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Daniel Gros

Articles by Daniel Gros

The COVID Inflation Scare

22 days ago

Central banks become concerned, and usually start tightening policy, when higher inflation fuels higher inflation expectations among consumers. Current trends suggest that US policymakers have more to worry about than their European counterparts.

BRUSSELS – Consumer price inflation in the eurozone accelerated further in September to a 13-year high of 3.4% year on year, prompting a wave of alarmed headlines. Annual inflation in the United States stood at 5.3% in August. So, how concerned should European and US policymakers be about a possible prolonged inflationary surge?
India’s Taliban Problem


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The Economic Roots of the Afghan Debacle

September 1, 2021

Afghanistan experienced rapid economic growth in the decade following the US invasion and the ouster of the Taliban. But the subsequent stagnation of living standards – rooted in the failure to build a self-sustaining domestic economy – made unrest all but inevitable.

BRUSSELS – Nation-building has manifestly failed in Afghanistan. MIT’s Daron Acemoglu has elucidated an important reason why: the West took a top-down approach to establishing state institutions, even though Afghanistan is a “deeply heterogeneous society organized around local customs and norms.” But economic factors also played a key role.
The AI Revolution and Strategic Competition with China

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That Old Time Anti-Vaxx Feeling

August 6, 2021

The best single predictor of vaccine uptake per US state is not political affiliation, but the share of the population that believes the human race has always existed. Such findings do not bode well for the global effort to boost vaccination rates.

BRUSSELS – Vaccination is the best protection against COVID-19, and the evidence for that is overwhelming. While protection against infection or transmission is not guaranteed – especially with the Delta variant raging – getting vaccinated substantially reduces the risk of severe illness, hospitalization, and death from the coronavirus. Widespread vaccination is thus the key to enabling responsible governments to relax public-health restrictions, thereby allowing the

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The Transatlantic Macroeconomic Divergence

July 12, 2021

Different economic conditions and priorities in the US and the eurozone are leading to divergent macroeconomic-policy approaches. While there is nothing shocking about this, there are potential longer-term effects that should not be underestimated.

BRUSSELS – With Europe finally beginning to catch up to the United States in vaccinating its population, both sides of the Atlantic seem set for a strong economic recovery. But macroeconomic policies are diverging in ways that could create serious problems in the future.
The Global Tax Devil Is in the Details

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Is America Losing the Digital-Currency

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The Great Lockdown and Global Trade

June 8, 2021

Global supply chains have weathered the pandemic intact, and the deep recession has not unleashed a wave of protectionism. That is good for global trade, and probably for foreign direct investment, too, and suggests that predictions of globalization’s demise were premature.

BRUSSELS – Trade is recovering robustly alongside the upticks in growth in major economies. This good news deserves more attention. Less than 12 months ago, many observers were predicting an end to globalization. The pandemic disrupted supply chains, and governments, suddenly confronted with the resulting vulnerabilities and dependencies, encouraged “reshoring” production of critical goods.
Making America Global Again

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The Green Art of the Possible

May 5, 2021

Europe’s experience suggests that decarbonizing the power sector first, while sheltering industry from higher costs, can generate some modest progress in reducing greenhouse-gas emissions. But achieving the more ambitious targets ahead will require tougher choices.

BRUSSELS – US President Joe Biden recently gathered 40 world leaders for a summit on combating climate change, a welcome sign of progress on forging a global strategy. But tackling global warming is a marathon, not a sprint. And while the recent increase in climate ambition from the United States and the European Union is welcome, more difficult choices lie ahead.

Share the Intellectual Property on COVID-19


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Fiscal Follies in the COVID Recovery

March 5, 2021

With governments in advanced economies continuing to keep the fiscal taps open, it is worth considering whether additional stimulus is really what the situation demands. Unlike the aftermath of the 2008 crisis, the problem today is not a lack of purchasing power, but rather circumstances unique to a viral pandemic.

BRUSSELS – When COVID-19 went global about a year ago, the memory of the 2008 global financial crisis was still fresh, and policymakers pulled every lever at their disposal to maintain financial stability. The reaction to the previous crisis had indeed been somewhat slow and confused, especially in Europe, because no one at the time had ever dealt with anything like it before. But 2020 was different.

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The Limits of the EU-China Investment Agreement

February 4, 2021

The new EU-China Comprehensive Agreement on Investment will eventually be judged by its implementation and the concrete steps China takes to fulfill its promises. If European firms do not perceive any improvement, and China makes no progress on labor standards, the pact might come to represent an empty gesture.

BRUSSELS – During the last days of 2020, the European Union and China finalized a Comprehensive Agreement on Investment that they had been negotiating for seven years. In the weeks since, the CAI has attracted a lot of Western commentary – much of it damning. But now that the full text of the agreement is available, it seems that critics may be overstating its importance.


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The Dangerous Allure of Green Central Banking

December 18, 2020

Europe’s central bankers have been insulated from political influence to pursue the very narrow mandate of price stability. Greening monetary policy might look attractive at first glance, but it represents a departure that is incompatible with their independence.

BRUSSELS – Central bankers and financial supervisors around the world are increasingly focusing on an issue that is normally outside their remit: climate change. Both the International Monetary Fund and the Bank for International Settlements (the central bank for central banks) have published reports on climate risk recently. And the European Central Bank is seemingly getting ready to target the so-called green spread, or the difference in financing conditions for

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Why Subsidies Beat Lockdowns

November 20, 2020

As the second wave of the COVID-19 pandemic threatens Europe, governments should induce restaurant, bar, and shop owners to take a paid vacation, rather than ordering them to close. Such a policy promises much lower fiscal and social costs and would be politically far easier to sustain in the tough winter months ahead.

BERLIN – Many European governments are trying to combat the second wave of the COVID-19 pandemic by imposing a “lockdown light,” usually including limitations on the operations of restaurants, bars, and some non-essential shops. The assumption behind these partial closures is that the risk of infection is high when people mingle in closed spaces. A recent paper published in Nature provides further

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The US Must Accept China’s Rise

November 5, 2020

The US is haunted by the specter of a technologically dominant China – and keen to ensure it never materializes. And yet, given China’s fundamentals, there is little the US could do to hamper, let alone arrest, its progress.

BERLIN – Elections tend to bring differences to the fore. That is certainly true of the United States’ recent presidential election, in which votes are still being tallied. Among the most bitterly contested elections in the country’s history, the outcome will have profound implications for many aspects of US policy. And yet there is one issue on which both parties seem to agree: the need to “stop” China.

One America, Two Nations


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Europe’s “Green China” Challenge

October 7, 2020

If, as seems likely, China commits fully to President Xi Jinping’s recent pledge to achieve carbon neutrality by 2060, the implications will be far-reaching. This is particularly true for the European Union, which will have its own plans and policies both facilitated and challenged in unanticipated ways.

BERLIN – At the recent United Nations General Assembly, Chinese President Xi Jinping declared that his country will strive to become carbon neutral by 2060. It was a potentially highly consequential announcement, and it deserves more attention – not least from the European Union.

The Eternal Marx

PS OnPoint

Hannelore Foerster/Getty Images

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Retiring Abenomics

September 7, 2020

Outgoing Japanese Prime Minister Shinzo Abe’s highly publicized economic-policy program was supposed to rescue Japan from years of disappointing growth, below-target inflation, and rising debt. But, in the end, the most that can be said for it is that it has offered a cautionary tale for other aging rich countries.

BERLIN – The official reason given for Shinzo Abe’s departure as Japan’s longest-serving prime minister was personal health. And now, his signature economic-policy program may be headed for a similar fate.

The Post-Pandemic Economy’s Barriers to Growth

PS OnPoint

Peter Zelei Images/Getty Images

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The High Cost of a Strong Euro

August 7, 2020

Given their strong performance during the COVID-19 crisis, and their US counterparts’ ongoing debacle, European leaders who have been pushing for a stronger global role for the euro may be about to get their wish. But it may not be long before they regret it.

BRUSSELS – Europe is experiencing a “good” crisis. Despite the damage wrought by the COVID-19 pandemic and ensuing recession, its response has minimized the damage and bolstered confidence in the economy. Yet even this positive news carries risks.

How to Prevent the Looming Sovereign-Debt Crisis

Teradat Santivivut/Getty Images

From American to European

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Europe’s Good Crisis

July 7, 2020

The COVID-19 crisis has shown that the European Union is much more than an assemblage of incessantly bickering small to medium-size countries. The evolution of key economic and epidemiological indicators is remarkably similar across EU countries, owing to a unity of perspectives that is glaringly absent in the United States.

BRUSSELS – A few months ago, the COVID-19 pandemic, coupled with the economic and financial crisis it has caused, looked like it might break the European Union. Member states had closed their national borders and rejected all coordination, with some even halting the export of urgently needed medical equipment to their EU partners. Today, however, internal EU borders have been re-opened, medical

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Europe’s New Deal Moment

June 10, 2020

US President Franklin D. Roosevelt’s 1930s reforms are now accepted as an essential part of America’s “economic constitution.” The longer-term challenge for the European Union will be to implement its COVID-19 crisis measures in such a way that they, too, come to be seen as useful economic stabilization tools when more normal times return.

BRUSSELS – Many believe that the recent Franco-German proposal for a European recovery fund – to be financed by bonds issued by the European Union – could be the bloc’s “Hamiltonian moment.” The term refers to the 1790 agreement spearheaded by Alexander Hamilton, the United States’ first treasury secretary, whereby the US federal government assumed the debts incurred by the new

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The EU’s Nullification Crisis

May 15, 2020

By challenging the right of an EU court to rule on the European Central Bank’s monetary-policy decisions, Germany’s Federal Constitutional Court most likely has picked a fight it cannot win. Like South Carolina in 1832, Germany’s judges may soon find that they have less political support than they think they do.

BERKELEY – A recent ruling by Germany’s Federal Constitutional Court (GCC) has opened a deep rift in the eurozone. In three months, the Bundesbank will be prohibited from participating in the European Central Bank’s Public Sector Purchase Program (PSPP) unless the GCC receives a satisfactory explanation that the ECB’s bond buying constitutes a “proportionate” measure for maintaining price stability.

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COVID-19 and Europe’s New Battle of Ideas

April 23, 2020

On the surface, European Union member states are arguing about whether the bloc should issue mutualized “coronabonds” to help its hardest-hit countries deal with the COVID-19 pandemic. But the real fight is about the future direction of fiscal policy and even the euro itself.

BERKELEY – Europe can see light at the end of the COVID-19 tunnel as the numbers of daily infections and deaths from the virus fall gradually across the continent. But the economic fallout from the “Great Lockdown” is still to come. The International Monetary Fund is forecasting that the eurozone will experience a drop in real GDP of more than 7% this year and only partly recover in 2021, making this downturn deeper than even the Great Recession

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The West’s COVID-19 Learning Curve

March 30, 2020

If central bankers and governments can keep financial markets working and prevent mass bankruptcies during the COVID-19 pandemic, then the now unavoidable global recession could be followed by a vigorous recovery once the virus has been contained. But protecting public health requires Western societies to learn and adapt quickly.

BERKELEY – Politicians sometimes belittle military leaders with the charge that they always fight the last war. But that potted wisdom applies equally to policymakers – and it’s not always a bad thing.
Insuring the Survival of Post-Pandemic Economies

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This Time Truly Is

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How Europe Should Manage the Coronavirus-Induced Crisis

March 9, 2020

Neither interest-rate cuts nor new government spending would do much to offset the short-term effects of COVID-19 in Europe. Central banks and government authorities should explain this to the public, and then focus their attention on the less glamorous work of safeguarding public health, household incomes, and the financial system.

BRUSSELS – The spread of the COVID-19 coronavirus across Europe and the United States has led to a sharp financial-market correction and prompted calls for active monetary and fiscal policy to prevent a recession. But a closer look suggests that such an approach might not help much at all.
Plagued by Trumpism

Sean Gallup/Getty Images

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Building an EU-UK Special Relationship

February 3, 2020

With Brexit, the European Union has lost one of its largest member states, and now must decide what kind of future relationship to pursue with the United Kingdom. Fortunately, beyond trade, there is a broad range of issues on which the two parties can cooperate.

BERKELEY – The European Union has lost one of its most important member states. The United Kingdom accounted for around one-sixth of the EU’s population and economy. Without it, the EU will still be one of the world’s premier economic powers, but it will suffer a loss of dynamism.
Can Sanders Do it?

PS OnPoint

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Britain Enters

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Will Eurozone Policymakers Take the Long View?

January 7, 2020

The 2010s were an exceptional decade that called for unprecedented economic policies. Now, however, the eurozone’s fiscal and monetary policymakers must think more long-term and accept that continued stimulus measures are unlikely to offset the effects of Europe’s demographic decline.

BRUSSELS – The beginning of a new year, and the start of a new decade, is a good time for longer-term reflection on economic policy. In the 2010s, a decade dominated by the aftermath of a once-in-a-lifetime financial crisis, a strong monetary and fiscal stimulus was clearly justified. In fact, there is now general agreement that large fiscal expansions by governments almost everywhere, followed by unconventional monetary policies, were instrumental

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What EU “Geopolitical” Power Will Cost

December 6, 2019

Ursula Von der Leyen, the new president of the European Commission, has promised to position the European Union as a geopolitical power that is capable of holding its own against the United States and a rising China. But the EU may come to regret any attempt to parlay its economic strength into geopolitical clout.

LONDON – With former German Defense Minister Ursula von der Leyen assuming the presidency of the European Commission, the European Union now has a new executive. Von der Leyen has promised to lead a “geopolitical” Commission, believing that Europe needs to be more assertive in its relations with other countries, and more hard-nosed in pursuing its own interests around the world, particularly vis-à-vis the

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The Siren Song of Strategic Autonomy

November 8, 2019

A recent report by the European Commission’s in-house think tank has called for Europe to aim for more “strategic autonomy.” But what may seem like an innocuous goal could easily take an economic-nationalist turn, with serious implications for world trade and the global economy.

BRUSSELS – For over a year, US President Donald Trump’s protectionist war against China – and his broader use of import tariffs to advance geopolitical objectives – has been fueling anxiety about the future of world trade. But tariffs are only the tip of the iceberg of economic nationalism. If the world doesn’t navigate carefully, hidden hazards could sink the global trading system.
The Rise of Nationalism After the Fall

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The Eurozone’s 2% Fixation

October 7, 2019

The European Central Bank’s inflation target of “below, but close to, 2%” currently dominates economic policymaking in the eurozone. Moreover, the idea that this target supersedes the bloc’s fiscal rules seems to be gaining ground – with potentially worrying implications for financial stability.

BRUSSELS – Economic policy discussions in Europe used to be dominated by the number three, namely the 3%-of-GDP upper limit on national fiscal deficits. Although the fiscal rules enshrined in the Maastricht Treaty were in fact much more complex, public debate tended to focus on the 3% figure, especially when deficits ballooned during the euro crisis nearly a decade ago.
The Impeachment Trap

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The ECB’s Deflation Obsession

September 6, 2019

It is hard to understand why the European Central Bank is currently so anxious to find new ways to make its policy stance even more expansionary. Its hyper-vigilance about falling prices is misplaced, and its ability to increase the rate of inflation is dubious.

BRUSSELS – Central banks aim for price stability, and today, prices are largely stable across much of the developed world. Yet central bankers declare themselves unsatisfied. Some policymakers, most notably at the European Central Bank, are even preparing further stimulus measures aimed at convincing financial markets of their resolve to fight deflation. But such policies overestimate the risk of falling prices.
The Trump Narrative and

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The Real Cost of Trump’s Trade Wars

August 6, 2019

Economic analysis suggests that bilateral trade wars are unwinnable in an interconnected world. By firing his latest tariff salvo against China, US President Donald Trump has further raised the stakes in an increasingly damaging dispute – and America is likely to emerge as the bigger loser.

BRUSSELS – For a while at least, trade tensions between the United States and China seemed to have settled into a “new normal.” After both countries imposed high tariffs on a substantial proportion of each other’s goods, US President Donald Trump refrained from further escalation. But, following another inconclusive round of bilateral trade talks in Shanghai last week, Trump announced that the US will impose 10%

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Europe’s 5G Wake-Up Call

July 8, 2019

Whereas the battle over 4G mobile networks was essentially commercial, the ongoing 5G debate is about geopolitics, technological leadership, and national security. And Europe, in particular, must develop a much stronger common approach in order to make itself less vulnerable to security risks.

BRUSSELS – How times change. Not so long ago, the next big thing in telecommunications was 4G mobile networks, which promised massive data transfers and cheap voice calls. Now comes 5G, which will potentially spur all sorts of new digital innovations, thanks to its greater speed (200 times faster than 4G), faster data transfers from wireless broadband networks, and, most important, the ability to connect

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A Parliament is Born

June 4, 2019

With the latest election, the European Parliament seems to have taken a small but important step toward becoming a true expression of Europeans’ popular will. While many issues are still decided in the European Council, the balance of authority between European and national leaders now seems to be less lopsided.

BRUSSELS – European Parliament elections used to be a boring affair, forsaken by voters and barely noticed by the media. But the latest election, held in the last weekend of May, broke the mold, capturing attention as it confounded expectations.
How Central-Bank Independence Dies

PS OnPoint

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Don’t Fear the Euroskeptics

May 8, 2019

Although the European Union is arguably as popular as ever, the next European Parliament may well contain a large minority of forces skeptical or hostile to further integration. Instead of viewing this as a threat, pro-Europeans should seize the opportunity to start a necessary debate about the continent’s future.

BRUSSELS – As the European Parliament elections draw closer, most opinion polls predict a strong showing by parties that declare themselves Euroskeptic to varying degrees. But their likely success represents an unsurprising backlash against recent European integration, rather than opposition to the European Union itself.
The Economy We Need

Keith Bishop/Getty Images

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