European Union

Monetary policy decisions require a prior assessment of different economic scenarios, including the most extreme ones. Assessed on the basis of the Banque de France's Financial Conditions Index, financial risks that are likely to weigh on the distribution of future euro-area GDP growth appear limited.

Expected distribution of euro area quarterly GDP growth between 2001 and 2018
Chart 1: Expected distribution of euro area quarterly GDP growth between 2001 and 2018 Sources: Eurostat, Banque de France, authors' calculations.

By Laurent Abraham and Jean-Baptiste Gossé (Banque de France)

On its 20th anniversary, the euro is enjoying remarkably high levels of support. However, a paradox exists in public opinion: each country appears to believe that the single currency is more beneficial for the other countries. Improving the functioning of national and European institutions could mitigate this paradox and strengthen attachment to the euro.

The benefits of the euro are more widely recognised at the European level than at the national level.
Chart 1: The benefits of the euro are more widely recognised at the European level than at the national level. Source: Flash Eurobarometer. Note: Average gap between the perceived benefits of the euro for the EU and for the individual countries, 2011-2018, excluding Latvia and Lithuania due to the period under review. The darker the green, the larger the gap.

Morgan Després, Édouard Vidon

Deeper financial integration through capital markets can support European growth and resilience to shocks by spurring cross-border equity investment. Completing the banking union requires parallel progress in credit risk reduction and risk-sharing, while keeping systemic risks in check. These priorities should be seen as part of the same agenda and are all the more critical in a post-Brexit EU.

By Edouard Vidon

Game theory provides examples and a few valuable lessons for negotiators, whether hawks or doves, such as the risk of “falling off a cliff” in the “game of chicken”. Investment bank strategists and academics have already started toying with such tools to analyse the Brexit “game”. Surely the negotiators’ war rooms have been paying attention.

Brexit negotiations: the clock is ticking Photo: T. Depenbusch (via wikicommons)