Talking point
The financial drawbacks of being an emerging economy
The US today, like Britain under the gold standard, acts as the world’s banker. It is the most important source of international liquidity, leading countries to hold USD-denominated assets. Not only does this allow the US and especially the US Treasury to tap into a large investor base ready to finance current account and fiscal deficits at a lower cost. To the extent that the demand for international liquidity and USD assets exceeds the US balance-of-payments deficit, it allows the US to recycle short-term foreign liabilities into long-term assets. [more]
European integration
Balance-of-Payments Facility: Current profile and future challenges of non-euro area financial assistance
The Balance-of-Payments Facility of the European Union is a medium-term financial assistance mechanism for non-euro area member states suffering from a balance-of-payments crisis. This Research Briefing reviews current challenges in the ongoing negotiations between the European Parliament, the Commission and the Council on a recent legislative proposal which aims to streamline the facility with the current institutional framework of the ESM. Still, there is a particular need for reconciliation regarding the facility's volume, economic conditionality and the future role of the IMF. [more]
European integration
The dynamics of migration in the euro area
Migration patterns within the eurozone have changed fundamentally. While prior to the crisis many citizens from Central and Eastern European EU countries migrated to Spain and other peripheral countries, the westward migration is now primarily directed to the core. The crisis has also triggered increasing migration from the periphery to the core. Eurozone migration acts as a sensible adjustment mechanism in the labour markets. In Germany it contributes to the reduction of bottlenecks in the market for qualified labour, whereas in the GIPS it functions like a safety value. Migration also fosters growth in the host countries, while the impact on the GIPS is ambiguous. Emigration reduces persistent structural unemployment especially in problem sectors like construction. It also helps to rein in public spending. However, the huge swing in the migration balance, especially in Spain, weighs on domestic demand. Higher remittances would be helpful to mitigate the shock from the outflow of purchasing power. While fears of a brain drain are overstated, lasting migration deficits would accelerate population ageing in the periphery. [more]
Spotlight on Germany
 
 
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