Michael Wickens's picture
Affiliation: 
Cardiff Business School & University of York
Credentials: 
Professor of economics

Voting history

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:
Strongly Agree
Confidence level:
Very confident
Comment:
It is being in the eurozone that is the problem . Nations are then unable to bail out their own banks. Given its inflation remit and the ineffectiveness of QE, there is little that the ECB can do to help.

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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:
Not confident
Comment:
Neither argument is persuasive. QE has had little or no effect in increasing credit in the eurozone (or in the US, the UK and Japan) and so will be be very unlikely to raise economic activity and hence inflation. The correct role and the real problem for the ECB is how to bail out solvent but temporally threatened national banks many of which have been forced to hold their nation's debt. Supranational buying national government debt is fiscal policy. It spreads risk to the whole eurozone. It also distorts the price of national debt by disguising its riskiness. This riskiness should be priced in and not artificially suppressed. Hence the eurozone is in danger of doing exactly the wrong thing.

Deal or no deal: The Greece standoff

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Question 3: Do you agree that implementation of the agreement will lead to an expected decrease in Greek debt repayments?

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Answer:
Disagree
Confidence level:
Confident
Comment:
The aim of the tax rises is to persuade creditors to extend more credit rather than to pay off existing debt. This might provide a political fig-leaf for providing more short-term relief. But the economic basis for extending credit is a credible long-term fiscal policy.

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Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

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Answer:
Agree
Confidence level:
Confident
Comment:
Unless the maturity date of Greek debt is rescheduled (in effect a default), and sustainable reforms are implemented which keeps capital markets open to Greece there is no viable alternative to default.

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Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Greece's short term problem is its 180 percent debt-GDP ratio. The additional proposed tax revenues will have little effect on this except as a demonstration of longer term intent. They will also further reduce economic growth in the short term. The key to Greece's survival in the eurozone in the long term - which is what further lending to Greece should be based on - is more fundamental reform to public finances and labour markets. For example, if raising tax revenues from labour income is so difficult then much higher VAT must be used to fill the gap on the mainland as well as the islands. And why wait until 2025 to raise the pension age to 67?

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