According to Eurostat, the annual inflation rate in the Euro area was only 0.7% in February 2014. A year earlier that same rate stood at 1.8%. This has prompted concerns about the Euro Area slipping into deflation. Deflation is defined as a general decrease of the price level. There have been several such episodes in […]
Zombies: Financial and Industrial
The current crisis has brought the old word “zombie” back into fashion. Originated in some black African cultures and associated today mostly with Haitian customs, “zombie” usually designates a dead person brought back to life by means of what one calls black magic or, more precisely, its lowest form, necromancy, a time-reviled practice. Economic zombies, […]
Financial Transactions Tax: What is the problem?
“The financial sector has grown too big and volatile and something must be done. A tax on financial transaction is something, therefore a tax on financial transaction must be done.” If you can spot the logical error in that line of reasoning you just outsmarted many European policymakers. Eleven EU countries – including France, Germany, […]
The euro under construction
The crisis in the euro area is long and painful, and progress towards its resolution is not proceeding in a linear way. The problem by now has been well-diagnosed. The euro was put in place without the proper institutions to support it. A monetary union needs a fiscal union pillar, a financial stability pillar and […]
Will Cyprus exit?
Last week, Paul Krugman argued here that Cyprus must leave the euro. “The convenience and efficiency of a single currency is gone; meanwhile, the future for Cyprus on the euro is one of years of grinding deflation and catastrophic austerity. Is the hope of someday, somehow restoring the status quo ante enough to justify all of this?,” […]