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.
This is a report of the panel discussion, following the masterclass of Mathias Dewatripont, at the Universiteit Antwerpen, on April 4th, 2019.
Masterclass at the Universiteit Antwerpen, April 4th, 2019.
This is a report of the conference on ‘Quantitative Easing’, organised by Het Financieel Forum West-Vlaanderen, which took place on April 2nd, 2019 in Kortrijk.
The issue of non-performing loans (NPLs) in Europe continues to be a focal point of attention for the banking system, both at national and European level. This article explores the origins and causes of the accumulation of NPLs in Europe and explains why they have been and continue to be an important challenge that needs to be tackled. The reduction of NPLs in the EU banking sector is in fact encouraging and substantial progress is being made. Nevertheless, NPLs remain a significant challenge to the profitability and viability of EU banks, and economic growth at large. Attention also needs to be drawn to the clear and important EU dimension to reducing NPLs, as well as preventing their renewed build-up in the future, given the interconnectedness of the banking system of the EU and particularly of the euro area. In this respect, there is a clear connection with the "Action Plan to Tackle Non-Performing Loans In Europe", which was endorsed by finance ministers in the ECOFIN Council in July 2017. The contribution also touches upon the link with the wider agenda of advancing risk reduction and risk sharing in the EU. Most importantly, the contribution elaborates upon the actions that the European Commission has taken to address NPLs, what their main objectives are and how they could affect the EU banking sector.
The Eurosystem has spent 73.4 billion euros on Belgian Public Sector Securities between March 2015 and December 2018. It is believed that these purchases concerned mainly, if not entirely, Belgian OLOs issued by the federal government. Together with other non-standard measures taken by the ECB, this quantitative easing has exerted downward pressure on Belgian bond yields. Now that net buying of public sector securities has come to an end, it is worth looking at interest rate developments. Interest rates did not increase until now, and the federal government debt servicing costs which were for the first time lower than 2.0% of GDP in 2018, would further decline in 2019. Projections by the Belgian Debt Agency show that debt servicing costs would not materially rise, not even in the long term, when scenarios of rising rates are combined with very conservative debt management strategies.
Flemish local authorities are in quite good fiscal condition at the start of the new local legislature, which runs from 2019 up to 2024. Although, big financial problems arise due to the growing expenditure for their statutory staff pensions. Without support by the other (regional and federal) central governments, local authorities might be obliged to cut in investment spending. This means that they wouldn’t be able to react properly to the important social and civic challenges coming from the society.
Initial coin offerings (ICOs) extend the universe of funding sources for firms. Indeed, ICOs are a fast, cheap and convenient way to raise for firms. Also, they offer a number of potential benefits for investors such as access to a product or service or financial gain. Moreover, ICOs eliminate the need for a trusted intermediary by recording smart contracts in a public and immutable blockchain. Despite this claim and its advantages, however, ICOs still require a leap of faith from investors as important risks should not be overlooked.
In recent years, the financial sector has been characterised by an increasing degree of digitalisation and the introduction of numerous new applications, processes or products under the impetus of technological innovations and changed preferences of the consumer. Digital transformation and fintech are concepts that are closely intertwined. They are characterised on the one hand by the entry into the market of new innovative service providers and on the other hand initiatives of existing institutions whereby the organisation, the processes, the service provision and the product range are improved through technological innovations. Fintech and digitalisation have a significant impact on individual banks but also on the sector as a whole. In order to gather a sector-wide insight into the important trends and evolutions regarding fintech and digitalisation in the Belgian financial landscape, the NBB has started an analysis, based on a survey among and discussions with Belgian banks, to solicit general insights into and observations about fintech, views on certain specific business models and technologies, and the concrete fintech strategy followed by Belgian banks. This report summarises the results of that analysis and wishes to contribute to raising awareness about the risks and opportunities of fintech. It also aims to share knowledge about the development of fintech in the Belgian banking sector, and to provide support to institutions in dealing with certain fintech-related challenges, by sharing best practices observed.
Crowdfunding entailing a financial return has gained ground in Belgium. Since 2012, different platforms of crowdfunding providing crowdlending, equity-based crowdfunding or both have emerged. In order to assess the scale and the characteristics of the existing crowdfunding market, the Financial Services and Markets Authority (FSMA) decided to conduct a survey of the five main crowdfunding platforms operating in Belgium: Lita.co, Ecco Nova, Look&Fin, Spreds and Bolero Crowdfunding. Each platform was surveyed about the crowdfunding campaigns launched during the period from January 2012 to December 2017. The objective of the present paper is to report the main findings of the analysis of the collected data.