Catch Up: Out of Intensive Care, Where Next for the Eurozone?

Centre for European Reform: A New Deal for the Eurozone

The eurozone is out of intensive care; unemployment is falling and economic output per capita has finally recovered to levels seen before the 2008 crisis. But the crisis and the painful remedies prescribed have left many voters disillusioned with the EU and with their domestic institutions. In the countries that were hardest hit by the crisis, citizens felt disenfranchised, as creditors demanded austerity in exchange for financial assistance. This provided fertile ground for eurosceptics and populists, who promised to resist the alleged diktats from Brussels and Frankfurt. If EU memberstates fail to win back the support of disaffected voters, the bloc could end up facing a more serious existential threat as populists and eurosceptics look to win more seats in their domestic legislatures and the European Parliament.

Emmanuel Macron’s election victory has generated some optimism that France and Germany can agree a plan that will put the euro area on a more stable footing and boost public enthusiasm for the EU as a whole. Macron has called for a “new deal for the eurozone” that would facilitate investment and make the euro area less vulnerable to future economic shocks. He believes that the eurozone would be strengthened by having its own finance minister and budget, which would help stimulate demand during a downturn. Paris and its southern allies have long argued that eurozone countries do not have the firepower to tackle economic shocks on their own: monetary policy is set at the eurozone level, and they are unable to resort to currency devaluation.

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Insitute for Fiscal Studies: Who Benefits from Student Loans Reforms?

Reducing the interest rate on student loans to RPI + 0% increases the long-run government cost by £1.3 billion. This is a smaller increase than the recent change to the repayment threshold, which cost £2.3 billion. It is also a much less progressive reform, as it is the highest earners who benefit the most in this case, while the benefits of increasing the repayment threshold were concentrated further down the distribution. A cheaper alternative interest rate change would be to reduce the interest rate during study to RPI + 0%. This would cost £250 million a year in the long run.

Due to the differential treatment of grants and loans in the public finances, reintroducing maintenance grants would significantly increase the cost of HE as measured by the current deficit, but would increase the long-run cost much less. Reintroducing maintenance grants at a similar level to that before 2016 would add around £1.7 million to the deficit; however, the long-run cost is only around £350 million.

These reforms all have the effect of reducing the level of student debt held by graduates. As a result, the main beneficiaries of such reforms are high-earning graduates, as these are the only graduates who fully repay their student loans.

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New Economics Foundation: Getting an Industrial Strategy Right

Government must get national policy right – delivering certainty for investors in sustainable industries and ensuring that the ‘rules of the game’ deliver decent, well-paid jobs across the UK. But it would be wrong to conceive, as is often the case, of industrial strategy as starting and ending in Whitehall. In reality the diverse needs and different strengths of areas and regions in the UK compels a bottom-up and empowering approach. Industrial strategy must be, therefore:

  • place-based, with people in control of local developments;

  • built on the different strengths and assets that already exist in each locality;

  • making sure that marginalised areas and communities are not held back.

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