Silvia Merler

Companies swamped by 3,000 hours of paperwork to tap EU climate funds Of the €7.1bn awarded from the bloc’s flagship innovation programme for clean tech, only 5% has been paid out

Want to know why Europe lags in innovation? Exhibit 1: less than 5% the EU Innovation Fund established in 2021 has been paid out, because companies spend up to 3’000 hours and an average 85’000€ in administrative costs to apply. Economic death by paperwork.

www.ft.com/content/0797...

The fifth #CERditchley panel, chaired by Yasmine Moezinia was on ‘Will Europe risk its (capital) markets taking off?’ with Agnès Bénassy-Quéré, @smerler.bsky.social, @erikfossingnielsen.bsky.social and Alexander Plekhanov

The 10 year BTP-Bund spread is at its lowest since 2010 and Italy in 2024 went back to a primary surplus, as it consistently did for almost two decades before COVID (unlike France, who’s been overshooting its deficit forecasts for 30 years). Don’t cry wolf where there isn’t one, it’s irresponsible.

Sudden stops in the euro area Internal balance-of-payment crises should be taken as a strong signal of weakness and a wake-up call to reform euro area structures

#Bruegel is republishing the classics and I’m super proud that this paper by @pisaniferry.bsky.social and myself made the cut. It took a lot of work on then-obscure central bank liquidity data, but it changed the way we look at capital flows within monetary union.

www.bruegel.org/policy-brief...

UK scraps Taxonomy, stakes green reputation on credible transition Transition plans and disclosure rules will be central to UK’s bid for sustainable finance leadership

Thank you to Jon Hay for featuring my comments in this extensive article on the UK’s decision to scrap plans for a Green Taxonomy. Great insights also from the other people quoted in the piece!

www.globalcapital.com/article/2f2q...

My latest, on the recent notice by the European Commission on defence investment in the sustainable finance framework.

Germany and Italy pressed to bring $245bn of gold home from US Trump’s attacks on the Fed and growing geopolitical risks reignite public debate about repatriating bullion

The international monetary system is changing before our eyes. Germany and Italy pressed to bring gold home from US; a survey of more than 70 global central banks showed more were thinking of storing their gold domestically amid concerns about ability to access it.

www.ft.com/content/e393...

More EU debt issuance would be the best response to Trump’s tariffs The European Union should think strategically and seize the opportunity to fill the void created by Trump

Great piece by @martinsandbu.ft.com in today’s FT. As I wrote back in April, the EU’s best response to Trump’s tariffs would be to issue more EU debt. My preference however is for ramping up genuine EU debt issuance, not settling for synthetic asset solutions.

www.bruegel.org/first-glance...

Huge Stock Swings Are the New Normal for Frazzled Investors April is poised to be the most-volatile calendar month since the Covid crash in 2020.

The return of volatility: the S&P 500 has gained or lost at least 1% in seven of the past 10 sessions, and April is poised to be the most-volatile calendar month since the Covid crash in 2020.

www.wsj.com/finance/stoc...

ECB’s Guindos Says Euro May Become Alternative Reserve Currency ‘in Some Years’ European Central Bank Vice President Luis de Guindos said the euro could become an alternative to the dollar as a reserve currency if Europe increases its integration efforts.

ECB’s Guindos Says Euro May Become Alternative Reserve Currency ‘in Some Years’ - but that will require “additional integration” he says (and a step up in EU issuance, says I)

www.bloomberg.com/news/article...

To clarify: in the piece I don’t argue the euro will replace the dollar, but rather that demand for safe asset diversification is an opportunity for Europe to push the euro to play a greater role (while doing a welcome fiscal stimulus and ensuring appropriate provision of European public goods)

US consumer sentiment, inflation expectations deteriorate sharply in April U.S. consumer sentiment deteriorated sharply in April and 12-month inflation expectations surged to the highest level since 1981 amid unease over escalating trade tensions.

Latest US inflation numbers surprised to the downside, but the University of Michigan survey points to 12-month inflation expectations at 6.7%, and above 4% for the next 5 years. Powell previously dismissed it as an outlier, but important to watch for role of the $.

www.reuters.com/markets/us/u...

More EU debt issuance would be the best response to Trump’s tariffs The European Union should think strategically and seize the opportunity to fill the void created by Trump

It may seem counterintuitive to issue more debt during a crisis. But in a world where US economic policy is unpredictable, safe asset diversification suddenly has value. And the EU’s best response to US tariffs is to issue more debt.

My OpED at @bruegel.bsky.social

www.bruegel.org/first-glance...

More EU debt issuance would be the best response to Trump’s tariffs The European Union should think strategically and seize the opportunity to fill the void created by Trump

"The EU should thus move to fund the entire cost of its planned rearmament with EU debt, similarly to NGEU." @smerler.bsky.social on the global role of the euro in light of American chaos. www.bruegel.org/first-glance...

All eyes in the market are on China. So far, China is going for a strategy of being the adult in the room:

*US TARIFFS A HEGEMONIC MOVE, SELFISH: LIN
*US TARIFFS DEPRIVE GLOBAL SOUTH OF RIGHT TO DEVELOP, LIN SAYS
*NATIONS SHOULD OPPOSE PROTECTIONISM, LIN SAYS

Dollar down on a massive trade protectionist shock is something that will go in the macroeconomics handbooks for the next generations:

*EURO RISES MORE THAN 1% TO $1.0980, HIGHEST LEVEL IN SIX MONTHS

« Simplification ou dilution ? Les implications du paquet Omnibus pour la finance durable » La simplification du reporting dans l’Union européenne entraînera une réduction de l’information disponible et introduira des distorsions sur le marché de la finance durable.

Ma tribune dans L’Opinion, sur les implications du paquet Omnibus pour la finance durable ⬇️

www.lopinion.fr/internationa...

Sustainability rules are not a block on EU defence financing, but reputational fears are To mobilise private capital for weapons, the European Commission should clarify the status of defence investing in its sustainable finance framework

🔎 I’ve been asked many times whether EU sustainable finance rules are holding back EU defence financing. The short answer is that the regulatory constraints are not that tight, but self imposed reputational restrictions are tighter. The longer answer is ⬇️

www.bruegel.org/analysis/sus...

EU omnibus: ‘The uncertainty is killing everything’ The EU Commission’s proposals may have found favour with many in business and industry, but sustainability-minded investors are worried At a glanceThis week, the first debate was held in the European...

Many thanks to Philippa Nuttal for featuring my thoughts in her must read @sustainableviews.bsky.social piece on the Omnibus. The bottomline is that sustainability-minded investors have reasons to be worried.

www.sustainableviews.com/eu-omnibus-t...

US exceptionalism is fading in the data, but is still alive in
markets. S&P 500 trades at 23x, 15% above the 10 year average. USD real exchange rate is at 40 year highs, despite the US having grown slower than most of Asia for the past 20 years. Yet, both these trends are now reverting fast. End/

Monetary policy is also constrained because US inflation still runs above target and stopped slowing in late 2023. A trade-induced slowdown is a negative supply shock, so it would be inflationary at least in the short term. This will leave the Fed in a tough spot. 6/

Fiscal policy is constrained because the US debt is high and bound to increase on a growth shock. Interest costs are just shy of 3% of GDP, laving little space for peimary spending. The rhetoric from the Treasury aligns with a lack of urgency regarding supportive fiscal policy. 5/

Leaving aside campaign promises, the actual policies that have been implemented so far are not growth-positive. But if the US economy slows down, the policy space to react is very limited. 4/

Historically, uncertainty means recession. When uncertainty is too high, firms temporarily and suddenly pause investment and hiring. Output and employment tend to fall quickly as a result. US policy uncertainty is at the second highest level of the past forty years. 3/

US economic data are deteriorating meaningfully. Jobless claims are on the rise, pushing the unemployment rate above 4%. Economic surprises have been trending down steadily since November. Confidence is shaky and real time gauges of GDP are dropping sharply. 2/

The Algebris Bullet | The Myth of Exceptionalism - Algebris Investments Download The sweeping Republican victory in US elections revived the American dream. President Trump would be a positive disruptive force for America. Active fiscal policy and tariffs would boost inte...

The narrative for markets going into the US election was that Trump may be bad for the world, but was certainly good for America. That’s starting to change, as massive policy uncertainty threatens the myth of American exceptionalism. 🧶 1/

algebris.com/algebrisbull...

Chronicle of a death foretold.

German Bund reacts to the historic announcement of up to 800€ billion in military and infrastructure spending - which quite frankly trumps the EU RearmEU plan.

Streamlining or hollowing out? The implications of the Omnibus package for sustainable finance EU reporting simplification will result in less information and introduce distortions in the sustainable finance market

🔎 Streamlining or hollowing out? The implications of the Omnibus package for sustainable finance

In this @bruegel.bsky.social First glance I highlight two key risks for both the European Green Deal and sustainable finance present in the first Omnibus package.

🔗 buff.ly/eKbn6t2
#EconSky

So far, Taxonomy-linked green bonds have been largely issued by already green companies, in sectors where demonstrating greeness is easier. In my view, this shows the Taxonomy framework doesn’t lend itself naturally to be used for transition finance.

#Econsky

🔗: www.bruegel.org/policy-brief...