The European recovery fund

Casper de Vries
Erasmus School of Economics

Casper de Vries, Professor Emeritus of Monetary Economics at Erasmus School of Economics, was part of BNR Nieuwsradio's economists' panel. Here, he spoke about the new boss at the banking supervision department at the European Central Bank (ECB) and her policies and the European recovery fund.

At the ECB, there is a new boss at the banking supervision department. According to her, banks need to tighten their seat belts as there is still a lot of action to come. De Vries thinks this is because interest rates are high and have yet to feed through to the economy. This is likely to be seen first in real estate. In America this effect is already visible, but in Europe this movement is yet to come. The ECB is likely to start acting tightly, something the banks do not like as much. In Europe, the shortcoming is that there are no private markets that also provide funding, making us too dependent on banks. 

In addition, the president of the Dutch Bank released a report the other day. On this, de Vries indicates that, in crisis situations, the ECB is going to regret their large-scale purchases. According to him, this is not the instrument to sustain on such a large scale for so long. Besides, the positive effects are not easily identifiable, but the negative effects are disruptive. 

With the new formation, a new state budget needs to be drawn up. According to de Vries, the question is whether to invest or hand out presents. In addition, the Stability and Growth Pact (SGP) needs to be taken into account. Currently, countries adhere to it poorly, partly because there is no supreme authority. Conditionality is then the next step, according to de Vries. Flexibility may be possible for innovative investments, but in general a hard line should be drawn. That way, countries must learn to stick to the agreements.

Casper de Vries, Professor Emeritus of Monetary Economics at Erasmus School of Economics
More information

You can listen to the full podcast from BNR Nieuwsradio, 18 March 2024, here

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