Panicos Demetriades's picture
Affiliation: 
University of Leicester
Credentials: 
Professor of financial economics
Former Governor, Central Bank of Cyprus and ECB Governing Council member

Voting history

Brexit and financial market volatility

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Question 1: The value of the pound fell sharply this week. Do you agree that the public debate on Brexit can be expected to (continue to) lead to a substantially higher level of exchange rate volatility in the upcoming months?

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Answer:
Strongly Agree
Confidence level:
Very confident
Comment:
It is not just the debate that matters, it is also changing perceptions as to a probability of a vote in favour of Brexit. Such a vote would clearly weaken growth prospects and weigh heavily on the exchange rate. It is almost inevitable to see many swings in public opinion as we get closer to the referendum since there is so much at stake.

Autumn Statement & Charter for Budgetary Responsibility

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Question 2: Do you agree that the Charter for Budgetary Responsibility is helpful in underpinning the credibility of fiscal policy?

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Answer:
Agree
Confidence level:
Very confident
Comment:
It's a step in the right direction, which can help enhance the credibility of fiscal policy, although on its own it is not sufficient to ensure fiscal responsibility. Fiscal policy remains in the hands of democratically elected politicians, if they have other priorities they will always find ways around fiscal rules.

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Question 1: The Chancellor forecasts a cyclically adjusted fiscal surplus by 2017-18 and in cash terms by 2019-20. Do you agree that this planned path of fiscal consolidation is appropriate?

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Answer:
Neither agree nor disagree
Confidence level:
Very confident
Comment:
It's very hard to say without having access to their models, although from the outside it looks rather optimistic that GDP will grow above trend at a time when Europe is still struggling and there is growing global uncertainty, emanating from geopolitical factors, including terrorism, ISIS, the refugee crisis, the Middle East crisis, tensions between Russia and the West. We are going through some very uncertain times and this will weigh down heavily on the growth prospects of the U.K., which is a relatively open economy and therefore susceptible to events in Europe and the rest of the world.

ECB's quantitative easing

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Question 2:

Do you agree that the structure of the ECB's QE programme makes the Eurozone more fragile and increases the risk of one country leaving the euro?

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Answer:
Agree
Confidence level:
Very confident
Comment:
See my reasoning above. There are of course temporary benefits by the QE programme in terms of liquidity boost. But at the same time, the programme will also helps to shift most of the risk of eurozone failure from the private sector to the public sector.

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Question 1:

Do you agree that the design of the ECB's QE programme reduces its effectiveness? 

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Answer:
Agree
Confidence level:
Very confident
Comment:
The absence of risk sharing partially defeats the purpose of the exercise, although I appreciate that this may have been the best that could have been agreed by the Governing Council under the curcumstances. It is indeed likely that several countries are likely to face higher borrowing costs as a result, for the reasons provided by Giavazzi and Tabellini. Relatedly, there's also a new risk to central bank independence that arises from these arrangements, as politicians at the national level will, in effect, decide whether to honour their obligations to the national central bank, which can be used as means of putting pressure on the central bank on other issues. The threat of central bank insolvency and the process of recapitalisation this will instigate, are powerful tools in the hands of politicians who want to exercise control over their national central banks. In the end the central bank may end up being a senior creditor but not without a dent in its independence. This creates longer term risks to the viability of the euro and the effectiveness of monetary policy.

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