Category: Charts

The eurozone’s external surplus is not a business model, it’s a fiscal imperative

The eurozone’s external surplus is not a business model, it’s a fiscal imperative

It has become a common trope to refer to the economic structure of a country – or a currency area like the eurozone – as its “business model”. Never mind that a business firm is an atrocious metaphor for a national economy,  let alone a currency area.

Now, in the specific case of the eurozone, running a persistent external surplus is not a business model. It is a necessary consequence of the fiscal rules.

By not giving the eurozone another choice than running an external surplus, the fiscal compact makes it very hard for the eurozone to withstand the impact of Donald Trump’s trade war, or of a potential no-deal Brexit. One way to make up for this might be a helicopter drop of the order of €10bn per month. Will Mario Draghi’s successor have the audacity to try it?

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How to buy government bonds when there aren’t any

How to buy government bonds when there aren’t any

This was the question the ECB had to answer about Estonia when it instituted its Public Sector Purchase Programme with the added stipulation that bonds would be bought proportionally to each member state’s share in the ECB’s capital key.

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Panic and misdirection on the ECB capital key

Panic and misdirection on the ECB capital key

The accusation by Professor Friedrich Heinemann of the ZEW institute that the ECB’s public sector purchase programme is deviating from the eurosystem’s capital key to the benefit of Southern European states must have hurt, because a week after Mario Draghi’s press conference the ECB communications office saw fit to bring up the issue again in a longish twitter thread:

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