While the ECB is not allowed to monetise debt formally in the wake of the Covid-19 crisis, there seems to be some scope to do so, without fear of galloping inflation. It might even be needed to hit the inflation target.
The pandemic may prove to have the same effect on the financial sector as on the EU as a whole – it will accelerate integration. As the EU is proposing to double its budget, so may the crisis help to create a truly European financial market. The EU’s reaction will create spill-overs in other fields and allow the EU to take centre stage in financial markets, ensuring that many well-known obstacles will finally be tackled. But the crisis has also revealed that further competition is coming to one very crucial function of banks: payments.
This article first reviews the situation of public finances in the euro area member States, specifying the impact that the coronavirus crisis may have on them and reviewing the divergences between the public finances of the various countries. On this basis, the article looks at the solutions that will have to be found to the problem of public finances and the inevitable tensions that will arise in the management of the problem. Finally, the article argues that the European Central Bank (ECB) will be the epicenter of these tensions, caught between its mandate, the need to support the sustainability of the euro and diverging views on what it can or cannot do. As an epilogue, the article discusses some extreme solutions to the issue of public debt.
Economic convergence has been one of the explicit goals of the EU from its very beginning. The prospect of higher living standards has undeniably been a major attraction of EU membership. Conversely, economic divergence may undermine support for the European project and complicate the common monetary policy in the euro area. In this policy note, we first summarise the key findings of an analysis of national and regional convergence across the EU. In particular, we show that initially poorer European countries and regions have, in general and over the longer term, made progress in catching-up with the income levels of their richer peers, even though convergence has not been a smooth process. The relative performance of countries and regions in the EU is also illustrated. We then shed some light on the extent to which the Covid-19 crisis and the ensuing recovery might impact the functioning of the EU “convergence machine”, before drawing some implications in terms of economic policy.
This research note describes the construction of news-based Economic Policy Uncertainty (EPU) indices for Flanders, Wallonia and Belgium. The indices are computed from January 2001 until May 2020. Important domestic and more global events coincide with spikes in the indices. The COVID-19 pandemic represents the highest point, reflecting very strong consecutive Belgian newspaper attention to economic policy uncertainty. The monthly values of the EPU indices for Flanders, Wallonia and Belgium are published on www.policyuncertainty.com.
Many tier1 and tier2 universal banks do or will suffer from the COVID-19 global pandemic impact due to customer habit changes and global tech players focusing on fintech platforms. Through a proven architectural methodology that we call “Bank on a Page” surrounded with pragmatic techniques, classical banks are able to digitally transform based on four major focus areas.
We are told that digitalization changes everything. The great disruption comes and will sweep us all away if we don't throw everything overboard that we have stuck to so far: hierarchies, proper clothing, serious business bills. Should we believe that? Short answer: No. But digitalization forms a triangle of technology, economy and human behavior/society – where the decisive interdependencies between the three factors are often missed. This article is a plea for an engineering-like approach to digital transformation and tries to make enemies equally on all sides.
How Banks and Financial Technology Are Reshaping Financial Markets.
Since the start of the 21st century, the architecture of the financial system has changed under the pressure of several crises. The way supervisors, central banks, regulators, and the commercial banks interact is now very different from the situation at the end of the 20th century. Many changes have been implemented as an “urgency measure” to stabilize the system, without looking at the coherence of the whole system and the occasional unintended consequences in the long run. Given that the Corona crisis will not allow us to return quickly to the architecture in line of “best practices” of last century, there should be a thorough analysis of the new “normal” and its internal coherence. Many of the existing “checks and balances” in the architecture have been eliminated for short term reasons. It is urgent to think about a financial system, adapted to the reality of today.