Intereconomics - Review of European Economic Policy

Intereconomics - Review of European Economic Policy

Volume 48, January/February 2013

The January/February issue of Intereconomics is highlighted by a Forum focusing on the austerity measures taken by the crisis-stricken eurozone countries and the impact of these measures on the countries’ populaces. This issue’s Articles investigate topics as diverse as international services trade, eurozone current account divergences and the hazards of crafting fiscal policy based on unreliable economic estimates. The Editorial examines the ECB’s new authority to supervise the eurozone’s important banks. Finally, this issue introduces a new feature, the Letter from America, in which a top US economist will analyse economic matters of transatlantic interest. The inaugural column by Dean Baker explores the recent fiscal cliff crisis in Washington.


Featured Topic

Additional Highlights from the Current Issue

Quote of the Month


Austerity Measures in Crisis Countries

Since the onset of the sovereign debt crisis, the crisis-stricken countries in Europe have been pushed to take drastic steps to consolidate their finances and reduce their budget deficits. Despite strong public opposition and largely damaging short-run effects, the countries have undertaken many of the internationally recommended/mandated reforms and spending cuts. In this Forum, authors from Greece, Ireland, Italy, Spain and Portugal report on the fiscal consolidation achieved in their respective countries - and the sacrifices that have made it possible. Furthermore, the authors detail what remains to be done to resolve the crisis.


Potential Economic Variables and Actual Economic Policies in Europe

Erik Klär (German Federal Ministry of Labour and Social Affairs) asserts that tying one's fiscal policy to econometric estimates of potential variables, as the EU Fiscal Compact mandates, ignores the notorious unreliability of these estimates. With every one of its biannual economic forecasts, the EC provides revised estimates of structural parameters that are crucial components of its macroeconometric models and, by extension, its economic policy advice. Klär shows that the EC's econometric estimates of potential growth variables in Europe have been subject to massive revisions since the financial crisis.

The Fiscal Cliff Crisis and the Real Economic Crisis in the United States

In the inaugural Intereconomics Letter from America, Dean Baker (Center for Economic and Policy Research) reviews the fiscal cliff "crisis" that dominated political debate in the US at the end of 2012. He argues that markets are currently doing all they can to signal that they are not concerned about current US deficit levels, but Washington politicians seem intent on ignoring this message and trying to reduce the deficit as quickly as possible. In an economy still suffering from the consequences of the financial crisis, this is a dangerous policy path to embark on.

Fiscal Divergence, Current Account Divergence and TARGET2 Imbalances

Diverging fiscal policy paths and unit labour costs were driving forces of rising intra-European current account imbalances, which were underpinned by low interest rates. José Abad, Axel Löffler, Gunther Schnabl and Holger Zemanek (all from the University of Leipzig) explain how the adjustment of intra-EMU current account imbalances has been postponed since the outbreak of the crisis by a rising divergence of TARGET2 balances, as the repatriation of private international credit and deposit flight from the crisis economies is intermediated by central bank credit. This process has brought the Deutsche Bundesbank into a debtor position to the domestic financial system. The authors discuss options for liquidity absorption by the Bundesbank to forestall asset price bubbles in Germany.

Current Issue of Intereconomics Online


Unless a major policy change is quickly adopted, [European policy makers] should know that when History is finally written, their names will be forever linked to the hubris, the blind ideology and the wilful ignorance that doomed the euro and the European Union.

from Ricardo Cabral's Forum contribution The Euro Crisis and Portugal's Dilemma

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.

Newsletter Subscription

To unsubscribe from the newsletter, please visit the following web page, enter your email address, and click "unsubscribe":

To change your email address, please unsubscribe as explained above and then resubscribe using your new address.

Editorial Office

Redaktion Intereconomics
ZBW - Leibniz Information Centre for Economics
Neuer Jungfernstieg 21
20354 Hamburg, Germany

Phone: +49 (0)40 42834-306/307
Fax: +49 (0)40 42834-262


Centre for European Policy Studies (CEPS)
Place du Congrès 1
1000 Brussels, Belgium

Phone: +32 (0)2 229 39 11
Fax: +32 (0)2 219 41 51


Derek Kruse
Phone: +49 (0)40 42834-412

Christine Klein
Phone: +49 (0)40 42834-334