For two decades, the lack of private investment has been one of Europe's biggest economic weaknesses, undermining productivity, hampering growth potential, and damaging its competitiveness. Moreover, different financial conditions across the euro-area Member States have contributed to diverging...

One important conclusion of Robert Shiller's influential 2015 book, Irrational Exuberance, is that bubbles are random exogenous phenomena that cannot be foreseen and do not depend on macroeconomic policies. This CEPR Policy Insight throws light on the root causes of speculative fevers in asset...

This paper attempts to provide a perspective on real exchange rate developments following the inception of the EMS. The focus is on structural determinants of real exchange rates, notably the behavior of tradables and nontradable prices and productivity. It is found that changes in the relative...

This paper discusses the application of the new European rules for burden-sharing and bail-in in the banking sector, in view of their ability to accommodate broader policy goals of aggregate financial stability. It finds that the Treaty principles and the new discipline of state aid and the...

Following the proposal by Avgouleas and Micossi (2021) and Micossi (2021), several authors (Amato and Saraceno 2022, Baglioni and Bordignon 2022, Cottarelli and Galli 2021, D’Amico et al. 2022) have engaged in the debate on how to manage the sovereign debt portfolio accumulated by the European...

This paper presents an in-depth review of the proposal by Micossi (2020) and Avgouleas and Micossi (2021) to transfer a substantial share of the sovereigns acquired by the European System of Central Banks (ESCB), both during and before the pandemic, to the European Stability Mechanism (ESM)....