Publications

In spite of the attacks it has suffered in the past years, globalization is doing well. In particular, last November free trade supporters celebrated the birth of the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement that includes the members of the Association of Southeast Asian Nations (ASEAN), plus China, Japan, South Korea, Australia, and New Zealand. India initially took part in the negotiations but later decided to leave. The 15 RCEP member countries account for about 30% of the world population and 30% of global GDP, and are the largest trade bloc in history, larger than the US-Mexico-Canada Agreement and the European Union. The deal will take effect 60 days after ratification by at least six ASEAN and three non-ASEAN signatories. Thus far, it was ratified by Japan, China, Singapore and Thailand. Presumably, RCEP will be operational by the end of this year.

„I hope that our government, more enlightened and more liberal than in the past,
will be in the future the true friend of the best and noblest cause that exists;
and that the name of England will forever be dear to the Greeks.“

Mary Wollstonecraft Shelley in a letter to Alexandros Mavrokordatos (February 22, 1825)

The European Banking Authority (EBA) has been aware of the growing problem of non-performing loans (NPLs), especially in Italy, which quickly built up in the recessionary environment following the sovereign debt crisis from 2010. The EBA, hoping that banks could demonstrate solvency, introduced in 2014 new definitions of forbearance and of non-performance, aimed at relaxing the problem. However, despite the EBA’s efforts, Italian NPLs continued to grow at a rate of about 20% each year and peaked in 2015-16, when €341 billion, or about 17% of all Italian bank loans were classified as non-performing. In 2018 international accounting standard changes led to stricter rules requiring provisioning and loss recognition.[[IFRS9, implemented in Italy 2018]] The EBA then pressed banks to maintain more realistic valuations for NPLs on their balance sheets, making provisions which reduced profits and capital. However, these provisions were typically applied by banks to the most severe category of NPLs.

‘Towards a zero-risk society’ might be thought as the manifesto of a dishonest politician who tries to win voters’ support by promising to free them from any possible risk. A deceitful manifesto, however: although it could attract plenty of people and gather widespread consensus, the promise would be absurd.

For some years, they have been the undisputed queens of political talk shows, the master key used by most commentators to explain the whatever. There was no election in which they did not make their triumphal appearance: The «leave» won at Brexit? Fault of fake news! Trump becomes president? The same! True, fake news, a catch-all term referring to intentionally fabricated information characterized by politically charged content, suffered a first backlash in conjunction with the 2019 European elections, where the expected populist tide ultimately failed to come about. But with Joe Biden at the White House the miracle seems to have materialised: all of a sudden, fake news and their thaumaturgical role in influencing the vote vanished (or almost did).

In the last European elections, the so-called green parties won a record number of seats and became the fourth largest bloc in the European parliament. The Greens are now seen as pivotal political allies for passing EU legislation.

Not surprisingly, climate issues have become central to the EU decision-making. As soon as she took office, President Ursula von der Leyen unveiled the European Green Deal, a set of initiatives aiming at making Europe climate-neutral by 2050. However, the deal has already faced criticism and generated tensions between the greener western half of the Continent and the coal-dependent east, between corporations and NGOs, and also between the EU and its trading partners.

Jabs are the way out of the COVID-19 pandemic. The UK, US, and Israel have made much progress with their vaccination programmes. In continental Europe, however, life-saving vaccine doses are scarce – partly due to the EU’s unfortunate purchasing policy. In light of the scarce vaccines and of the suffering caused by the virus, it is necessary to distribute the existing doses efficiently. It is becoming increasingly evident that the first shot already offers high protection against serious illness and frequently avoids fatal consequences. All existing doses should thus be used to distribute first shots and provide basic protection to as many people as possible.

What is PEPP?

In March 2020, the ECB and European Commission announced the inception of PEPP as a ‘non-standard monetary policy measure’ to deal with the risks to monetary transmission posed by the pandemic. It is in fact the eighth eurosystem bond buying programme. Three of these have been discontinued but there are four presently running:

In a previous article, we pointed out a number of technical problems related to the Digital Euro (DE) and the expected benefits for the users. To make a long story short, the costs and risks of the project seem greater than the benefits. We now add some thoughts about the ECB monetary policy.

The ECB does not give the impression it has a clear view about how to inject DEs into the economy. Moreover, it is mired in deciding how to acquire assets to hold against the DEs it will be issuing. Buying bonds from banks and paying them with DEs is an option. However, it would run against the ECB’s intention to limit the use of DE to individuals.

The European Central Bank is working on her own digital currency: the Digital Euro (DE). Several details are provided in the specific ECB report. There are still many technical problems to solve and structural choices to make before implementing DE. Yet, some features seem clear. DE would be a new technology to use the euro, and will present both cash and deposit-money features. Three sets of reasons back the project. It aims at improving the public payment system on the user’s side; improving the effectiveness of monetary policy and protecting the transmission mechanism; answering some strategic and geopolitical concerns. The first set of issues is discussed in this contribution. A following article will examine the remaining topics.