There are many reasons to reform the Stability and Growth Pact, but that reform is no panacea. This is because the euro area periphery has increasingly entered a debt conundrum.

This paper investigates determinants of convergence in GDP per capita in the euro area and the EU between 1995 and 2021. It finds that the COVID-19 crisis temporarily slowed convergence but the estimated negative impact is significantly smaller than during the global financial crisis. Diverging...

The decline of "natural real interest rates" during the last three decades is a common phenomenon in all advanced economies and can be explained by a number of structural factors: the downward trend in potential growth; population ageing, which has led to higher savings rates in many countries;...

A chasm has opened up across the Atlantic in terms of fiscal policy.

Credibility of the revised fiscal rules will be crucial so that vulnerable countries can benefit from confidence effects. National ownership will be key in that respect and can be supported via a stronger role of independent national fiscal institutions.

Two recent proposals for overcoming the euro area crisis make the case for monetary financing of the public sector. Watt proposes that the ECB finances public investment directly, while Pâris and Wyplosz contend that public debt may be effectively restructured by burying parts of it in the...

There was a widespread consensus on the need to modify fiscal rules in the EU even before the COVID-19 crisis. The aim of this article is to reflect on the reform of fiscal rules from a broader perspective, looking at three different dimensions: the political economy of fiscal rules in the...

This paper analyses the adjustment mechanism in the euro area prior to the crisis. Results show that the real exchange rate adjusted to redress cyclical divergences and that after monetary unification, real exchange rate dynamics became less reactive to country-specific shocks but also less...