The Sound of Economics

In the first episode of the new Backstage series on ‘The Sound of Economics’, Bruegel senior fellow Nicolas Véron takes time out from the Bruegel Annual Meetings to discuss the immediate future of European banking and capital markets union with Jörg Kukies, state secretary at the German ministry of finance. The euro-area reform agenda hopes to prevent the repetition of problems that arose during the crisis at the beginning of this decade – to provide better protection for taxpayers and depositors and to avoid any perception of privilege for the banks of one country over those of another. Although there appears to be consensus on the necessity of completing banking union, the question remains open as to which elements are still missing.  On the matter of capital markets union (CMU), though the current European Commission has given great emphasis to progressing with the project, we are still quite far from consensus on the exact shape that a more integrated supervisory framework should take. This discussion gets into the details of the immediate challenges and the particular sticking points in negotiations over banking and capital markets union. For further reading, consider the Policy Contribution on making a reality of Europe’s capital markets union, co-written by Nicolas Véron, André Sapir and Guntram Wolff. Meanwhile, in a previous edition of the Director’s Cut podcast, Nicolas Véron discusses the importance of developing deposit insurance as a part of Europe’s broader banking union aspirations.

Bruegel senior fellow Zsolt Darvas joins Sean Gibson on ‘The Sound of Economics’ to expound on the themes of a Policy Contribution on the macroeconomic implications of healthcare systems, which he has co-written with Nicolas Moës, Yana Myachenkova and David Pichler.This episode is the first in a new Bruegel podcast series, ‘Deep Focus’, looking specifically at Bruegel research and elaborating on the insights contained therein, in conversation with the authors. The effects that healthcare systems can impose upon economies are pronounced and far-reaching. The health sector alone accounts for a significant portion of output and employment in the EU, even before we look at the pharmaceutical companies conducting research and development towards healthcare. From a fiscal point of view, health is one of the most expensive items on a government’s list of expenses.  In this analysis, the scholars measured the efficiency of each EU healthcare system – and of several from beyond the EU’s borders. The results illustrate that improving healthcare outcomes is not as simple as investing more and more money in the system. In this podcast, we discuss some of the areas where real differences can be made both to the health of the general public and to the cost incumbent upon governments.For further reading, consider our blog post digging into the details of the ongoing lack of German public investment, written by Alexander Roth and Guntram Wolff.

Bruegel director Guntram Wolff welcomes Brad Setser, senior fellow at the Council on Foreign Relations, and Jean Pisani-Ferry, mercator senior fellow at Bruegel, to discuss the deterioration of Turkey's economy. Although a recent souring of relations with the US has provided the immediate prompt for Turkey's current crisis, the country's underlying economic malaise is more deeply rooted.  Headlines have tracked the plummeting value of the lira, while the trust of external investors has been challenged by recent policy decisions. Though Turkey's case bears some of the hallmarks of a textbook emerging-market meltdown, there are key divergences. Meanwhile, President Erdogan's previous refutation of IMF policy recommendation does not bode well for potential assistance in the event that Turkey needs help brokering extension agreements with its creditors.  In conversation with Brad Setser, senior fellow at the Council on Foreign Relations, and Jean Pisani-Ferry, Mercator senior fellow at Bruegel, Guntram Wolff assesses not only the nature of the crisis in Turkey but how the country might navigate its way back to safer economic waters. For further reading, consider the recent blog post written by Grégory Claeys and Guntram Wolff discussing how the EU might respond to the currency crisis unfolding in Turkey, including options for the EU to help Turkey in the absence of any agreed IMF assistance programme.

More than two months after the Italian elections and its turbulent political negotiations, Italy finally has a new government. While this has had a calming effect on the financial markets, Italy's medium and long term economic outlook is yet to be determined. Bruegel affiliate fellow, Silvia Merler, is joined by Marcello Minenna, PhD lecturer at the London Graduate School and Head of Quants at Consob, and Lorenzo Codogno, LSE visiting professor, to examine the different ways the country can move forward.Starting off this Sound of Economics, Silvia examines the new government's policy priorities and discusses the message of uncertainty it sends to financial markets and investors. Indeed, the way in which the government will finance its promises is still uncertain, thus leaving room for unpredictability. In the short and medium term, Lorenzo puts forward the proposal that the new government should tread carefully by introducing policies gradually in order to maintain fiscal stability and discipline.The three guests address the widely discussed topic of Italy's euroscepticism. Italy's relatively stagnant economic growth over multiple generations is seen as a key factor in the country's present-day skepticism towards the single currency. They agree that, although an 'Italexit' is an unlikely scenario, it is nonetheless an important one to consider. Moreover, Marcello points out that Italy's situation is also a testament to ongoing issues at the European level, requiring a reform of the eurozone's policies and a tough look at its current functioning.

Bruegel director Guntram Wolff and Ashoka Mody – visiting professor in international economic policy at Princeton University – explore subjects addressed in the latter’s latest book, Euro tragedy: a drama in nine acts.Kicking off this Director’s Cut of the 'The Sound of Economics', the two explore the historical development behind the EU's creation. Ashoka Mody argues that the adoption of the euro as a single currency has exacerbated economic divergences between EU Member States as some do not have the institutional maturity or capabilities to fully adopt monetary policy measures. Guntram Wolff points out that in the view of Helmut Kohl, the adoption of the euro was a means to further reunite the continent and support peace-building. They also discuss the role of social democracy in the drama on the future of Europe.The conversation from this episode explores the development of the EU from its early history until its present-day situation. Member States’ commitments to the European project from a political and economic point of view are touched upon, with a particular focus on Germany's role within the whole debate. For a more in-depth discussion on the subject, be sure to play back the full recording of the Bruegel event chaired by Maria Demertzis and featuring Ashoka Mody and Guntram Wolff.

According to Annamaria Lusadi, academic director at the Global Financial Literacy Excellence Center, financial literacy requires both a knowledge of financial concepts and the confidence to make effective financial decisions in order to maximise one's well-being. Financial literacy is not only limited to knowledge of monetary calculations, but is also measured by the extent to which individuals understand their financial rights and obligations, in addition to their ability to educate themselves on financial matters. People are increasingly expected to have the appropriate skills to manage their own financial decisions; however, the rapidly shifting financial environment often proves to be extremely complex to understand and, thus, leaves many with poor financial literacy abilities. The young, the elderly, women, and people with low-education levels are particularly susceptible to the negatives effects of low financial literacy. The consequences of the situation are harmful both for the individual and at a national level. Just as reading and writing skills are a part of the educational curriculum, Annamaria Lusadi believes that financial literacy courses should now be a requisite part of school programmes. Moreover, the adult population should also have access to workplace and public financial education programmes. All in all, good financial literacy skills have long-term beneficial effects; sound financial decisions take today's resources and invest them in the future. As a result, policy-makers should redouble their efforts in this area. Maria Demertzis has co-authored a Bruegel Policy Contribution with Uuriintuya Batsaikhan on financial literacy and inclusive growth in the European Union. Annamaria Lusardi previously made a presentation at the Bruegel event, ‘The importance of being financially literate’.

Paul Tucker, former deputy governor of the Bank of England, joins Bruegel director Guntram Wolff to discuss the thesis of his new book, as well as the current tensions within current models of central banking governance.On the agenda is the contention that there is, and even should be, a limit to the level of responsibility that a central bank can reasonably be expected to shoulder. Some decisions have such far-reaching consequences that we might prefer they be made by elected, rather than appointed, officials.Paul Tucker presented his book in an event at Bruegel in May 2018, with Bruegel deputy director Maria Demertzis hosting a debate between Paul Tucker, Joanne Kellermann, former member of the Single Resolution Board, and Jean Pisani-Ferry, mercator senior fellow at Bruegel.For further reading, consider 'Central Banking in Turbulent Times' - a book co-written by Bruegel senior fellow Francesco Papadia with Tuomas Valimaki, launched at a Bruegel event in April 2018.Additionally, we recommend reading Silvia Merler's collation of economists' opinions on the current state of central banking in an age of populist politics.

Technological advancements continue to drive change in every industry. In a recent working paper co-written with Francesco Chiacchio and David Pichler, Bruegel research fellow Georgios Petropoulos has explored the impact of the increasing number of robots on employment and wages in Europe.The introduction of robots constitutes only one industrial advance among many, and each automated technology has different impacts on employment. The impacts across social strata can also be disparate.In this episode of ‘The Sound of Economics’, Georgios Petropoulos discusses the findings of his study, which focuses on six EU countries (Finland, France, Germany, Italy, Spain, Sweden) that account for 85% of robots in the EU market. Specifically this work sought to answer the question of whether robots have a positive or negative effect on EU employment and wages, and to place its conclusions in the context of other studies of automated technologies and their consequences for labour.The research pertinent to this podcast can be found in our publication: ‘The impact of industrial robots on EU employment and wages: A local labour market approach’. Meanwhile, Georgios Petropoulos has previously detailed the specifics of the growing presence of robots in EU industries in a Bruegel blog post.He has also written an article questioning whether we understand the impact of artificial intelligence on employment. Elsewhere, a number of Bruegel scholars have collaborated on our Blueprint book of research: ‘Remaking Europe: the new manufacturing as an engine for growth’. This comprehensive study looks at how well European firms are responding to new opportunities for growth, and in which global value chains they are developing new activities.

The coalition agreement between Italy’s Five Star Movement and the League puts the country’s new government on a potential collision course with the European Union, and has prompted fears that the country could nosedive out of the euro zone.Markets have already born witness to investor nervousness over the coalition’s proposed agenda, and the new government’s priorities run counter to the prevailing fiscal and monetary policies of the euro area. If Italy were to follow through on its new plans for spending, the expected reaction in among bond-buyers would make it very difficult for Italy to finance its already-significant amount of public debt.Any discussion of a possible default necessarily involves the euro area – as Bruegel’s database of sovereign bond holdings illustrates. Just how exposed are the other members of the currency bloc, and what paths might be taken in order to avert a crisis?In this week’s Director’s Cut, Bruegel senior fellow Francesco Papadia joins Guntram Wolff to assess the problems that currently occupy both Italy and the EU.For further reading, note Guntram Wolff’s article on why Europe needs a strong Italy, whoever is leading the government.Also consider looking at Jean Pisani-Ferry’s opinion piece on the opportunity that such political upheaval might offer Italy to overcome its longstanding internal issues.

The global financial crisis exposed flaws in the methods and theories of macroeconomics. Certain aspects of the crisis were completely unexpected; other burgeoning problems were flagged up but explained away, and thus allowed to get worse. As the profession seeks to reinvent itself post-crisis and reassert its worth, what exactly has been learned and what changes have been made to the practice of macroeconomics? New models appear to be flourishing, but debate continues over whether we have improved our understanding and mitigated the potential for misreading the results that these models present. In this Director's Cut of 'The Sound of Economics' podcast, Bruegel deputy director hosts a conversation with Nicola Viegi, South African Reserve Bank professor of monetary economics at the University of Pretoria, and Frank Smets, director general of economics at the European Central Bank.  For further reading on this topic, consider our overview of the ‘Rebuilding Macroeconomic Theory Project’ recently concluded by the Oxford Review of Economic Policy, written by Konstantinos Efstathiou.