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Uncertainty over output gap and structural-balance estimates remains elevated
June 17, 2019--The EU fiscal framework strongly relies on the structural budget balance indicator, which aims to measure the 'underlying' position of the budget. But this indicator is not observed, only estimations can be made. This post shows that estimates of the European Commission, the IMF, the OECD and national governments widely differ from each other and all estimates are subject to very large annual revisions.
The EU should get rid of the fiscal rules that rely on structural balance estimates and use this opportunity to fundamentally reform its fiscal framework.
The European fiscal framework involves a complex set of rules and indicators. An important indicator is the so-called structural balance of the general government, which aims to measure the underlying position of the budget balance. Its estimation tries to exclude the impact of the economic cycle (e.g. tax revenues are smaller than usual in an economic downturn) and one-off measures (like bank recapitalisation costs).
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Source: bruegel.org
Making the Euro Area More Resilient Before the Next Recession Hits
June 17, 2019--Growth in the euro area rebounded earlier this year, but it remains fragile, while risks have increased. Now is a good time for euro area economies to strengthen their ability to weather any future economic difficulties.
A new IMF staff paper looks at the resilience of euro area countries and finds that they have had more frequent and severe recessions than other advanced economies over the past 20 years.
An even greater cause for concern is that differences between member countries' growth and unemployment rates after euro area-wide downturns have widened. This widening was most stark following the 2008 global financial crisis.
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Source: IMF
ESMA Publishes 2018 Annual Report
June 17, 2019--The European Securities and Markets Authority (ESMA) has published its Annual Report, which reviews its achievements against its 2018 priorities and objectives in meeting its mission of enhancing investor protection and promoting stable and orderly financial markets in the European Union.
In 2018 ESMA's key achievements and highlights included its work on:
Promoting Supervisory Convergence
Brexit preparations including the work of the Supervisory Coordination Network; and
Product Intervention Measures-first use of ESMA's powers to restrict the sale and marketing of CFDs to retail investors and ban binary options;
Assessing risks to investors, markets and financial stability
MiFID II/MiFIR Data Management-successful data collection, processing and analysis with publication of key calculations and data under MiFID II/MiFIR;
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Source: ESMA
Monday Morning Memo: Review of the European ETF Market, May 2019
June 17, 2019--The promoters of ETFs in Europe enjoyed net inflows for May. Despite these, the assets under management in the European ETF industry decreased due to the negative performance of the underlying markets. In more detail, the assets under management in the European ETF industry decreased from €746.7 bn as of April 30, 2019, to €721.6 bn at the end of May.
The decrease of €25.1 bn for May was driven by the performance of the underlying markets (-€27.4 bn), while net sales contributed inflows of €2.3 bn to assets under management in the European ETF segment.
With regard to the overall number of products, it was not surprising equity funds (€494.1 bn) held the majority of assets, followed by bond funds (€196.8 bn), commodity products (€18.5 bn), alternative UCITS products (€6.8 bn), money market funds (€3.6 bn), mixed-asset funds (€1.7 bn), and "other" funds (€0.1 bn).
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Source: Refinitiv
New SPDR ETFs on Xetra: US government bonds and smart beta investment each with currency hedging
June 17, 2019--Since Monday two new Exchange Traded Funds issued by State Street Global Advisors are tradable via Xetra and Börse Frankfurt.
The SPDR S&P U.S. Dividend Aristocrats EUR Hdg UCITS ETF (Dist) allows investors to participate in the performance of US shares with high dividend payments. The Smart-Beta-ETF weights these shares based on the respective income levels and is tradable as a distributing and currency-hedged share class.
The SPDR ICE BofAML 0-5 Year EM USD Government Bond EUR Hdg UCITS ETF (Acc) offers a replica of US dollar-denominated emerging markets government bonds issued in the local US market and the Eurobond markets. The underlying index considers bonds with a fixed interest rate and a residual maturity of less than five years.
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Source: Deutsche Börse Cash Market
Ireland: Selected Issues
June 17, 2019--PERSONAL INCOME TAX REFORM: PAST AND PRESENT1
Ireland's personal income tax has undergone significant changes in the last fifteen years. From
reductions during the boom, through introduction during the crisis of an additional tax-the Universal
Social Charge that broadened the tax base and increased revenues-, to tax reductions with tax base
narrowing in the recent recovery years.
These changes resulted in a currently less efficient personal income tax system, with a high administrative burden and narrow tax base. Consideration should be given to an income tax reform, aiming at a broader tax base, reduced disincentives to work more, while preserving the overall tax yield and progressivity.
view the IMF Ireland: Selected Issues report
Source: IMF
ESMA Updates Q&A On EMIR Data Reporting
June 14, 2019--The European Securities and Markets Authority (ESMA) has issued today an update of its Q&A on practical questions regarding the European Markets Infrastructure Regulation (EMIR).
The Q&As provide further clarity regarding the implementation of EMIR Refit with respect to:
Q&A OTC 3 on the calculation framework towards the clearing thresholds; and
TR Q&A 51 regarding the notifications to be made by market participants to their competent authorities to apply an intragroup exemption from reporting.
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Source: ESMA
EU tries to revive plan for financial transaction tax
June 14, 2019--European Union finance ministers have discussed on Friday a plan for a 0.2% tax on shares, which Germany sees close to be agreed, although further work remains to be done.
Plans for an EU financial transaction tax (FTT) have stumbled over the past years. After an initial proposal in 2011 was blocked by member governments, a group of states pressed ahead, while the majority of the 28 EU states backed down.
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Source: Reuters
Euro Area-IMF Staff Concluding Statement of the 2019 Article IV Mission
June 13, 2019-- The euro area is at a challenging juncture. Growth is expected to firm-up later this year but there are significant risks to this outlook. Greater structural reforms efforts at the national level would enhance the region's resilience. In the event of a sharp downturn additional policy support will be needed. While there is some progress on euro area reforms, in many cases political consensus on the path forward is missing.
The incoming European Parliament and European Commission should use the opportunity to forge a renewed consensus around strengthening the foundations of the monetary union.
Outlook and Risks
Euro area growth has slowed and inflation continues to disappoint. Growth decelerated sharply in the second half of 2018, due to a combination of slowing external demand and mostly temporary domestic factors
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Source: IMF
ESMA updates register of derivatives to be traded on-venue under MiFIR
June 13, 2019--The European Securities and Markets Authority (ESMA) has updated today the public register of those derivative contracts that are subject to the trading obligation under the Markets in Financial Instruments Regulation (MiFIR).
Today's update consists of adding to the list several UK venues where some of the classes of derivatives subject to the trading obligation are available for trading.
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Source: ESMA
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