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Newsletter – Volume 48, November/December 2013

The November/December issue of Intereconomics features a Forum that explores economic inequality in Europe. The contributing authors took part in the recent Intereconomics conference on inequality, which gave them an opportunity to present their findings and discuss and debate their policy recommendations with one another. Inequality is also the focus of this issue's Letter from America, which shines a light on the role played by inequality in the run-up to the financial crisis in the US. Additional contributions include an analysis of the costs and benefits of EU membership (with particular emphasis on the UK), a sceptical take on claims that the US is undergoing a manufacturing resurgence, an overview of the Irish experience before and after the financial crisis, and an Editorial that examines the eurozone's flaws and suggests policy changes that could ensure post-crisis prosperity.


Featured Topic

Additional Highlights from the Current Issue

Quote of the Month

Featured Topic

Inequality in Europe: What Can Be Done? What Should Be Done?

As economic inequality in Europe has continued to rise, it has become the subject of increasing academic attention. What are the drivers of inequality? How does it affect intergenerational economic and social mobility? At what point does inequality become a drag on economic growth or a threat to social order? What economic policy tools are available to reduce inequality? This Forum addresses these and other aspects of this complex and disturbing trend. Case studies of Ireland, Germany and Spain also highlight the impact of economic inequality on individual member states.

Additional Highlights from the Current Issue

Rising Inequality, Recession and Slow Recovery: A Sad American Tale

The link between the rising inequality of American incomes and the unsustainable trends of household spending and debt that sowed the seeds of the Great Recession is often overlooked. In this issue's Letter from America, Barry Z. Cynamon (Federal Reserve Bank of St. Louis and Washington University) and Steven M. Fazzari (Washington University) detail that connection, arguing that the excessive borrowing by those in the bottom 95% of the income scale fuelled pre-recession economic growth in America. Now the U.S. must find a new, more sustainable source of demand generation.

Cost of Regulation and Impact of EU Membership on Policy Enforcement

Recent public debate on the costs and benefits of EU membership has focused more on the costs and less on the benefits. Phedon Nicolaides (College of Europe) explores the benefits from improved regulatory or policy implementation and enforcement. If actual regulatory enforcement differs from the socially optimal level, membership of a regional bloc that strengthens accountability mechanisms can improve the quality of implemented regulation. However, if the regional bloc tends to overregulate, the overall increase in the regulatory burden, together with strengthened accountability, will move a country farther away from its socially optimal state. Membership of the EU is beneficial for countries with weak enforcement institutions, but it may worsen the welfare of countries with strong regulatory institutions.

The Near-Death Experience of the Celtic Tiger

Manfred Gärtner (University of St. Gallen), Björn Griesbach (University of St. Gallen) and Giulia Mennillo (University of St. Gallen) narrate Ireland’s recent odyssey from the pride and envy of Europe to kneeling supplicant through the eyes of an econometric model of the government bond market. The exercise suggests that, in essence, two developments triggered and propelled Ireland’s drift towards sovereign default: first, the global financial crisis that drove Ireland into a severe recession with collapsing tax revenues and increasing unemployment; second, a gap between the post-2007 increase in sovereign default risk that can actually be linked to macroeconomic fundamentals and the much bigger increase in perceived risk reflected by high interest rates and communicated by the massive downgrades of Ireland’s sovereign debt rating.

Current Issue of Intereconomics Online

Quote of the Month

Policy issues notwithstanding, a first step toward resolving the problem is to have a clear understanding that inequality in more than an issue of social justice.

from Barry Z. Cynamon and Steven M. Fazzari's Letter from America Rising Inequality, Recession and Slow Recovery: A Sad American Tale

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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ZBW – Leibniz Information Centre for Economics
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Phone: +49 (0)40 42834-306/307
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Centre for European Policy Studies (CEPS)
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Derek Kruse
Phone: +49 (0)40 42834-412