Some five years after the severe recession of 2009, private sector investment in Europe is still dangerously sluggish. And public investment has been cut further, reinforcing a long term downward trend. At a mere 2% of GDP, it has halved over thirty years.

The decline in investment rates in the euro area following the global financial crisis has been sharp. And it looks as though it will not reverse significantly. Rebooting investment and channeling investable funds to the right places on the continent is therefore a major challenge for policy makers.

Strikingly, the debate about the Feb 7 ruling of the German Constitutional Court against the ECB’s flagship OMT programme has gone almost unnoticed in France. This is wrong. The French should care about it.

In the United States, the regional Federal Reserve Banks (FRBs) are de facto subsidiaries of the central Federal Reserve Board. The claims and the debts between FRBs are settled through a transfer of assets which is actually a simple accounting arrangement.

Central banks in the Eurozone have accumulated claims and debts between themselves. These "Target 2 imbalances" substituted for the outstanding between private entities, in particular for the interbank loans and there is no mechanism to settle them. Should the Eurozone burst, they would become due.

Europeans face a fourfold crisis: a sovereign debt crisis, a banking crisis, a competitiveness crisis and a crisis of governance. CEPII's first Policy Paper highlight the key issues that need to be addressed for a comprehensive solution to be found.

In December 2011, the ‘six pack’ introduced a new surveillance procedure of macroeconomic imbalances at the European level. However, the ten indicators used for the early warning of imbalances do not seem much more relevant than the simple indicator of the current account balance.

On 12 of September, the European Commission (EC) has unveiled its proposal that shifts banking supervision to the European level, giving sweeping supervisory powers to the ECB. 

The Lettre du CEPII No. 324 shows that internal devaluation strategies in Latvia and in Ireland produced only limited adjustments at the price of considerable social costs.

The Eurozone is facing three intertwined and mutually reinforcing crises: a sovereign debt glut, banks’ financial fragility and dampened growth prospects. Further fiscal and political integration seems to be the only way to address these issues.