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Whatever It Takes in Italy?

23 days ago

With deft and bold action, Mario Draghi’s unity government in Italy can go some way toward addressing the COVID-19 emergency, laying the groundwork for long-term economic recovery, and restoring Italians’ confidence in their political leaders. But he cannot do it alone.

BOLOGNA – In 2012, then-European Central Bank President Mario Draghi pulled Europe from the depths of economic crisis with his famous promise to do “whatever it takes” to save the euro. Now, Draghi’s native Italy is hoping he can save it, too, by leading a new unity government. But even for “super Mario,” success is far from guaranteed.

Multilateral Cooperation for Global Recovery

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China’s Debt Grip on Africa

January 15, 2021

Since the 2008 global financial crisis, China has steadily increased its direct lending to developing countries – often with draconian conditions attached. Debt moratoria during the pandemic, while important, will not solve this problem.

LONDON – The pandemic is confronting highly indebted poor countries with a fateful dilemma. As Ethiopian Prime Minister Abiy Ahmed, a Nobel Peace Prize laureate, lamented last April, leaders have been forced to choose whether to “continue to pay toward debt or redirect resources to save lives and livelihoods.” And when they choose the latter, it is often China – Africa’s biggest bilateral lender – to which they have to answer.

Whither America?

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A Good but Incomplete Start to Debt Relief

November 23, 2020

After initially responding to the pandemic-induced economic crisis with an initiative to postpone developing countries’ debt payments, the G20 has now come back to the table to offer a more plausible solution. But the new common framework for restructuring sovereign debt should be merely a first step in a longer process.

LONDON – A global collapse in economic activity during the COVID-19 pandemic has significantly increased the risk of debt distress in many countries, pushing the poorest ones to the brink. In response, various international organizations have unveiled a number of initiatives to forestall circumstances necessitating between responding adequately to the public-health crisis and servicing existing

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Economics in a Post-Pandemic World

November 20, 2020

US President-elect Joe Biden may have promised a “return to normalcy,” but the truth is that there is no going back. The world is changing in fundamental ways, and the actions the world takes in the next few years will be critical to lay the groundwork for a sustainable, secure, and prosperous future.
For more than 25 years, Project Syndicate has been guided by a simple credo: All people deserve access to a broad range of views by the world’s foremost leaders and thinkers on the issues, events, and forces shaping their lives. At a time of unprecedented uncertainty, that mission is more important than ever – and we remain committed to fulfilling it.
But there is no doubt that we, like so many other media organizations nowadays, are under growing strain. If you are in a

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The Limits of Extreme COVID Monetary Policy

May 29, 2020

Just because the major central banks can continue to introduce increasingly unconventional measures doesn’t mean that they should. The current economic crisis demands primarily a fiscal-policy response, whereas extreme monetary policies carry high risks and produce adverse side effects.

LONDON – With output having collapsed as a result of the COVID-19 pandemic, many are wondering how far monetary policy can be stretched to support the economy. For the US Federal Reserve, negative interest rates appear to represent an effective limit, not because such a policy is technically unfeasible, but because it would be politically unacceptable. Yet for the European Central Bank, the Bank of England, and the Bank of Japan,

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What the G20 Must Do

March 20, 2020

With the coronavirus outbreak having now become a full-blown pandemic that is threatening both the global economy and millions of lives, an international coordinated response is desperately needed. As in the 2008 financial crisis, the G20 must take the lead, starting with its emergency virtual summit next week.

LONDON – Saudi Arabia, this year’s chair of the Group of Twenty (G20), will convene a virtual summit next week to discuss a global response to the COVID-19 crisis. The emergency meeting could not come too soon. Because global health is a collective public good, any threat to it requires a multilateral response.
The COVID Wake-Up Call

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Italy’s New Affliction

February 28, 2020

Having long been saddled with a sluggish economy, Italy is now faced with a recession. Along with Germany’s economic slowdown and the uncertainty of Brexit, the country’s COVID-19 affliction is further grim news for Europe.

BOLOGNA – Northern Italy currently is the center of the COVID-19 outbreak in Europe. So far, 17 Italians have died as a result of the new coronavirus, and 650 have been infected. Schools in the region have been shut, universities have suspended lessons, companies have asked their staff to work from home, and many theaters, cinemas, and bars are closed. The virus caused the cancellation of the last two days of the Venice Carnival, which attracts thousands of visitors every year. And the area south of Milan,

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Locking China Out of the Dollar System

October 21, 2019

By broadening the nexus between economic interest and national security, Trump is encouraging the decoupling of the world’s two largest economies and the emergence of a bipolar world order led by rival hegemons. Beyond fragmenting the trade and financial system that has underpinned the global economy for decades, the stage would be set for a devastating conflict.

LONDON – The recently announced “phase one” agreement between the United States and China has been touted as an important step toward a comprehensive deal that ends the trade war that has raged for over a year. But if you think that US President Donald Trump is ready to abandon his antagonistic China policy, think again. In fact, the Trump administration is

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Trump’s Manipulation of Currency Manipulation

August 9, 2019

By treating international trade as a zero-sum game in which the US makes its own rules, President Donald Trump’s administration has weakened the incentive for countries to engage in policy cooperation. Why should China bow to a US that treats it as an enemy?

LONDON – The weaponization of currency has rarely ended well for the United States. Look no further than the unilateral 1971 decision of President Richard Nixon’s administration to cancel the US dollar’s direct international convertibility to gold – a key element of the “Nixon Shock” that destabilized floating currencies and led to stagflation later in the decade. But that hasn’t stopped President Donald Trump’s administration from (mis)labeling China

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Italy’s Risky Silk Road

March 20, 2019

The Italian government is keen to join China’s "Belt and Road Initiative" and plans to sign an agreement to this effect during Chinese President Xi Jinping’s upcoming visit to Italy. But although deeper trade and investment ties with China could boost its sluggish economy, Italy should pursue them through the EU, not bilaterally.

VENICE – Is China’s “Belt and Road Initiative” (BRI) “a train that Italy cannot afford to miss,” as Italian Finance Minister Giovanni Tria says? Prime Minister Giuseppe Conte also thinks Italy should jump on board, saying the multi-billion-dollar Chinese infrastructure plan is “an opportunity for our country.”

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The Road From Thatcherism

February 15, 2019

This year marks four decades since Margaret Thatcher came to power as Britain’s first woman prime minister, inaugurating an era of market fundamentalism that is still with us today. Why does an ideology that is so obviously exhausted maintain its grip on policymakers worldwide?

LONDON – The last few years, with the rise of populism across the developed world, have seemed like the ending of an age. This is perhaps most true of economics, where the free-market revolution that emerged forty years ago now seems to have petered out in denunciation, self-doubt, and recrimination.In May 1979, Margaret Thatcher became the first woman to serve as Britain’s prime minister, after having been elected leader of the Conservative Party four

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Italy’s Old New Populism

October 5, 2018

Long-term economic and social considerations almost inevitably collide with short-term political objectives. This is all the more true for populists like those in Italy’s coalition government, which recently unveiled an imprudent and even dangerous draft budget.

CANBERRA – Italy’s coalition government, comprising the anti-establishment Five Star Movement (M5S) and the far-right League party, made headlines recently for its new draft budget, which violates European Union rules. But this is hardly the first Italian government to make over-the-top promises and squander public money to pay for them. In fact, when all is said and done, Italy’s new populism is not new at all.


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Hard Lessons from Genoa

August 21, 2018

In Western Europe and the United States, bridges, roads, and railways built in the 1950s and 1960s during the post-war reconstruction and economic boom are now old, obsolete, and overused. So why aren’t they being replaced?

GENOA – Is our infrastructure safe? In the aftermath of the collapse of the Morandi Bridge in Genoa, this is the question on everybody’s mind. Of course, we could argue that disasters like this are one-offs, and even believe that they may be peculiar to Italy – a country where infrastructure projects are often fertile ground for corruption. But we would only be fooling ourselves.

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China’s Currency Catch-22

July 19, 2018

As the Trump administration ratchets up tariffs on Chinese goods, many observers have begun to wonder if China will respond with a strategic currency devaluation to boost the competitiveness of its exports. But, despite despite possessing a powerful financial and monetary arsenal, Chinese policymakers have no good options.

LONDON – Officials at the People’s Bank of China (PBOC) have long insisted that “China won’t weaponize the renminbi.” And yet, implicit in their promise not to manipulate the currency for strategic ends is their ability to do so if they so desired.

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The Central-Bank Song Remains the Same

April 10, 2018

Even as the world’s major central banks face important transitions, the choices of their new leaders have reflected a desire for continuity. In terms of both policy and personnel, the new normal looks set to be mostly old wine in familiar bottles.
LONDON – The changing of the guard that is taking place at the systemically important central banks in 2018-2019 will mark the beginning of a new era of monetary policy. Who is likely to lead this transition to a “new normal”? More important, just how new will it really be?

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In the decade since the global financial crisis, advanced-country central banks

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The Electoral Fate of Italy’s Banks

January 15, 2018

[unable to retrieve full-text content]To fix Italy’s banking system, the government that emerges from the general election in March will need a solid majority, a comprehensive strategy to boost economic growth, and a willingness to confront vested interests. But none of the parties has shown any indication that it can meet any of these criteria, much less all three.

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Why the Renminbi Won’t Rule

October 20, 2017

As the US retreats from the world stage and a multipolar global order emerges, the international monetary system may well be transformed – but probably not into a renminbi-led system. Indeed, not even China expects the age of renminbi diplomacy to arrive anytime soon.
TOKYO – In the dystopian fantasy Blade Runner 2049, Los Angeles 32 years from now looks a lot like China’s megacities today: grey, polluted, and dominated by tall towers emblazoned with flashing neon advertisements. The viewer never learns much about the outside world, much less in what currency the advertised goods are traded. Is the US dollar still dominant, has the Chinese renminbi taken over, or has some other currency surged to global preeminence?

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Saving the International Economic Order

September 1, 2017

LONDON – This autumn, the International Monetary Fund and the World Bank will once again hold their annual conference in Washington, DC. At a time when the liberal world order that these institutions underpin is under threat, they cannot afford to stick with business as usual. Instead, they must consider deep reforms – and that will require abandoning the paternalistic, even hostile, tone that has often dominated discussion of the topic. Since the election of Donald Trump as US president last November – the culmination of an upsurge in nationalist-populist sentiment across the Western world – the weaknesses of existing multilateral frameworks have come increasingly to the fore. But the current crisis of the liberal world order has been a long time in the making. In fact,

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The Return of Industrial Strategy

March 15, 2017

LONDON – Industrial policy is making a comeback in many advanced economies. Dismissed out of hand in the go-go 1980s as a contributor to the previous decade’s stagnation, it is increasingly viewed as a means to stem working-class voters’ defection to right-wing populist parties. But developing a modern and effective industrial strategy will be no easy feat.

The European Union has been trying to define a consistent framework for addressing the topic since 2014, when it published an analysis of industrial policy’s advantages and disadvantages. The United Kingdom is further along, having released in January a green paper on building an industrial strategy. US President Donald Trump has also focused on industrial policy, though his version would presumably entail substantial state intervention and protectionist measures.

Trump’s regressive vision, despite remaining short on details, already seems defective. But Europe’s approaches to industrial strategy show some promise, not least because they are likely to eschew the broad interventions of the past that emphasized “picking winners.” In the United Kingdom, for example, the government expects to focus instead on “targeted interventions” designed to create positive incentives, correct market failures, and address social, geographical, and sectoral imbalances.

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Economic Crises and the Crisis of Economics

January 13, 2017

LONDON – Is the economics profession “in crisis”? Many policymakers, such as Andy Haldane, the Bank of England’s chief economist, believe that it is. Indeed, a decade ago, economists failed to see a massive storm on the horizon, until it culminated in the most destructive global financial crisis in nearly 80 years. More recently, they misjudged the immediate impact that the United Kingdom’s Brexit vote would have on its economy.

Of course, the post-Brexit forecasts may not be entirely wrong, but only if we look at the long-term impact of the Brexit vote. True, some economists expected the UK economy to collapse during the post-referendum panic, whereas economic activity proved to be rather resilient, with GDP growth reaching some 2.1% in 2016. But now that British Prime Minister Theresa May has implied that she prefers a “hard” Brexit, a gloomy long-term prognosis is probably correct.

Unfortunately, economists’ responsibility for the 2008 global financial crisis and the subsequent recession extends beyond forecasting mistakes. Many lent intellectual support to the excesses that precipitated it, and to the policy mistakes – particularly insistence on fiscal austerity and disregard for widening inequalities – that followed it.

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Free Trade in Chains

October 22, 2016

LONDON – At the beginning of the new millennium, when the world was deemed “flat” because of its economic openness, international trade was a subject confined to the business pages and discussions among technocrats. Now, trade tops the political agenda in much of the world; in the advanced economies, it is populists’ favorite horse to whip. Even politicians who once embraced trade deals are now disavowing them.In Britain, as a result of the Brexit vote, debates about the merits of trade with the European Union’s single market versus trade under World Trade Organization rules are now heard almost nightly. In the United States, both presidential candidates have made opposition to mega-regional trade deals – specifically, the 12-country Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) with the European Union – central to their campaigns.None of this should be surprising, given how sharply public opinion has soured on such trade agreements. Opinion polls on both sides of the Atlantic identify trade as one of the major sources of the discontent roiling the world’s developed democracies. A survey by YouGov indicates that approximately 71% of Americans and 58% of Germans believe that their countries should embrace more restrictive trade policies to protect their economies from foreign competition.

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Saving Italy From Itself

September 27, 2016

SIENA – Now that Italian Prime Minister Matteo Renzi’s credibility is weakening at home, he will need all the friends he can get to clear the hurdle of a constitutional referendum in December – and thereby avoid likely political disruption. Renzi will need the support not just of his own party, which is deeply divided over the referendum, but also of an Italian electorate that has grown disillusioned with politics in general.

The referendum has become a litmus test for Renzi and his government partly because of his ill-considered warning earlier this year that he would resign if the proposed reform of the Senate (the parliament’s upper house) were voted down. But Renzi’s bigger problem is that he is a mid-term, unelected prime minister who promised, in 2014, to bring change to a country that has heard it all before.
Two years later, far less change than expected has materialized, and Renzi has come to resemble a guarantor of political stability more than a rottamatore – a “scraper of the old,” as he had been nicknamed. Renzi has vigorously backpedaled from his conditional vow to step down; but if voters reject the Senate reform, he will become a lame duck, and political stability will most likely suffer unless he keeps his promise.

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No Country for Young Men (and Women)

March 28, 2016

MILAN – Over the last 20 years, roughly a half-million Italians aged 18 to 39 have moved abroad, especially to more economically dynamic European Union countries such as Germany, France, and the United Kingdom. And those are just the official figures; the actual numbers are probably much higher, possibly more than double. Why are young Italians so eager to leave?
It is not for lack of political representation. Since 2013, the share of Italy’s parliament that is under 40 has increased from 7% to 13%. Moreover, Italy now has one of the youngest governments among advanced countries (only France does better). And Prime Minister Matteo Renzi, at age 41, is Italy’s youngest prime minister ever.

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Nonetheless, young Italians remain deeply dissatisfied with the state of their country and the economic opportunities it can provide. Indeed, despite Renzi’s promise to implement reforms aimed at rejuvenating the country’s economy and institutions – the platform on which he won power in 2014 – some 90,000 Italians under the age of 40 have since left.
Renzi’s message, while skillfully crafted and optimistic, cannot mask the harsh economic reality in Italy today. Most jarring, youth unemployment stands at 39% – one of the highest rates in the EU and well above the bloc’s average of 20%.

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The Renminbi Goes Forth

December 11, 2015

LONDON – The Nobel laureate Robert Mundell once said, “great powers have great currencies.” China, whose government Mundell long advised, seemed to take this notion to heart, prodding the International Monetary Fund for years to add the renminbi to the basket of currencies that determine the value of the IMF’s reserve asset, the Special Drawing Right (SDR). And now the IMF has decided to do just that, in what amounts to a huge vote of confidence in China’s capacity to play a major role in international finance.
Many market participants, however, remain skeptical about the decision. Does the renminbi really belong in the same category as the US dollar, the euro, the Japanese yen, and the British pound in the international monetary system?

No doubt, China has made remarkable progress over a relatively short period. Since 2009, the share of China’s trade settled in renminbi has increased from less than 1% to more than 20%. And the renminbi now ranks fourth among the world’s currencies used for international payments.
But the renminbi’s 3% share in global payments lags far behind that of the dollar (45%) and the euro (27%). Moreover, growth in the use of the renminbi to settle trade has been concentrated largely in the Asia-Pacific region, and specifically in transactions between China and its neighbors.

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