des plus hauts revenus : souvent, les revenus les plus bas ont augmenté beaucoup plus lentement pendant les années prospères, et sont tombés en période de ralentissement économique, mettant la pauvreté monétaire relative (et, dans certains pays, absolue) sur le radar des préoccupations politiques. Ce document cherche à savoir si ces évolutions peuvent avoir un impact sur la performance économique.<P> S'appuyant sur des données harmonisées couvrant les pays de l'OCDE au cours des 30 dernières années, l'analyse économétrique suggère que les inégalités de revenus ont un impact négatif et statistiquement significatif sur la croissance ultérieure. En particulier, ce qui importe le plus est l'écart entre les ménages à faible revenu et le reste de la population. En revanche, aucune preuve n'est trouvée sur le fait que les personnes ayant des revenus élevés s'élevant loin du reste de la population nuit à la croissance. Le document évalue également la «théorie de l'accumulation du capital humain" montrant le capital humain comme un canal par lequel les inégalités peuvent affecter la croissance. L'analyse fondée sur les micro données de l'Enquête sur les compétences des adultes (PIAAC) montre que l'augmentation des disparités de revenus inhibent le développement des compétences chez les personnes dont les parents ont un faible niveau d'instruction, aussi bien sur le plan quantitatif du niveau de scolarité atteint (par exemple, en années de scolarité), qu'en termes de qualité (niveau de compétences). Les résultats scolaires des personnes issues de milieux les plus riches, toutefois, ne sont pas affectés par les inégalités.<P> Il s'ensuit que les politiques visant à réduire les inégalités de revenus ne doivent pas seulement être poursuivies pour améliorer les résultats sociaux, mais aussi pour soutenir la croissance à long terme. Les politiques de redistribution via les impôts et les transferts sont un outil essentiel pour s'assurer que les bénéfices de la croissance sont plus largement distribués et les résultats suggèrent qu'on ne doit pas forcément s'attendre à ce que la redistribution nuise à la croissance. Mais il est également important de promouvoir l'égalité des chances dans l'accès et la qualité de l'éducation. Ceci implique de mettre l'accent sur les familles avec enfants et les jeunes - car c'est lorsque les décisions sur l'accumulation de capital humain sont prises - par la promotion de l'emploi pour les groupes défavorisés, grâce à des politiques actives du marché du travail, des supports de gardes d'enfants et des prestations d'activité.
    JEL: H23 J62 O15 O47
    Date: 2014–12–09
  19. By: Escudero, Verónica; Milasi, Santo; Pignatti, Clemente; Silvander, Johanna
    Abstract: The Spanish economy has begun to recover from both the global financial crisis of 2008 and the sovereign debt crisis of 2011 and has made some employment gains. However, the recovery remains both incomplete and fragile. On current trends, it would take at least a decade for the unemployment rate to return to the pre-crises situation. It is therefore crucial to strengthen the employment recovery in order to ensure sustainable economic growth and avoid a further erosion in social conditions. The report points to a number of areas where Government and social partners could take action together to solidify these recent gains and build a new path to more and better jobs.
    Keywords: employment creation, economic recovery, employment policy, Spain, création d'emploi, reprise économique, politique de l'emploi, Espagne, creación de empleos, recuperación económica, política de empleo, España
    Date: 2014
  20. By: Christopher Gandrud; Mark Hallerberg
    Abstract: â?¢ At least 12 European Union member states used publicly created asset management companies (AMCs), otherwise known as a â??badbanksâ?? to respond to the recent financial crisis. This tool remains an option for future bank resolutions under the EU Bank Recovery and Resolution Directive. â?¢ We assess the design of AMCs in the recent crisis and why their form has changed. Through its role as definer of statistical concepts used under the Stability and Growth Pact, Eurostat has affected the design of AMCs. Increasingly stringent rulings on whether AMCs count as debt have pushed member states to create similar types of AMCs, namely those with majority private-sector ownership. â?¢ We argue that privately owned AMCs act differently to publicly owned ones. In particular, private AMCs usually impose larger haircuts on the price they pay for the assets they acquire. This haspositive benefits for how profitable the AMC will be and how much it will help in avoiding the creation of zombie banks and zombie badbanks. â?¢ There are important caveats. The effect of Eurostatâ??s accounting rules on decision-making is stronger in countries with more strained budgets. Also, when the public owns a failed bank, Eurostat rulesare likely to have little impact on AMC ownership decisions. Governments tend to use publicly owned bad banks to resolve publicly owned failed banks. This is because it is difficult to compel private sector involvement in these situations
    Date: 2014–12

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