Intereconomics - Review of European Economic Policy

Intereconomics - Review of European Economic Policy

Volume 46, July/August 2011

The July/August issue of Intereconomics features several articles exploring the roots of and solutions to the ongoing euro crisis. This issue's Invited Paper is a particularly insightful analysis of the policy choices that inevitably led to the crisis and how they can be reversed. Waltraud Schelkle's Editorial discusses the most recent crisis summit and warns of the negative effects such exclusive negotiations have on European democracy. Other articles include a review of the NYSE Euronext-Deutsche Börse merger and an analysis of whether market share volatility is a significant indicator for cartel detection.


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Misunderstanding the Euro

EMU is in trouble, and Heiner Flassbeck (UNCTAD) and Friederike Spiecker argue that European politicians continue to misunderstand the cause of the crisis. In an invited paper for Intereconomics Issue 4, 2011, they write that the source of the euro's troubles is the widely divergent competitiveness gap within EMU. Germany has unilaterally undercut the EU's stated 2% inflation target by restricting wage growth. This has led to an impressive increase in German competitiveness but has come at the expense of the other EMU countries.

For the euro to be saved, Germany will have to end its belt tightening and allow increased wage growth. Meanwhile, Southern European countries must limit wage growth in order to increase their competitiveness. According to Flassbeck and Spiecker, this is the only hope for the euro to be saved. But if European leaders continue to misunderstand the fundamental economics of a single currency, the euro is destined to fail.


Protectionism in the Great Recession

In light of the increasing tendency of countries to adopt protectionist policies in response to the financial crisis of 2008, Mario Larch (University of Bayreuth) and Wolfgang Lechthaler (Kiel Institute for the World Economy) explore whether such policies can be effective in stimulating an economy in the middle of a downturn.

Intangible Capital: the Key to Growth

In the Economic Trends section, Hannu Piekkola (University of Vassa) examines the crucial role played by intangible capital in the future growth of Europe. These intangibles go beyond what is already covered in national accounts (e.g. entertainment, software, etc.) to include eight new types of intangible capital such as new financial products, branding and scientific R&D. Piekkola finds that intangible capital improves companies' profitability, and that EU GDP would be 5.5% higher if expenditures on intangibles were counted as investments rather than current costs.

Asset Bubbles and the ECB

The ECB's willingness to dampen asset bubbles in the early stages of formation puts it squarely at odds with the U.S. Fed's "benign neglect" approach. In order to determine which policy approach is best-suited for the EU, Christian Drescher (University of Bayreuth) examines historical asset bubbles in eurozone countries. He comes to the conclusion that such bubbles tend to spread from one member country to another and build clusters, thus supporting the ECB's monetary policy strategy.

Current Issue of Intereconomics online


...[T]he most important benefit of a timely restructuring of Greek debt would be to avoid destroying the reputation of the ECB!

from Ansgar Belke and Christian Dreger's article Ramifications of Debt Restructuring on the Euro Area - The Example of Large European Economies' Exposure to Greece

About Intereconomics - Review of European Economic Policy

Intereconomics is jointly produced by ZBW - Leibniz Information Centre for Economics and the Centre for European Policy Studies (CEPS). The journal appears bimonthly and features papers by economists that deal with economic and social policy issues and trends in Europe or affecting Europe. To submit a paper for publication, please visit the Call for Papers section of our website for relevant information.

Intereconomics is published by Springer-Verlag Berlin Heidelberg.

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