Search results for: CEPS Working Document in Series Title

Do Germans support the euro?

Author(s): Daniel Gros,Felix Roth / Language(s): English / Publication Year: 2011

This paper analyses public support for the euro in Germany. Drawing from the results of regular Eurobarometer surveys, it finds that the ongoing financial and sovereign debt crisis has reduced support for the euro among German citizens, but not dramatically so – at least not yet. In the 1990s, the German public was sceptical towards the euro. But since the introduction of euro bank notes and coins, a clear majority of citizens supports the euro –despite the financial and sovereign debt crisis. Moreover, on average, support for the euro isat a similar level in Germany as it is elsewhere in the euro area. This salient finding, however, appears to contradict the results of a survey conducted by the Allensbach Institute, an influential public opinion polling centre in Germany, which concludes that an overwhelming majority of Germans do not trust the euro any more. We suggest that this striking difference in findings could be due to three factors: a) the fact that the Allensbach Institute and Eurobarometer were measuring different concepts: trust in the euro and support for the euro, respectively; b) the Allensbach Institute’s results might be biased, given the scaling of their trust question and c) the fact that Eurobarometer frames its survey questions explicitly in a European context, where as the Allensbach surveys have a purely national context.

QE in the euro area: has the PSPP benefited peripheral bonds?

Author(s): Ansgar Belke,Daniel Gros / Language(s): English / Publication Year: 2019

The asset purchase programme of the euro area, active between 2015 and 2018, constitutes an interesting special case of Quantitative Easing (QE) because the ECB’s Public Sector Purchase Programme (PSPP) involved the purchase of peripheral euro area government bonds, which were clearly not riskless. Moreover, these purchases were undertaken by national central banks at their own risk. Intuition suggests, and a simple model confirms, that, ceteris paribus, large purchases by a national central bank of the bonds of their own sovereign should increase the risk for the remaining private bond holders. This might seem incompatible with the observationthat risk spreads on peripheral bonds fell when QE in the euro area was announced. However, the initial fall in risk premiums may have been due to expectations of the bond purchases proving effective in lowering risk-free rates. When these expectations were disappointed, risk premiums returned to their initial level. Formal statistical tests confirm that indeed risk premiums on peripheral bonds did not follow a random walk (contrary to what is assumed inevent studies). Nor did the announcements of bond buying change the stochastics of these premiums. There is thus no reason to consider the impact effect to have been permanent.

The Enduring Popularity of the Euro throughout the Crisis

Author(s): Felix Roth,Lars Jonung,Felicitas Nowak-Lehmann / Language(s): English / Publication Year: 2011

This paper analyses the evolution of public support for the euro from 1990 to 2011, using a popularity function approach, focusing on the most recent period of the financial and sovereign debt crisis. Exploring a huge database of close to half a million observations covering the 12 original euro area member countries, we find that the ongoing crisis has only marginally reduced citizens’ support for the euro – at least so far. This result is in stark contrast to the sharp fall in public trust in the European Central Bank. We conclude that the crisis has hardly dented popular support for the euro while the central bank supplying the single currency has lost sharply in public trust. Thus, the euro appears to have established acredibility of its own – separate from the institutional framework behind the euro.

Why has the crisis been bad for private pensions, but good for the flat tax?

The sustainability of ‘neoliberal’ reforms in the new EU member states

Author(s): Miroslav Beblavý / Language(s): English / Publication Year: 2011

In this paper, we examine two questions related to the sustainability of the major, neoliberal, economic and social reforms in the new EU member states, namely the flat income tax and private pension pillars. First, we look at the relationship between the political consensus/controversy at the time major policy reforms were passed and the future sustainability of these reforms after a change of government. Second, we explore what we call a paradox of reverse sustainability, where by the flat income tax has been more politically resilient during the global financial and economic crisis than private pensions, even though ex ante expectations and the literature would lead us to expect the opposite. The paper shows that controversy at the time the reforms were passed had no effect on subsequent sustainability, and the levels of partisanship and public support with regard to a specific reform seemless important than the political costs and benefits. We also find that despite their apparent neoliberalbent, the two policies are versatile enough to be shaped towards a variety of policy goals, allowing their introduction and retention in a variety of economic and social circumstances. In other words, even though private pensions and particularly the flat tax have powerful political connotations, they are by no means policy strait jackets.