THE STATE INNOVATION

Europe
beyond markets

EUROPE
BEYOND MARKETS

The euro was planned during a period in which economic policy making was driven by a deep belief in market liberalism and the near impossibility of systemic financial crises. This belief has been brought into question since the euro crisis, which showed that panics do happen. New thinking needs to focus on developing mechanisms to protect eurozone countries from such panics and to foster economic convergence between members.

LATEST NEWS

EUROPE 21 SEPTEMBER 2022

What Would a Populist Government Mean for Italy and the Euro? Short Cut with Lucio Baccaro and Holger Schmieding

According to polls, Italians will elect a right-wing coalition in less than ten days. Would such a populist government lead Italy into a new debt crisis? We talked about this with Holger Schmieding and Lucio Baccaro.

EUROPE 21 SEPTEMBER 2022

What Would a Populist Government Mean for Italy and the Euro? Short Cut with Lucio Baccaro and Holger Schmieding

According to polls, Italians will elect a right-wing coalition in less than ten days. Would such a populist government lead Italy into a new debt crisis? We talked about this with Holger Schmieding and Lucio Baccaro.

KNOWLEDGE BASE
EUROPE
BEYOND MARKETS

The Challenge

The ECB’s continuing program of bond purchases and its emergency lending to struggling banks show the underlying instability of the eurozone.

What Went Wrong

A deep belief in self-regulating markets and market-driven integration failed to lead to convergence. It instead led to divergence and major imbalances.

New Economy in Progress

New research focuses on the policies – macroeconomic, institutional and regulatory – needed to ensure convergence, prevent shocks and improve crisis management.

5 WAYS THAT ARE DISCUSSED TO STRENGTHEN EUROPE

1

Make the ECB’s role as lender of last resort an explicit part of its mandate, not an implicit political deal as it is at present.

2

Establish a common European safe asset in place of the current de facto safe asset - the 10-year German government bond.

3

Establish pan-eurozone deposit insurance and with it the risk of deposit flight, and self-fulfilling runs on banks.

4

Reform fiscal rules so that governments are not forced to cut spending in economic downturns.

5

Introduce much tougher penalties for countries running persistent trade imbalances, be they surpluses or deficits.

UNEMPLOYMENT RATES IN EUROPE (%, AVAILABLE WORKFORCE), 1995 - 2018

EUROPE 28 JANUARY 2020

Video: Carlo Jaeger – EU needs a new Innovation Strategy

The Green Deal as currently designed is a big chance but not enough. Carlo Jaeger (Global Climate Forum) advocates for more public investments and a redirection in the innovation strategy in Europe.

EUROPE 23 DECEMBER 2019

The proposed reform of the European Stability Mechanism must be postponed

Eurozone finance ministers reached a preliminary agreement on a reform of the European Stability Mechanism in June, but failed to conclude it last week. The reform is now set to be discussed during the European Council meeting on 12-13 December. Shahin Vallée, Jérémie Cohen-Setton, Paul De Grauwe and Sebastian Dullien write that the proposal should not be endorsed in its current form. They argue it would represent a missed opportunity to secure a broader and more ambitious reform package.

EUROPE 1 NOVEMBER 2019

Mario Draghi’s farewell remarks

Mario Draghi, October 28th, 2019

OTHER MAIN TOPICS

New Paradigm

NEW PARADIGM

After decades of overly naive market belief, we urgently need new answers to the great challenges of our time. More so, we need a whole new paradigm to guide us. We collect everything about the people and the community who are dealing with the question of a new paradigm and who analyze the historical and present impact of paradigms and narratives – whether in new contributions, performances, books and events.

Redefining
the role of
the state

REDEFINING
THE ROLE OF
THE STATE

For decades, there was a consensus that reducing the role of the state and cutting public debt would generate wealth. This contributed to a chronic underinvestment in education and public infrastructure. New research focuses on establishing when and how governments need to intervene to better contribute to long-term prosperity and to stabilize rather than aggravate economic fluctuations.

Remaking
finance

REMAKING
FINANCE

More than a decade after the financial crisis there still seems to be something seriously wrong with the financial system. Financial markets still tend to periodically misprice risk and contribute to boom and bust cycles. A better financial system needs to discourage short-termism and speculative activity, curtail systemic risk and distribute wealth more broadly.

Greening
prosperity

GREENING
PROSPERITY

During the high point of market orthodoxy, economists argued that the most 'efficient' way to combat climate change was to simply let markets determine the price of carbon emissions. Today, there is a growing consensus that prices need to be regulated and that a carbon price on its own might not be enough.

Reducing
inequality

REDUCING
INEQUALITY

The rising gap between rich and poor has become a threat to social cohesion in most rich countries. To reverse this trend it will be crucial to better understand the importance of different drivers of income and wealth inequality.

Innovation Lab

INNOVATION LAB

Do we need a whole new understanding of economic growth? What would be a real alternative? How viable are alternatives to GDP when it comes to measuring prosperity? These and other more fundamental challenges are what this section is about.

Globalization
for all

GLOBALIZATION
FOR ALL

After three decades of poorly managed integration, globalization is threatened by social discontent and the rise of populist forces. A new paradigm will need better ways not only to compensate the groups that have lost, but to distribute the gains more broadly from the start.

Corona Crisis

CORONA CRISIS

The current Corona crisis is probably the worst economic crisis of the post-World War 2 era. Economists are working hard on mitigating the economic effects caused by COVID-19 to prevent a second Great Depression, the break-up of the Eurozone and the end of globalisation. We collect the most important contributions.