Javier García Arenas and Adrià Morron Salmeron (CaixaBank ) | The independence of central banks seems indisputable, even more so in these times of pandemic, in which they have increased their use of unconventional policies and provided coverage for the high funding needs of states. In this article we will explore the theory and empirical evidence supporting the importance for central banks to maintain their independence.
Alphavalue | The boards of Veolia Environment and Suez have reached an agreement on the companies’ merger. After months of confrontation, Veolia will launch a takeover bid for Suez. In a statement, the two firms said the price of the bid will be 20.5 €/share, valuing Suez at 12.9 billion euros. This is an improvement of 13.9% on the 18 €/share that Veolia had proposed up until now and which was one of the main blocking points for the deal. Suez had set a price of €22/share as a condition.
Rafael Domenech & Jorge Sicilia (BBVA Research) | The empírical evidence for a large sample of countries at different stages of development since 1960 to the present shows that an increase of 10 percentage points in the ratio of private investment to GDP corresponds to an increase of 3.1 points in the long-term growth rate of per capita income, higher than the elasticity of 2.7 obtained between total investment and growth. The empirical evidence points to private investment being typically allocated more efficiently than public investment, indicating that the best strategy is for public investment to be complementary and incentivize higher private investment.We see this as evidence that the focus of policies oriented to providing fiscal stimulus to incentivize private investment, such as the European Fund NGEU as an adequate strategy to increase per capita income growth in the long term in European economies.
The share of electricity generated from renewables in the EU energy mix (39%) exceeded the share of fossil fuels (36%) in 2020 for the first time ever and EU consumption of both electricity (-4%) and gas (-3%) fell from 2019 levels, but most of the drivers for this change (notably the COVID-19 pandemic) were exceptional, according to the latest Commission quarterly reports on gas and electricity markets published today.
Gemma Cairó i Céspedes (University of Barcelona) | A few weeks ago, a group of prestigious economists addressed a proposal to the ECB. In it, they called for the restructuring of the Eurozone countries’ public debt and proposed the need for the ECB to write off their public debt (or swap it for perpetual debt). Although it is true the Treaty of the European Union explicitly forbids the ECB from financing governments, it does not express explicitly that debt restructuring is not possible.
Andreas Baur, Lisandra Flach and Feodora Teti (Ifo Institute ) | Mercosur, one of Latin America’s most ambitious economic and political integration projects, celebrates its thirtieth anniversary on March 26, 2021. The fact that the member countries Argentina, Brazil, Paraguay and Uruguay have little reason to celebrate is not only due to the Corona pandemic. The disappointment about the slow progress with respect to integration is widespread among members, and the future of Mercosur seems more unclear than ever.
Scope Ratings | The dismissal of central bank governor Naci Ağbal worsens the crisis of confidence in Turkey’s monetary policy, further undermining macroeconomic stability. This is credit negative for Turkey’s B/Negative sovereign ratings. Saturday’s announcement of the sudden change in central-bank leadership, shortly after a market-friendly, above-expectation 200bp tightening of rates on Thursday, underlines Recep Tayyip Erdoğan’s wish for looser monetary policy in support of unsustainably high growth.
Lidia Conde | The Germans are champions at saving money. In 2020, 330 billion euros. But 41% of citizens have less than 10,000 euros of wealth. Per household, the median wealth amounted (median) to 119,100 euros in Spain, 132,200 in Italy, 117,900 in France and 71,100 in Germany. In the eurozone, 99,400. These are ECB data.
Comments on dividends and buybacks for Q4’21 have dominated the publication of banking sector results. Although regulatory restrictions still apply, most banks want to compensate their shareholders for the dividends they did not pay through special dividends and buybacks in Q4’21. This will result in high payouts at the end of the year. So far, dividend futures of December 2021 STOXX Banks EUR Price index are up 55% year- to-date versus the index which is up 12%.
Asset managers, pension funds, insurers or investment advisors in the European Union (EU) will be obliged to report how they assess the environmental and social sustainability of their products. And when they claim to have a green strategy, to justify it. This is required by the regulation on sustainability disclosure in financial services that came into force on Wednesday and seeks to prevent so-called “greenwashing”, whereby investments not actually climate-friendly are labeled as “green”.