Tag Archives: brookings

ECB’s Draghi on raising inflation in Europe: ‘We will do exactly that.’

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Italy’s Mario Draghi, the president of the European Central Bank, joined Stanley Fischer, the vice chair of the Federal Reserve, in an hour-long program at the Brookings Institution earlier today.European_Union

Draghi addressed at length both the ECB’s steps to confront deflation and the need for EU countries to enact bolder economic reforms in his remarks and in his discussion with Fischer, the former president of Israel’s central bank and a former professor at the University of Chicago who once taught Draghi.

Deflation as Europe’s chief economic threat

DSC00853Draghi stressed that he understands the biggest risk to European Union’s economic recovery is deflation. He noted that the ECB is transitioning from a more passive approach to a much more active ‘QE-style’ approach to the bank’s balance sheet — in part by moving last month to purchase private-sector bonds and asset-backed securities. Even if Draghi’s efforts still fall short of the kind of quantitative easing (e.g., outright asset purchases) that the Federal Reserve introduced to US monetary policy five years ago, Draghi committed himself to lifting the eurozone’s inflation from ‘its excessively low level’:

We will do exactly that.

It’s not exactly ‘whatever it takes,’ but it’s a sign that Draghi realizes the dangers that deflation presents, with the eurozone inflation rate falling to just 0.3%, the lowest level since the height of the eurozone’s existential sovereign debt crisis:

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Draghi has been one of the leading voices for a more active ECB approach to boosting inflation to 2% within the next two years, though Germany’s powerful central bank, the Bundesbank, and its president Jens Weidmann (also a member of the ECB’s 24-person governing council), remains skeptical of full-throated quantitative easing.  Continue reading ECB’s Draghi on raising inflation in Europe: ‘We will do exactly that.’

Who is Federica Mogherini?

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When Matteo Renzi, the 39-year-old former Florence mayor, pushed Enrico Letta out of power in February, I questioned the timing of his decision and noted that it was an arguably anti-democratic electoral coup against a prime minister of his own party that could easily backfire on Renzi.Italy Flag Icon

But among the most eyebrow-raising choices was Renzi’s decision not to reappoint the internationally acclaimed Emma Bonino as foreign minister, allegedly against the wishes of Italian president Giorgio Napolitano.

A longtime leader of the Radicali Italiani (Italian Radicals), a group of reform-minded, good-government economic and social liberals, Bonino had a long career in Italian and international politics as an inaugural (and subsequent) member of the European Parliament,  international trade minister under center-left prime minister Romano Prodi, and European commissioner for health and consumer protection in the late 1990s. A longtime  international activist for human rights, Bonino surfaced briefly as a potential Italian presidential contender in May 2013, though the electors  ultimately decided to reappoint Napolitano.

Instead, Renzi appointed Federica Mogherini, a previously little-known international affairs expert and legislator in Renzi’s Partido Democratico (PD, Democratic Party).

Of course, youth need not prevent an official from becoming foreign minister (it hasn’t stopped Austria’s 27-year old foreign minister Sebastian Kurz). Nonetheless, it was a risk to replace such a renowned official like Bonino with an untested foreign minister like Mogherini (pictured above). Even before Bonino, the foreign ministry is a role that’s been held by some of Italy’s most senior politicians — Gianfranco Fini and Franco Frattini on the right, and Massimo D’Alema and Lamberto Dini on the left.

Mogherini, in her first trip abroad, was received by US secretary of state John Kerry yesterday, and she appeared briefly at the Brookings Institution today to share thoughts about European relations with Russia, Ukraine, North Africa and the Middle East.

Mogherini is impressive, even to those of us who regret that Bonino’s time as foreign minister was truncated to just 10 months. At her discussion at Brookings, she was more forthright and authoritative than one might expect from such an untested foreign minister.   Continue reading Who is Federica Mogherini?

Letta discusses political stability in Washington on day after US gov’t shutdown ends

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It’s astonishing that in his hour at the Brookings Institution earlier today, Italian prime minister Enrico Letta mentioned ‘Tea Party’ once, but the words ‘Berlusconi,’ ‘Lampedusa,’ or even ‘election law’ never escaped his lips. Italy Flag Icon

Letta said that he was following with interest the current political standoff in the United States over the debt ceiling and the government shutdown, especially with respect to the relationship between debt yields and political stability.  Letta, who is in Washington DC this week, met with US president Barack Obama earlier today, the day that the US federal government reopened after a 16-day shutdown:

This is why… I was so interested in understanding what’s happening here [in the United States], the discussion with the tea parties, the Republican Party and so on. It was something very interesting for me, of course, because of the future of the discussion of the political parties and of the discussion around the problem of the debt, around the problem of how to deal in a bipartisan way.

It’s saying something quite spectacular when an Italian prime minister, who leads Italy’s 64th postwar government, can compare the instability of the American political system to that of Italy’s system, where, most recently, former prime minister Silvio Berlusconi tried to cause Letta’s government to fall just 15 days ago.  Letta leads a ‘grand coalition’ among his own party, the center-left Partito Democratico (PD, Democratic Party), Berlusconi’s center-right Popolo della Libertà (PdL, People of Freedom), and a small group of centrists led by former technocratic prime minister Mario Monti.

Despite the precarious nature of Italy’s coalition government, Letta — with a professional, earnest, mild-mannered mien — has tried to project an aura of stability.  Letta is keenly aware that the perception of Italy’s own political instability could be the difference between a future of economic growth and dynamism and a future of demographic decline and economic stagnancy.

From today’s remarks, you may have gotten the sense that Letta thinks that a more integrated European Union and greater domestic political stability will be enough to transform Italy — he even said that the difference between the Italian government’s paying 3% interest rates and 6% interest rates is the difference between the sun and the moon.

But does a solution to Italy’s political and economic problems lie solely in the balance between 3% and 6% yields? Continue reading Letta discusses political stability in Washington on day after US gov’t shutdown ends

Regling denies north-south European divide, claims EFSM a ‘lot of solidarity’

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If you were at Brookings Thursday afternoon, you could have taken away the following points:European_Union

  • Olli Rehn (pictured above), European commissioner for economic and monetary affairs and vice president of the European Commission, thinks the eurozone will return to growth by the end of 2013.
  • Klaus Regling, chief executive officer of the European Financial Stability Facility thinks there is no north-south divide in the eurozone.
  • The three-step plan presented by Jeroen Dijsselbloem, president of the Eurogroup of eurozone finance ministers, for future growth comes down to: balanced budgets, banking union and structural reform.  And, by the way, he thinks the main political problem in the eurozone is that European Union leaders have been so busy (for the past four years) dealing with the crisis that they haven’t had time to explain adequately their plans to the public.

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Consider this quote from Dijsselbloem (pictured above), whereby he says he and his colleagues have been so busy that they haven’t done a job of explaining themselves to the public:

‘[We’ve been so busy] solving the problems and dealing with the crisis, that we’ve not really involved a lot of people, the public, at large, as to what we’re doing, why we’re doing this, why it’s so crucial to work together along the lines of the strategy, why it’s so crucial to push forward structural reforms,” Dijsselbloem said.  ‘People are just experiencing the structural reforms in terms of, ‘I’m losing social rights,’ but we have to explain to them in order for young people to be able to participate also in labor markets, we have to rebalance maybe some countries’ securities and flexibilities in order to create new jobs.’

That’s a fairly audacious understatement of the democratic deficit problem in the European Union these days, and especially among the eurozone member states, who have had treaty upon treaty, condition upon condition dictated to them by Brussels and Berlin.

It also took two questions from the audience about deposit insurance for Dijsselbloem to confirm that their intention is for banking union reform to incorporate a eurozone-wide deposit insurance — in the fullness of time, of course.

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Regling (pictured above), one of five northern Europeans sitting on the panel today, went so far as to rebuke Jean Pisani-Ferry, a French economist and director of Bruegel, a Brussels-based think tank, for suggesting that the political risks in the European Union are rising.

The director general of [the European commissioner of economic and monetary affairs] is Italian, I have two deputies, one is French and one is Spanish, so in the end we’re all good Europeans,’ Regling said, after calling Pisani-Ferry’s question cheap.  ‘We are also not saying that Southern Europe has no problems — you implied that, I think that’s just wrong. We are fully aware there’s a lot of solidarity coming from European partners to these countries.  My institutions alone have dispersed in two years alone €185 billion, in two years alone… That’s a lot of solidarity.  These countries go through very painful adjustments, nobody here is denying that, although we’re all northern Europeans.  But I don’t like this north-south [dichotomy].  I’ve said this before, Latvia was the first country to take [tough structural adjustments] and that’s pretty northern European, so I think we should all be a bit more rational here.’

Reasonable economists can disagree about the policy mechanisms available to Greece or Italy or Portugal or Spain or Cyprus to pull their economies out of depression and how to repair the eurozone’s growing pains.  I’m not going to argue that Italy is in no more dire need of labor market reform than, say Sweden or The Netherlands — of course, Italy needs to modernize its economy if it wants to goose its long-term GDP growth potential.  Greeks have had to learn that income tax isn’t an optional exercise.  And Germany needs to figure out a viable trade model where the eurozone doesn’t exist, as it seemed in its first decade, as a means of enabling the European periphery to buy all of Germany’s exports.

But to refuse to see that there’s a north-south divide in Europe, that Mediterranean Europe is not at the center of today’s eurozone crisis, is abjectly short-sighted.  Regling has to realize that even the north-south divide in Germany is stronger than the east-west divide, despite the separation of west from east for nearly three decades!

It’s Italy that’s currently undergoing a crisis of government today, not France.  It’s Golden Dawn in Greece winning their highest percentage of votes in the history of post-dictatorship Greece, it’s not a neo-Nazi resurgence in Germany.  It’s Cypriot depositors who spent a week wondering if their five-figure savings would be taxed by 6.75%, not the Irish or the Latvians.  That’s not to deny that Latvia and Estonia and Ireland have made incredibly tough decisions in the past four years, but none of those economies are even as big as Greece, let alone Spain or Italy.

If eurocrats like Regling have such a hard time at Brookings, who are largely sympathetic to the goal of (if not always the precise strategies for) saving the eurozone, good luck dealing with Alexis Tsipras’s radical left Greek government or the next Silvio Berlusconi government in Italy or Artur Mas’s declaration of Catalan independence — all of which could happen by the end of 2014.

Photo credit to Kevin Lees — Brookings Institution, Washington DC, April 2013. 

Tsipras predicts Greek debt haircut after German elections

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The great thing about Washington, D.C. is the flow of visitors we see from throughout the world and the relative access to top officials through top-notch organizations such as the Brookings Institution, which hosted Greek opposition leader Alexis Tsipras for a 90-minute session Tuesday.Greece Flag Icon

The beleaguered Greek economy has receded from headlines somewhat since the razor-close election in June 2012 (itself a rerun of an earlier inconclusive vote in May 2012) and since the conclusion of the latest agreement, reached in October 2012, between Greece’s government and the ‘troika’ of the International Monetary Fund, the European Commission and the European Central Bank for the disbursement of cash to the nearly bankrupt Greek government in exchange for €13.5 billion in budget cuts.

Tsipras leads SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς), which finished a very narrow second place to the center-right New Democracy (Νέα Δημοκρατία), whose leader Antonis Samaras, now prime minister, leads a broad pro-bailout coalition.  Although SYRIZA lost the election, it’s the largest anti-austerity force in Greece, and it either leads or ties New Democracy in most polls.

Given that Greece’s unemployment rate keeps increasing (it’s currently around 27%) and it’s entering its sixth consecutive year of economic contraction, even as the government’s been forced into adopting increasingly harsh austerity measures, it’s hard not to see Tsipras as a future prime minister.

Tsipras, who’s made several international trips since last June, has been on somewhat of a campaign to convince the world that he’s not a crazy socialist to be feared, but rather well-placed within the Keynesian macroeconomic tradition of the social democratic left, whose European leaders believe that austerity alone cannot deliver the kind of boost to the economy that will result in greater GDP growth and more employment.   Continue reading Tsipras predicts Greek debt haircut after German elections

Andrew Moravcsik, Brookings panel explore US-EU relations in Obama’s second term

I had the opportunity to catch Princeton University’s Andrew Moravcsik (pictured above, middle) at the Brookings Institution yesterday for a brief panel discussion on relations between the United States and the European Union following the reelection of U.S. president Barack Obama.  Moravcsik engaged with Atlantic columnist Clive Crook and other panelists on not only the direction of US-EU relations in Obama’s second term, but also whether US-EU relations are even incredibly relevant at all for an administration likely to have higher priorities. 

It takes a special kind of brass for an American to become one of the fundamental scholars of European integration, but Moravcsik is the father of the liberal intergovernmentalism theory of European integration, which purports that European institutions are essentially the creations of nation-states, and that supranational entities such as the European Union only have as much power as those states unanimously agree to provide them.  It stands in contrast to the competing neofunctionalism theory that purports that institutions like the European Union gather more power through the spillover effects of integration, allowing them to grow and gain additional power as integration deepens, notwithstanding the wishes of nation-states.  It’s a fascinating debate, and it’s especially fascinating to consider the consequences of both theories for the ongoing European response to the eurozone’s sovereign debt crisis.

Needless to say, few political scientists — European, American or otherwise — have had as much influence on European integration theory as Moravcsik.  As such, he’s long been one of my favorite scholars since I first studied European integration theory at the European University Institute, so it was somewhat of a pleasure to see him discuss US-EU relations in person — and not less than a 10-minute walk from home at that.

The discussion featured much of the standard debate between intergovernmentalism and functionalism, with Crook arguing in particular that the United Kingdom under prime minister David Cameron was perhaps irretrievably isolating itself from Europe and that it risked geopolitical irrelevance if it did so.  He worried that the European Union, more generally, has failed to adequately provide ‘variable geometry’ for European countries — a so-called ‘multi-speed Europe.’

Moravcsik, however, largely shrugged off those concerns and noted that a multi-speed Europe emerged two decades ago, with some countries participating more fully and others, like the United Kingdom, choosing to participate in some core functions but not others:

There’s a lot of people in Brussels who say a lot of things, but what happens is what member states say.

He pointed to the limited nature of participation in the eurozone — many members, including the United Kingdom, have not acceded to the single currency.  He also pointed to the voluntary nature of opting into any unified European foreign policy (e.g., the ‘coalition of the willing’ that included the United Kingdom, Italy and Poland, but few others, in support of the U.S. invasion of Iraq in 2003), the flexibility of European competition policy, and the opt-out nature of the Schengen Agreement that establishes the free crossing of borders throughout Europe, to which even some non-EU countries are party.  He added that Turkey and, increasingly, Morocco are both, to some degree, integrated into the European Union, if not in quite a de jure capacity.

I found Moravcsik’s thoughts on US-EU relations more intriguing, however — especially his thoughts on the Obama administration’s much-trumpeted ‘pivot to Asia.’

Moravcsik argued that US-EU relations are far more sanguine than, perhaps, has been reported, and noted the role that German chancellor Angela Merkel and European Central Bank president Mario Draghi played in preventing — or at least delaying — the kind of eurozone crisis that could have endangered Obama’s election.  He added that U.S. and European interests are largely aligned and that when the Obama administration needs to call someone in the world with the will and means to support its goals, it’s still likely to call on Europe.  He noted that the United States and Europe agree more consistently today than they did during the Cold War on issues as wide-ranging as nuclear proliferation, Israeli-Palestinian peace, consequences of the ‘Arab Spring,’ and environmental and climate change policy.

As such, he dismissed the idea of a ‘pivot to Asia’ as nothing so much as overheated rhetoric, comparing it to the talk of the United States as a unilateral ‘hyperpower’ in 2003.  In both cases, he argued that Europeans have (wrongly) taken American rhetoric at far more than face value.  To the contrary, Moravcsik claimed that the ‘pivot to Asia’ talk was ‘drummed up’ as a strategic justification for the United States pulling out of Iraq and Afghanistan.

That was perhaps a bit starker than I’d imagined.  After all, Obama is headed, of all places, to southeast Asia for his first post-reeelction trip — to Myanmar/Burma, the first trip by a sitting U.S. president to that country in U.S. history.

Broadly speaking, Moravcsik argued that large strategic shifts, like any ‘pivot’ to Asia, are accomplished only gradually over long periods of time.  That strikes me as largely correct, but it nonetheless will be interesting to see what happens between now and 2017 on U.S. Asia/Pacific policy.

Notably, we have a handful of measuring sticks to guide us: Continue reading Andrew Moravcsik, Brookings panel explore US-EU relations in Obama’s second term