Numerous conditions have come together in 2018 to make it the year for jumpstarting European construction. Key political players have high ambitions, as a buoyant economic environment allows them to look further ahead than usual. This article addresses a series of issues to make it easier to understand the debates and the upcoming decisions.
Capital Markets Union (CMU) aims to draw the best from the various financing channels, by expanding opportunities for saving and the availability of long-term financing, and to improve financial integration in the European Union. To this end, the European Commission has drawn up a lengthy but coherent list of actions, some of which have already been completed. Although the introduction of a more favourable legislative framework is essential, Capital Markets Union is a long-term process, whose success will depend above all on the behaviour of economic agents.
Since the second half of the 1980s, France’s unemployment rate has never fallen below 8% for very long. This observation, more than the surge in unemployment during the crisis, serves as the starting point for the overhaul of France’s labour code. Labour market reform should have a positive impact in the medium term. In the short term, however, the question is harder to answer: economic literature indicates that the starting point matters most when evaluating the short-term impact of structural reforms.
This article analyses the recent economic performances of the eastern countries of the European Union, specifically focusing on the so called Visegrad-6 group, comprising Poland, Hungary, the Czech Republic, Slovakia, Bulgaria and Romania. Long considered as the EU’s “junior partners”, their very strong macroeconomic performances in recent years suggest that they will soon catch up with their western EU counterparts. Are we about to witness the culmination of more than 10 years of convergence? Only if we ignore the structural challenges these economies are still facing.
French growth has resumed since 2013, albeit at a mild pace of only 1%. This sluggishness is partly cyclical. It can also be traced back to structural factors, notably the low participation rate and feeble productivity gains. Yet both indicators show room for improvement, suggesting major sources of growth that should be fairly easy to mobilise, assuming the right reforms are implemented. Poor competitiveness is also to blame for the lacklustre pace of growth. An improvement is underway, notably through higher corporate profit margins. Problems persist however, such as the high cost of non-labour inputs and unsatisfactory non-price competitiveness
Germany will elect a new parliament on 24 September 2017. The main contenders are the outgoing CDU Chancellor Angela Merkel and the SPD leader Martin Schulz. Whereas the Chancellor is defending the economic record of her government, her opponent is emphasising the growing inequality in German society. The latter is related to the labour market reaction to globalisation. Nevertheless, in terms of income inequality, Germany compares still very favourably with the other European countries. Given the booming economy, it remains to be seen whether social justice is indeed a major issue for the voters.
The June 2016 referendum and triggering Article 50 signalled the beginning of Brexit, the UK’s exit from the European Union. Brexit promises to be a long process fraught with obstacles. There are numerous sources of potential conflict, foremost of which are the so-called Brexit bill, the amount the UK must pay the European Union as part of its “divorce settlement”, and the rights of EU citizens residing in the UK. Given the close ties between the UK and the European Union, the big challenge in the years ahead will be the negotiation of a new trade agreement. Yet with the UK determined to halt the free movement of people, a priori very few options are open.
Non-performing loans are an inherent part of the financing activities of banks. Fluctuations in non-performing loans over the course of an economic cycle are not worrisome as long as they remain within reasonable proportions. In Italy, after two years of recession (2012 and 2013), a year of flat growth (2014) and two years of sluggish growth of less than 1% (2015 and 2016), non-performing loans have reached a level that hampers the bank lending channel. Experience in other countries shows that it is crucial to deal effectively with non-performing loans to reactivate bank lending.
In the eurozone, a large proportion of savings banks and co-operative banks belong to institutional protection systems, within which they undertake to support each other mutually. From a strictly accounting point of view, these networks do not constitute banking groups. However, regulators recognise that they are highly integrated and allow their members to apply a prudential treatment similar to that used by companies belonging to consolidated groups. These mutual support arrangements are to some extent part of the trend towards consolidation in the banking industry.
