Eurozone
EC approves state aid for two Italian banks
Small regional banks will receive about €5 billion, having avoided resolution
Dombret defends SSM as a ‘supervisory framework’
Bundesbank board member acknowledges there are issues, including communication, with the SSM and suggests targeting language barriers to reduce “home bias”
Reserve managers see politics shaping currency allocations
European political uncertainty weakens confidence in euro, with sterling pressured by Brexit; dollar’s popularity resurgent, despite Trump’s economic policies
Brexit will be ‘litmus test’ for global system – Carney
Global financial system has reached “fork in the road”, says Bank of England governor; UK financial firms told to submit robust set of Brexit contingency plans by July
Book notes: Architects of the Euro, edited by Kenneth Dyson and Ivo Maes
This biographical study of the 10 key players in the development of the Economic and Monetary Union provides a contrast to more historical analyses
ECB set for €50 note launch
The European Central Bank is to launch the fourth banknote in the new Europa series on April 4; the new note will retain design elements from previous series, but will feature revamped security features
Eurozone instability tops reserve manager fears – survey
Threat of instability or weakness in the eurozone and fear of major asset price correction are greatest concerns for reserve managers in 2017, Central Banking survey shows
Hysteresis can explain eurozone peculiarities – Eichengreen and Bayoumi
Eurozone has not responded to shocks in the way economic theory would normally imply, with the German economy tied surprisingly closely to those of ‘peripheral’ countries
IMF authors examine conditions for structural reform success
Most labour and product market reforms strengthen medium-term output and fiscal sustainability, but they may be painful to implement in some parts of the cycle
‘Substantial’ accommodation must continue – Draghi
ECB president says underlying eurozone inflation remains “subdued”, despite rise in headline rate; he sounds the alarm over the possibility of a “competitive devaluation” by advanced economies
NGO calls for changes to ESM’s governance
Klaus Regling welcomes some of Transparency International’s conclusions
Danish central bank conducts $670 million FX intervention
Danish central bank conducts largest intervention in FX market since June 2016; analysts say demand for krone will continue, but interest rate hike is unlikely
Bank of Italy paper looks at impact of monetary policy shocks
The impacts of eurozone and US shocks have diverged since the onset of the financial crisis, the working paper says
Italian paper tracks spreads on eurozone corporate bonds
“Fragmentation” has begun to decrease following ECB’s use of QE, researcher says
IMF stays tough on debt relief as it prepares to return to Greece
Maurice Obstfeld and other top officials stress the fund’s demands on debt sustainability; mission to return to Greece next week
Why the EU needs an asset management company
The European Banking Authority’s Piers Haben and Mario Quagliariello argue a well-designed asset management company should be a major part of efforts to clean up the European banking sector
Eurozone needs ‘hard laws’ for credible resolution, economist argues
“Soft law” arrangements can break down in crises, Schoenmaker says
Mersch: no political appetite for ‘European safe bonds’
The proposal for pooled, tranched bonds is “interesting”, but the public are likely to be suspicious
Monetary aggregates useful as eurozone inflation predictor – paper
“Predictive content” of monetary aggregates has improved since 2012, ECB paper says
BIS paper tracks US and eurozone QE spillovers
Shadow rates approach helps authors show US QE spilled across borders more strongly, though impact differed between countries
Eurozone still not a complete monetary union, Draghi says
Further reforms to create “common institutions” are necessary, ECB president argues
Energy base effects pushing recent eurozone inflation – ECB
Effect estimated to be negative for much of second half of 2017
Unconventional policy has improved ‘pass-through’, says ECB
“Simple pass-through models” are ill-equipped for analysis, paper argues
Fiscal rules fail to tackle EU policy biases – IMF research
Many biases relate to political economy factors, and should be tackled by future adjustments to the governance framework, IMF economists say