Economic & Fiscal Policy

The banking turmoil of 2023 had only a limited impact on banks in the Eurozone and the EU. Nevertheless, important lessons can be learned from this crisis: effective regulation and supervision is a moving target that must adapt to changing circumstances and banks' business models.

The outbreak of an unprecedented global health crisis about four years ago put the very foundations of our communities, economies and politics to the test. Policymakers had to learn and react fast to limit human and economic costs at the same time. This article highlights the importance of existing markets, technological features such as payments systems and economic decisions at the transactional level in combating the spread of a contagious disease while stabilizing aggregate economic activity.

To improve defence capabilities, Europe has to increase defence spending immediately and also to create fiscal space for a permanent rise in defence spending. Many European countries have collected a considerable peace dividend since the end of the Cold War. In the same period, welfare states have expanded to a degree not backed by the general economic development. This Policy Report shows that if European NATO countries shifted around one percent of non-defence expenditure towards defence, this would be sufficient to meet the NATO 2%-target.

The Covid-19 pandemic hit Germany hard in 2020. Driven by the need to limit close contact and the resulting strict lockdown measures, economic activity fell sharply. To counter the effects of the Covid-19 pandemic, the German government introduced several policy measures. While the macroeconomic impact of the Covid-19 pandemic is well documented, evidence on the distributional impact on household income at the micro level is more limited. Our analysis shows that German households experienced a loss of over 3 percent of market income in 2020 due to the Covid-19 pandemic.