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Lieven Noppe

  • Monday 30/1/2023

    With its just-published ideas for reforming the European fiscal framework, the European Commission (EC) is taking a step in the right direction. Replacing almost all existing complex rules with a norm for spending that is directly impacted by policymakers represents a drastic simplification and sharpens the accountability of policymakers. Integrating fiscal policy, economic reform, investment plans, and, where applicable, macroeconomic stability into a single policy plan with a medium-term focus can enhance policy coordination. By including country-specific public debt reduction requirements in that multi-year plan, considering the sustainability risks of existing public debt, fiscal consolidation objectives and the strengthening of economic growth potential can, in principle, be reconciled. Thus, tricky issues in the current framework are remediated.


    But the new way of working would also create new, complex, and sometimes politically charged discussions, with margin for discretionary decisions. The EC's role in the new policy framework is similar to its role in allocating NextGenerationEU support to member states. The EC consolidates and expands that role, inevitably further increasing its political character, with no proposals to strengthen its democratic legitimacy. There are also no proposals for a larger central budget (fiscal capacity) - a necessary cornerstone for a stable currency union. Thus, the EC’s ideas do not bring the missing link for a fully-fledged, stable currency union. They are a step in the right direction, but certainly not the final step.

  • Thursday 1/10/2020

    Contrary to most other (European) countries, Sweden mainly relied on voluntary measures  rather than binding restrictions in its fight against the coronavirus. This 'soft' anti-corona strategy was applauded by some, but there is not yet overwhelming evidence that it has drastically reduced economic costs. There are indications that the milder lockdown has spared the domestic economy a little. Sweden’s situation reminds us that in small, open economies, such as Belgium's, budgetary stimulus is not very effective in stimulating economic recovery, and the focus on competitiveness is all the more important.

  • Wednesday 19/6/2019

    Recent economic indicators are not very encouraging for those hoping that inflation in the euro area will soon return to the ECB's 2% target. Economic growth decelerated sharply in 2018 and the previous acceleration in inflation was completely reversed in the final months of the year. Core inflation has not yet picked up, although stronger wage increases would have justified hopes of such a development. However, the slowdown in consumer demand growth has probably prompted entrepreneurs to reduce their profit margins rather than increase prices.


    Low inflation in the eurozone also reflects the adjustment process whereby peripheral euro area countries continue to make up for competitiveness losses that occurred before the euro debt crisis. This is still not complete and implies that their inflation rates should remain below that of Germany. Consequently, as long as German inflation remains below 2%, average eurozone inflation cannot really get close to 2%.


    A stronger stimulation of the German economy, and in particular of German consumption, could accelerate the process by stimulating German inflation. But such a stimulus is unlikely. A significant acceleration of German inflation to above 2% is therefore also unlikely. As other large euro area countries will have to keep their inflation levels below German levels for a long time to come in order to restore their competitiveness, a return to average inflation in the euro area close to the ECB's 2% target is likely to be a very long-term effort.

  • Thursday 30/3/2017
    Jan Van Hove & Lieven Noppe

    In this research report we discuss the main fiscal policy proposals that have so far been put forward by the new US President Trump, starting with a brief overview of recent evolutions in US public finances and related projections under current policies. Our main conclusion is that Trump’s proposals are not well designed for spurring economic growth significantly, but are likely to further deteriorate the already worrisome fiscal position of the US economy. Notwithstanding the Republican majority in Congress, Trump will have to compromise on his ideas, which will temper sustainability risks of government finances. At the same time, such compromises are likely to lead to disappointment in financial markets that are currently anticipating a strong economic boost.