Grégory Claeys - Blog

Grégory Claeys

Blog

I'm blogging on Bruegel's website, so all my blog posts can also be found here

What will it cost the European Union to pay its economic recovery debt?Servicing the EU debt until 2058 seems feasible, despite increased borrowing costs, but member countries must make choices about budget funding

How should the EU deal with its rising borrowing costs?

The Net-Zero Industry Act puts EU credibility at riskThe EU Net-Zero Industry Act looks like it’s been set up to keep everyone happy – and to achieve limited results.

Does inflation hit the poor hardest everywhere?Low-income households suffer most from high inflation, but in some European Union countries the inflation burden is felt more equally than others.

How rate increases could impact debt ratios in the euro area’s most-indebted countriesDebt-to-GDP ratios should continue to fall in euro-area countries despite rising interest rates, post 2023 the situation might vary across countries

A new European tool to deal with unjustified rising spreadsThe ECB needs a new tool to prevent the current rise in spreads, triggered by monetary policy tightening, from escalating into a new euro-area crisis.

Who is suffering most from rising inflation? | BruegelThe lowest income households are suffering disproportionally from the current inflation increase, with rising energy prices the main culprit.

How have the European Central Bank’s negative rates been passed on? | BruegelNegative rate cuts are not that different from ‘standard’ rate cuts. Like them, they reduce banks’ margins, but this effect does not appear to be amplified below 0%.

The ECB needs political guidance on secondary objectives | BruegelWhile EU Treaties clearly stipulate that the ECB “shall support the general objectives of the European Union”, it is not appropriate to simply stand by, wishing that the ECB will use its discretionary power to act on them. Political institutions of the EU should prioritise the secondary goals to legitimise the ECB’s action.

How has COVID-19 affected inflation measurement in the euro area? | BruegelCOVID-19 has complicated inflation measurement. Policymakers need to take this into account and should look at alternative measures of inflation to understand what is actually happening in the economy.

Corporate insolvencies during COVID-19: keeping calm before the storm | BruegelMeasures in major economies have protected companies from COVID-19 related insolvency, but have also protected weak firms. Nevertheless, support should remain as long as necessary, while cumbersome insolvency processes should be reformed for the long term.

For the euro there is no shortcut to becoming a dominant currency | BruegelAs an international currency, the euro has always been a distant second to the dollar. The idea of a greater international role for the euro has been floated, but without major institutional reform the euro will not challenge dollar hegemony.

Is the EU Council agreement aligned with the Green Deal ambitions? | BruegelOn 21 July, EU leaders agreed on a €1.8 trillion package that should boost the recovery after the COVID-19 crisis, but also contribute to the advancement of key EU societal objectives, starting with the climate transition. In this blog post we assess the green ambitions of the package and evaluate its consistency with the European Green Deal.

One last push is needed to improve the Just Transition Fund proposal | BruegelThe European Parliament and the Council still have an opportunity to improve the Just Transition Fund by refocusing it on social support and basing fund allocations on more granular information that takes into account not only countries’ needs but also their green ambitions.

The European Union’s SURE plan to safeguard employment: a small step forward | BruegelThe new EU instrument to mitigate unemployment risks during an emergency (SURE) is too modest to have a significant impact the COVID-19 crisis beyond being a first step in the overall recovery plan.

COVID-19 Fiscal response: What are the options for the EU Council? | BruegelIt is time for the EU Council to make quick progress on the fiscal front and announce something as soon as possible to show that it taken full measure of the severity of the situation.

What should be done to reduce euro-area spreads? | BruegelSpreads are rising again in the euro-area at the worst possible time, when fiscal policy is needed to fight the coronavirus pandemic and the related economic shock. This blog post reviews the main options available to European policymakers, their feasibility and potential effectiveness to deal with this issue.

Berlin will make or break the European Green Deal | Bruegel€1 trillion isn't enough for the European Green Deal and the EU's fiscal framework is constraining public investment.

A trillion reasons to scrutinise the Green Deal Investment Plan | BruegelThe European Commission has revealed its €1 trillion investment plan for the European Green Deal. This will not be enough to unleash the expected “green investment wave”. For that to happen, more must be done

The European Green Deal needs a reformed fiscal framework | BruegelThe European Green Deal should include a sustainable investment strategy that will help citizens change behaviour and companies switch technologies. But to finance it, the EU will have to increase the flexibility of its fiscal rules to encourage member states to invest in the transition.

Four pillars to make or break the European Green Deal | BruegelThe recipe a successful European Green Deal is as simple as it is breath-taking: to intelligently promote deep decarbonisation by accompanying the economic and industrial transformation this necessarily implies, and by ensuring the social inclusiveness of the overall process.

‘Lo spread’: The collateral damage of Italy’s confrontation with the EU | BruegelThe authors assess whether the European Commission's actions towards Italy since September 2018 have had a visible impact on the spread between Italian sovereign-bond yields and those of Germany, and particularly whether the Commission’s warnings have acted as a ‘signalling device’ for bond-market participants that it might be difficult for Italy to obtain the support of the ESM or the ECB’s OMT programme if needed.

The evolution of the ECB governing council’s decision-making | BruegelBefore it is decided who will chair the governing council for the next eight years, the authors look back and examine precisely how decisions have been taken since the ECB was created – by unanimity, by majority, or by consensus.

How visible are independent fiscal institutions in public debate? | BruegelIndependent fiscal institutions have no formal powers to act and have to rely on soft power to influence the budgetary process. This blog post investigates how they exercise this soft power by enhancing public scrutiny of fiscal policies.

Does the Eurogroup’s reform of the ESM toolkit represent real progress? | BruegelThe deal reached on euro-zone reform at the December 4th Eurogroup is not ground-breaking. However, it contains a number of incremental but potentially key technical reforms – in particular regarding the ESM toolkit. Some constitute an improvement, but there are also clear flaws that should be corrected at the Euro Summit.

Italy’s new fiscal plans: the options of the European Commission | BruegelThe Italian government has announced an increase of its deficit for 2019, breaking the commitment from the previous government to decrease it to 0.8% next year. This blog post explores the options for the European Commission and the procedures prescribed by the European fiscal framework in this case.

The ECB is compromising the attractiveness of euro-area sovereign bonds | BruegelThe ECB should refine its collateral framework in order to continue protecting its balance sheet without putting at risk the safe-asset status of sovereign bonds of the euro area.

What should the EU do about the Turkish currency crisis? | BruegelThe Turkish lira has been under significant pressure in recent weeks; in this blog post, the authors discuss the EU’s exposure to possible crisis in Turkey and how the EU should react.

Are SBBS really the safe asset the euro area is looking for? | BruegelThe European Commission is pushing to create a synthetic euro-area-wide safe asset in the form of sovereign bond-backed securities (SBBS). However, SBBS do not fully fulfil their original promises. If introduced on a massive scale, they might increase the supply of safe assets in good times and loosen the link between sovereigns and banks. But they will not give governments a means to maintain market access during crises, they might change incentives for governments to default, and they could pose a problem to individual bonds not included in SBBS if, in the end, they are put at a regulatory advantage vis-à-vis individual bonds.

Is the ECB collateral framework compromising the safe-asset status of euro-area sovereign bonds? | BruegelCentral banks’ collateral frameworks play an important role in defining what is considered as a safe asset. However, the ECB’s framework is unsatisfactory because it is overly reliant on pro-cyclical ratings from credit rating agencies, and because the differences in haircuts between the different ECB credit quality steps are not sufficiently gradual. In this note, the authors propose how the ECB could solve these problems and improve its collateral framework to protect its balance sheet without putting at risk the safe status of sovereign bonds of the euro area.

The Commission’s proposal for the next MFF: A glass half-full | BruegelThe Commission’s proposal for the next Multiannual Financial Framework provides a good basis for subsequent negotiations and includes a number of bold suggestions. But it has a number of deficiencies and some of the proposed tools are conceptually weak. We make proposals as to how to improve them.

Make euro-area sovereign bonds safe again | BruegelIn their recent Policy Insight, the team of French and German authors suggest introducing sovereign bond-backed securities to play the role of safe asset in the euro area. This column, part of the VoxEU debate on euro-area reform, argues that an improved euro-area architecture would, in the long run, make all euro-area sovereign bonds safer, and thus make the provision of safe assets through untested and potentially disruptive sovereign bond-backed securities unnecessary.

New EMU stabilisation tool within the MFF will have minimal impact without deeper EU budget reform | BruegelThe European Commission’s proposal for a new stabilisation instrument inside the EU budget for the countries of the economic and monetary union is disappointing. This analysis highlights the proposed instrument’s main limitations, as well as the restrictive factors that will persist without a deeper EU budget reform.

The European Globalisation Adjustment Fund: Time for a reset | BruegelIt is only in the last decade that the EU has had an active policy to reintegrate workers who lost their jobs as a result of globalisation, through the European Globalisation Adjustment Fund (EGF). In this blog, the authors assess the performance of the Fund and make three recommendations to improve its effectiveness. To be more successful, the Fund should improve its monitoring and widen the scope of its usage.

Debunking 5 myths about Frexit | BruegelFrench elections are fast approaching and the debate on euro membership is now in full swing. ‘Frexit’ supporters promise that the benefits of leaving the euro would be substantial for the French economy, that economic policy would be greatly improved, and most importantly that the exit process would be a piece of cake. This blog post shows that these claims are greatly exaggerated if not outright lies.

Amsterdam’s boom-bust housing market needs its own mortgage limits | BruegelHouse prices in the Netherlands are on the rise again. But at the local level the pattern is very uneven: house prices in major cities are rising faster than in the rest of the country. Yet, macroprudential policies in Europe are based on trends in national housing price indices. With such divergence between Dutch regions, is that appropriate?

Now is the time to open Strasbourg’s ‘Bronislaw Geremek’ European University | BruegelIt is the right time to revive the proposal made 10 years ago by Bronislaw Geremek and Jean-Didier Vincent to create a truly European University in the European Parliament buildings in Strasbourg.

The Juncker plan needs to be turned on its head | BruegelThe Juncker Plan was launched one year ago to boost investment in Europe: has the plan been successful so far? How can we better use the EIB to increase investment?

Assessing the Juncker Plan after one year | BruegelWith the Juncker Plan, the European Commission intends to support valuable risky projects by expanding the risk capacity of the EIB. But has the new European Fund for Strategic Investments really been used to finance 'additional' projects?

How to reform EU fiscal rules | BruegelThe current inefficient European fiscal framework should be replaced with a system based on rules that are more conducive to the two objectives of public debt sustainability and fiscal stabilisation.

Have central banks lost their ability to control inflation? | BruegelThe potential effects of global integration on inflation dynamics, and whether this could affect the ability of central banks to fulfil their mandates.

Los trémulos cimientos del ‘plan Juncker’ | BruegelLos detalles del plan alimentan el escepticismo

Juncker plan: the EIB in the driver’s seat | BruegelAfter weeks of negotiations with the European Commission and the Council of the EU, the European Parliament on 24 June adopted the text establishing the European Fund for Strategic Investment (EFSI), the instrument at the centre of Commission president Jean-Claude Juncker's investment plan. Now that the details of the plan are available we can assess more precisely how it will work and what its impact might be on European growth and employment.

Keep calm … and reach a deal ASAP | BruegelA clear majority of Greek citizens has decided to decline the creditors’ proposal that was on the table on June 25. This result should not be over-interpreted and should be simply taken as it is, a clear NO to the policies that have been implemented in Greece over the last 5 years and that have failed to avoid a free fall of GDP 25% and a dramatic increase of unemployment to 25%

Inflation Surprises | BruegelWhile it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inflation expectations data allows us to get a sense of how inflation expectations have been evolving in the last few months.

ECB Quantitative Easing on track | BruegelOn 9 March 2015 the ECB began purchasing European sovereign and agency bonds and supranational debt securities under the Public Sector Purchase Programme (PSPP). Today, the ECB published its PSPP holdings and the corresponding weighted average remaining maturities for each member state and the supranational institutions after the first month of purchases.

The “Plucking Model” of recessions and recoveries | BruegelThe speed of economic recoveries is generally attributed mainly to economic policies. While this view might be true, a theory suggested by Milton Friedman in 1964 proposes a complementary hypothesis: strong recoveries are just natural after particularly deep recessions. This blog investigates the relevance of Friedman's theory for the recoveries currently taking place in Europe.

Deflation in France, hidden behind tax hikes? | BruegelThe significant divergence between the core inflation measures for France reported respectively by Eurostat and the national statistical office (INSEE) is due to the different definitions used. While the former defines core inflation simply as the overall inflation index excluding energy and unprocessed food, the INSEE defines core inflation as inflation excluding public sector prices, the most volatile consumer prices and tax measures.

Juncker’s investment plan: No risk – no return | BruegelPresident Juncker has presented the key features of the European Commission’s plan to boost investment in the EU. In this blog post we review the most important points and discuss the main policy challenges surrounding the plan.

Measuring Europe’s investment problem | BruegelUnder the leadership of Vice President Katainen, the Commission has designed a plan which will be announced this week. The announcement of the investment plan is scheduled to coincide with the announcement by the Commission of its assessment of national budgetary plans for 2015. Before evaluating whether the investment plan is sufficient to boost growth, there is a need to evaluate the extent of Europe’s investment problem, which is what this blog post does.

Do it yourself European Unemployment Insurance | BruegelTo illustrate our recent Policy Brief, this blog post proposes to give the reader the opportunity to take the main decisions on the design of a European Unemployment Insurance (EUI) Scheme and to visualize the evolution of the net flows from the scheme and its situation using a table, a line graph as well as a heat map of all European countries.

ECB shows activism but falls short of true QE | BruegelOverall, we welcome that the ECB has finally acted with a broad package. We also think that unanimity on the package was a very positive development and sends a strong signal of unity.

Addressing weak inflation: The ECB’s shopping list | BruegelIn this blogpost, we summarize our recently published paper, in which we discuss in detail the dilemmas for the ECB and the need to act. Inflation forecasts by the ECB have fallen substantially below the two percent threshold.

Is there a risk of deflation in the euro area? | BruegelEven though the euro area as a whole has not yet entered into deflation, this picture is worrying. Low inflation rates will make the relative price adjustment in the euro area more difficult, complicate debt deleveraging and put the sustainability of debt at risk.

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