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  • Author: Ilaria Maselli, Miroslav Beblavý
  • Publication Date: 01-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: There is a general consensus that to achieve employment growth, especially for vulnerable groups, it is not enough to kick-start economic growth. It is also essential to improve the s kills among both the high-and low-skilled population.
  • Topic: Economics, Migration, Science and Technology, Labor Issues
  • Political Geography: Europe, Somalia
  • Author: Rym Ayadi, Willem Pieter De Groen
  • Publication Date: 01-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The Arab Spring, which took root in Tunisia and Egypt in the beginning of 2011 and gradually spread to other countries in the southern Mediterranean, highlighted the importance of private-sector development, job creation, improved governance and a more equitable distribution of economic opportunities. The developments led to domestic and international demands on the governments in the region to implement the reforms needed to enhance business and investment conditions, modernise their economies and support the development of enterprises.
  • Topic: Economics, International Trade and Finance, Social Movement, Reform
  • Political Geography: Arabia, Egypt, Tunisia
  • Author: Viral V. Acharya, Sascha Steffen
  • Publication Date: 01-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The eurozone is mired in a recession. In 2013, the GDP of all 17 eurozone countries fell by 0.5% and the outlook for 2014 shows considerable risks across the region. To stabilise the common currency area and its (partly insolvent) financial system, a eurozone banking union is being established. An important part of the banking union is the Single Supervisory Mechanism (SSM), which will transfer the oversight of Europe's largest banks to the European Central Bank (ECB). Before the ECB takes over this responsibility, it plans to conduct an Asset Quality Review (AQR) in 2014, which will identify the capital shortfalls of these banks.
  • Topic: Economics, International Trade and Finance, Regional Cooperation, Monetary Policy
  • Political Geography: Europe
  • Author: Steven Blockmans, Luigi Scazzieri
  • Publication Date: 02-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: On January 20th, the International Atomic Energy Agency (IAEA) confirmed that Iran had been implementing its commitments as part of the Joint Plan of Action (JPA) agreed by the E3+3 in Geneva on November 24th of last year. In particular, the Agency confirmed that Iran had not installed new centrifuges, that it had stopped enriching uranium above 5%, that it had disabled connections between cascades being used to enrich up to 20%, and that it had begun the process of diluting half of its stockpile of 20%, while the other half is to be converted to oxide over the next six months. Over the next six months, the IAEA will continue to monitor Iranian enrichment, and activities at Arak, Fordow and Natanz. Immediately following the IAEA announcement, the US and EU suspended some of the sanctions currently imposed on Iran. Sanctions relief, quantified at $7 billion, comprises both the suspension of some sanctions and the repatriation of $4.2 billion of oil revenues in tranches.
  • Topic: Security, Economics, International Cooperation, International Organization, Treaties and Agreements, International Security, Nuclear Power
  • Political Geography: Iran
  • Author: Stefano Micossi, Ginevra Bruzzone, Miriam Cassella
  • Publication Date: 05-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: In July 2013, the European Commission adopted a new Banking Communication – the seventh since the start of the financial crisis – updating its criteria for the evaluation of state aid in the banking sector in response to the evolving economic and institutional environment. Under this Communication, any credit institution in need of recapitalisation or 'impaired asset' measures will be required, prior to any further action, to submit a plan for restructuring or the orderly winding down the bank. Moreover, whenever there is a capital shortfall, the Commission will require that, prior to any injection of public funds, not only shareholders – as has been the case so far – but also junior creditors write down or convert into equity their claims on the bank, regardless of whether the bank is under resolution, in order to minimise the need for state aid.
  • Topic: Economics, International Trade and Finance, Monetary Policy
  • Political Geography: Europe
  • Author: Stefano Micossi, Fabrizia Peirce
  • Publication Date: 07-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The policy debate about how best to restore growth in the flagging eurozone economy has been plagued by demands from some highly indebted member countries that the Stability and Growth Pact (SGP) be loosened to leave greater room to support the economy with budgetary instruments. These demands have been met with an instant rebuff from the Commission and other financially solid members who argue that loosening the Pact would do little to restore sound growth. This question has also hindered the broader discussion on the need for and content of a renewed growth strategy for the eurozone and the European Union, no least by fuelling fresh mistrust among their member states.
  • Topic: Economics, International Trade and Finance, Reform
  • Political Geography: Europe
  • Author: Willem Pieter De Groen
  • Publication Date: 11-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The Comprehensive Assessment conducted by the European Central Bank (ECB) representsa considerable step forward in enhancing transparency ineuro-area banks' balance sheets. The most notable progress since the previous European stress test has been the hamonisation of the definition of non-performing loans and other concepts as well as uncovering hidden losses, which resulted in a €34 billion aggregate capital-chargenet of tax. Despite this tightening,most banks were able to meet the 5.5% common equity tier 1 (CET1) threshold applied in the test, whichsuggests that the large majority of the euro-area banks have improvedtheir financial position sufficiently to no longer constrainthem in financing the economy.Our own estimation based on the detailed results, however,provide a more nuanced picture, with a large numberof the banks still highly leveraged and in many cases unable to meet the regulatory capital requirementsthat will be introduced in the coming years underthe adverse stress test scenario.
  • Topic: Debt, Economics, International Trade and Finance, Global Recession
  • Political Geography: Europe
  • Author: Michael Emerson, Denis Cenusa, Tamara Kovziridse, Veronika Movchan
  • Publication Date: 09-2014
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: While EU and US sanctions against Russia over its aggression in Ukraine, and Russia's counter-sanctions, are much discussed due to their evident political significance, less attention has been given to Russia's punitive sanctions against the three Eastern European states – Ukraine, Moldova and Georgia – that have signed with the EU Association Agreements (AA), which include Deep and Comprehensive Free Trade Area (DCFTA) provisions. This paper therefore documents these trade policy restrictions and embargoes imposed by Russia, and provides some first indications of their impact. The immediate impact on trade flows, especially for agri-food products, has been substantial, albeit with some leakage through Belarus. The main instrument for the Russian measures has been allegations of non-conformity with Russian technical standards, although the correlation of these allegations with movements in Russia's geopolitical postures makes it obvious that the Russian technical agencies are following political guidelines dressed up as scientific evidence. These measures also push the three states into diversifying their trade marketing efforts in favour of the EU and other world markets, with Georgia already having taken significant steps in this direction, since in its case the Russian sanctions date back to 2006. In the case of Ukraine, Russia's threat to cancel CIS free trade preferences infiltrated trilateral talks between the EU, Ukraine and Russia, leading on 12 September to their proposed postponement until the end of 2015 of the 'provisional' implementation of a large part of the AA/DCFTA. This was immediately followed on 16 September by ratification of the AA/DCFTA by both the Rada in Kyiv and the European Parliament, which will lead to its full and definitive entry into force when the 28 EU member states have also ratified it. However Putin followed the day after with a letter to Poroshenko making an abusive interpretation of the 12 September understanding.
  • Topic: Economics, International Trade and Finance, Power Politics, Sanctions
  • Political Geography: Russia, Europe, Ukraine, Moldova, Georgia
  • Author: Hrant Kostanyan, Bruno Vandecasteele
  • Publication Date: 10-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Besides the Eastern Partnership's (EaP) bilateral and multilateral framework and the Civil Society Forum, the European Union (EU) engages with the EaP countries – Belarus, Ukraine, Moldova, Georgia, Armenia and Azerbaijan – through multilateral parliamentary cooperation, namely within the EuroNest Parliamentary Assembly (EuroNest PA).
  • Topic: Foreign Policy, Economics, International Trade and Finance, Politics, Treaties and Agreements
  • Political Geography: Europe, Ukraine, Armenia, Belarus
  • Author: Bernard Delbecque
  • Publication Date: 10-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: This paper argues that it should be possible to complement Europe's Economic and Monetary Union with an insurance-type shock absorption mechanism to increase the resilience of member countries to economic shocks and reduce output volatility. Such a mechanism would neither require the establishment of a central authority, nor would it lead to permanent transfers between countries. For this mechanism to become a reality, however, it would be necessary to overcome certain technical problems linked to the difficulty of anticipating correctly the position of an economy in the business cycle.
  • Topic: Economics, Regional Cooperation, Governance
  • Political Geography: Europe
  • Author: Daniel Gros
  • Publication Date: 12-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: There are three aggregate numbers that describe the problem the Single Supervisory Mechanism (SSM) is inheriting: the 130 banks under its direct supervision hold assets worth 250% of the euro area's GDP, their capital is equivalent to only 4% of their assets' value and they have made zero profits, in the aggregate, over the last four years.
  • Topic: Debt, Economics, Markets, Financial Crisis, Reform
  • Political Geography: Europe
  • Author: Andrea Renda
  • Publication Date: 12-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: A lively debate emerged on the proposed "Connected Continent" legislative package presented by the European Commission in September 2013. The package contains a proposed rule on the 'open Internet', which was heavily discussed in European Parliament hearings in early December. This commentary argues that while the proposed rule is in principle balanced and appealing, it is utterly impractical due to the enormous uncertainty that its application would entail. At the same time, the rule is very far from what neutrality proponents have argued for almost a decade: rather than the place for internet freedom, it would transform the Web into a place requiring constant micro-management and tutoring of user behavior. Both arguments lead to the conclusion that the current proposal should be at once reformed and analysed under a more holistic lens. On the one hand, Europe should launch an ambitious project for the future, converged infrastructure by mobilising resources and reforming rules to encourage investment into ubiquitous, converged, 'always on' connectivity. On the other hand, enhanced legal certainty for broadband investment could justify a more neutrality-oriented approach to traffic management practices on the Internet. The author proposes a new approach to Internet regulation which, altogether, will lead to a more balanced and sustainable model for the future, without jeopardising user freedom.
  • Topic: Debt, Economics, Monetary Policy, Infrastructure, Financial Crisis
  • Political Geography: Europe
  • Author: Rym Ayadi, Willem Pieter De Groen
  • Publication Date: 12-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The 2007-09 global financial crisis led to a virtual collapse in economic activity and increased financial volatility worldwide. For the developing countries, the main channel of transmission has been a drop in external transactions, such as trade, financial and capital flows, and remittances. The southern and eastern Mediterranean countries (SEMC) have also faced declining economic activity, although there seems to be considerable variation in the relative magnitudes and timing of the decline. Most of the economies in the Mediterranean basin have had delayed but longer-lasting consequences as a result of the crisis, driven mostly by their endemic trade and investment ties with the EU and the Gulf Cooperation Council (GCC) countries.
  • Topic: Debt, Economics, Markets, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Jacques Pelkmans, Ineke Gubbels-van Hal, Lorna Schrefler
  • Publication Date: 12-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Right from the start of the REACH debate, following the Commission proposal of October 2003, one of the more serious concerns was whether and how SMEs could cope with REACH. Indeed, there were doubts whether one of the main objectives of REACH – competitiveness of chemical and downstream companies – is consistent with the design and detailed implementation of REACH. Already in 2005, the European Parliament adopted a resolution on this aspect, insisting e.g. on lower fees for SMEs as one remedy to reduce the expected regulatory burden for smaller companies. The fear of REACH being unduly heavy and costly for SMEs has never gone away (see e.g. Gubbels Pelkmans, 2009) but merely receded in the background when the Commission and the European Chemical Agency (ECHA) were in the process of building and elaborating the REACH machinery in operational terms. This year, the problem is rearing its head again in a magnified fashion and it will not go away so easily this time.
  • Topic: Economics, International Trade and Finance, Markets, Monetary Policy
  • Political Geography: Europe
  • Author: Matthias Busse, Christal Morehouse
  • Publication Date: 12-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Against the background of demographic decline and growing economic competitiveness from emerging economies, this Policy Brief looks into the potential benefits of increased intra-EU labour mobility. On the basis of an examination of the 'German case' on EU labour mobility. It proposes ideas on how to better foster a European fair deal on talent, one that would benefit the EU as a whole. It concludes with a proposal on how to increase the potential benefits of the freedom of movement.
  • Topic: Demographics, Economics, Migration, Labor Issues
  • Political Geography: Europe
  • Author: Paul De Grauwe, Yuemei Ji
  • Publication Date: 11-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: One of the more troublesome features of banks is that they still hold so little equity. In 2013 the capital and reserves of EU banks amounted to only 7.6% of total balance sheets. Well-run businesses outside the banking sector typically hold equity shares of 20%, 30% or more of their balances sheets. For good reasons; these well-run firms know that shocks can occur that could wipe out large parts of their balance sheets. Good business strategy thus leads these firms to hold sufficiently large buffers to avoid bankruptcy.
  • Topic: Debt, Economics, Monetary Policy
  • Political Geography: Europe
  • Author: Stefano Micossi, Jacopo Carmassi, Ginevra Bruzzone
  • Publication Date: 11-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The European Commission proposal for a Regulation establishing a European Single Resolution Mechanism (SRM) for banks is now under consideration before the European Parliament and the Council. The main principles and tools applicable for resolving a failing bank are contained in the June 2012 Commission proposal for a Directive on bank recovery and resolution (BRR), aimed at harmonising crisis management and resolution tools in EU member states, which is also under consideration by the European legislators. Any discussion of the new system must therefore be based on both proposals.
  • Topic: Debt, Economics, International Trade and Finance, Markets, Monetary Policy, Reform
  • Political Geography: Europe
  • Author: Karel Lannoo
  • Publication Date: 11-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: It is still an unresolved question whether a process for financial services regulatory cooperation and convergence will be included in the Transatlantic Trade and Investment Partnership (TTIP).From a n end-user's perspective, it could be argued that its inclusion could be an opportunity not only as regards product choice, but also to improve the consumer or investor protection regulatory environment on both sides of the Atlantic. The inclusion would also be in line with the assessments made by both the EU and the US that the G-20 agenda has been incorporated in local legislation and that both regimes are thus 'equivalent'.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: United States, Europe
  • Author: Daniel Gros, Matthias Busse
  • Publication Date: 11-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The Macroeconomic Imbalance Procedure (MIP) was designed to prevent the emergence of imbalances like the large and persistent current account deficits that occurred in Spain and Ireland. But within this mechanism, a current account surplus is also viewed as a source of concern. Indeed, last year's Alert Mechanism Report (AMR), issued by the European Commission signalled an excessive current account surplus for the Netherlands and Luxembourg, while Germany just barely scraped by with a 5.9% surplus, marginally evading the 6% threshold (over a 3-year average). With the most recent report, however, Germany's status has changed. Along with the Netherlands and Luxembourg, it too has now been singled out as a euro-area country with a surplus above the upper threshold.
  • Topic: Economics, International Trade and Finance, Markets, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Germany
  • Author: Andrea Renda
  • Publication Date: 10-2013
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: This Policy Brief looks at available options for the mid-term review of Europe 2020, which is currently being addressed both by the European Commission and by several Council formations under the aegis of the Italian presidency of the EU, and will be finalised by March 2015.
  • Topic: Economics, Political Economy, Infrastructure, Governance, Reform
  • Political Geography: Europe, Italy
  • Author: Stefano Micossi
  • Publication Date: 03-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The eurozone is in recession and will show negative growth in 2012; GDP will fall sharply in Greece and Portugal, and there is substantial risk that Spain and Italy will follow suit (the Commission's recent forecasts seem overly optimistic and complacent; the IMF is more downbeat). But fiscal policies are uniformly restrictive throughout the eurozone and much of the Union, and the hopes that fiscal consolidation could spur growth by improving household and business confidence are not materialising. In reality, domestic demand has been hit too hard by fiscal consolidation, and investment throughout the Union remains well below pre- crisis levels. Credit is tight due to the deteriorating quality of borrowers and the ongoing deleveraging in banking.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Markets, Financial Crisis
  • Political Geography: Europe, Greece
  • Author: Daniel Gros, Thomas Mayer
  • Publication Date: 03-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: This paper argues that the new permanent European rescue fund, the European Stability Mechanism (ESM), should be provided with a liquidity backstop by having it registered as a bank – and be treated as such by the European Central Bank. If the crisis were to become acute again, the ESM would stand ready to intervene in secondary markets, potentially with almost unlimited amounts of funding. Access to central bank financing will be crucial in a future crisis, because in such a crisis risk aversion is likely to be extreme, and even the ESM might not be able to raise at very short notice the huge sums that might be required to prevent a breakdown of the financial system. Hundreds of billions of euro might be needed just to top up the programmes for Greece, Ireland and Portugal – and Spain and Italy may require more than a thousand billion euro. Sums of this order of magnitude cannot be raised quickly by a new institution. Simply increasing the headline size of the ESM might thus be of little use.
  • Topic: Debt, Economics, Monetary Policy, Financial Crisis
  • Political Geography: Greece, Spain, Italy, Portugal, Ireland
  • Author: Jonas Teusch
  • Publication Date: 03-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: This Policy Brief argues that pursuing the renewables objective could contribute to the completion of the internal electricity market, help to overcome opposition to transmission projects and decrease the market power of incumbents. Conversely, an integrated internal electricity market means less price volatility in specific regional markets, which allows for more efficient deployment and grid integration of renewables.
  • Topic: Economics, Energy Policy, Markets
  • Political Geography: Europe
  • Author: Paul De Grauwe
  • Publication Date: 05-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: One of the major problems of the eurozone is the divergence of the competitive positions that have built up since the early 2000s. This divergence has led to major imbalances in the eurozone where the countries that have seen their competitive positions deteriorate (mainly the so - called ' PIIGS ' – Portugal, Ireland, Italy, Greece and Spain ) have accumulated large current account deficits and thus external indebtedness, matched by current account surpluses of the countries that have improved their competitive positions (mainly Germany).
  • Topic: Economics, Markets, Regional Cooperation, Global Recession, Financial Crisis
  • Political Geography: Europe, Greece, Germany, Spain, Italy, Portugal, Ireland
  • Author: Daniel Gros
  • Publication Date: 04-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Lax financial conditions can foster credit booms. The global credit boom of the last decade led to large capital flows across the world, including large movements of resources from the Northern countries of the euro area towards the Southern part. Since the start of the crisis and more markedly after 2009, these flows have suddenly stopped, creating severe adjustment pressures. This paper argues that, at this point, the common monetary policy can only try to mitigate the unavoidable adjustment by maintaining overall financial stability. The challenge is to strike a delicate balance between providing liquidity for solvent institutions while keeping the overall pressure on for a rapid correction of the imbalances.
  • Topic: Economics, Markets, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Daniel Gros, Cinzia Alcidi
  • Publication Date: 04-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Spain faces high unemployment and slow growth. This paper focuses on an important source of those problems, namely its housing market. While some adjustment has occurred since Spain's housing bubble burst in 2008, the authors find that house prices and construction need to decrease more to slow Spain's unsustainable accumulation of foreign debt.
  • Topic: Debt, Economics, Markets, Financial Crisis
  • Political Geography: Europe, Spain
  • Author: Rym Ayadi, Emrah Arbak, Willem Pieter De Groen
  • Publication Date: 06-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Adopted by the European Commission in July 2011, the proposed Capital Requirements Directive and Regulation (CRD IV-CRR) translate into EU law the Basel III standards adopted by the Basel Committee for Banking Supervision (BCBS). Among other things, the proposal increases the quality and quantity of the minimum capital; introduces new rules on liquidity, leverage ratios, counter-cyclical buffers and systemically important financial institutions; and amends the definitions of counterparty credit risk and rules for the banking book. The rules complement the earlier amendments that strengthened the capital and disclosure requirements for the trading book and resecuritization instruments as well as requirements to ensure that remuneration policies do not lead to excessive risk-taking.
  • Topic: Debt, Economics, Markets, Financial Crisis
  • Political Geography: Europe
  • Author: Stefano Micossi
  • Publication Date: 06-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Once again the European Council will meet in an emergency session at the end of June, with the eurozone economy in recession and actually plummeting in its Southern periphery. Further doubts are also growing on the sustainability of sovereign debts due to the vicious spiral of deteriorating bank balance sheets, ballooning potential liabilities from banking rescues and widening spreads on government borrowings. The sovereign debt crisis in the periphery has now turned into a fully fledged banking crisis that threatens to spread from Greece to Spain and tomorrow, who knows, to Italy, France and even Germany itself.
  • Topic: Debt, Economics, Regional Cooperation, Financial Crisis, Governance
  • Political Geography: Europe, Greece, France, Germany, Spain, Italy
  • Author: Daniel Gros
  • Publication Date: 05-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: As the euro crisis continues and unemployment climbs to new heights, the clamour calling for Europe to 'do something' is getting louder. But the real question is: can Europe, or rather the EU, do 'something' that would actually have a real impact on unemployment? In other words, does a European plan or employment strategy make sense?
  • Topic: Economics, Markets, Labor Issues, Financial Crisis
  • Political Geography: Europe
  • Author: H. Onno Ruding
  • Publication Date: 05-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The so-called 'euro crisis' is of the utmost economic, financial and political importance for all member countries of the euro area and for the future of the Economic and Monetary Union (EMU). In my view, however, it is not primarily a euro crisis in the strict sense. The euro itself is of course involved, but, as a currency with a rather stable exchange rate vis-à-vis other currencies and with a major role in global financial markets, it is not at the heart of the crisis. Rather the crisis is a matter of the serious imbalances in the economies of several euro-area countries, particularly their budget deficits and sovereign debts and as well as their lack of competitiveness and balance-of-payments deficits.
  • Topic: Economics, Markets, Monetary Policy
  • Political Geography: Europe
  • Author: Daniel Gros, Thomas Mayer
  • Publication Date: 08-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: For most of the time since the early 1950s, national savings in Germany have tended to exceed national investment, resulting in a current account surplus. Most of these excess savings have been intermediated by the domestic banking system, which has had difficulties investing these German surpluses abroad given that it is prohibited by law from taking any exchange rate risk. This tended to keep the surplus within limits most of the time (less than 1- 2% of GDP). With the advent of the euro, however, German surpluses could become much larger and seem now to have become structurally engrained at 6% of GDP, or over one-quarter of savings. Since the start of the euro crisis, German private savers have repatriated their investments – effectively unloading their exposure onto the public sector as German banks have deposited hundreds of billions of euro at the Bundesbank. These funds are being lent by the ECB to banks in the euro area periphery (at 75 bps) – ensuring effectively a negative real return.
  • Topic: Economics, International Trade and Finance, Markets, Sovereign Wealth Funds
  • Political Geography: Europe, Germany
  • Author: Daniel Gros
  • Publication Date: 07-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The sentiment that the euro is now in real danger is based in large part on the widespread conviction that interest rates of 6-7% are simply unsustainable for both Italy and Spain., After taking a closer look at the fundamentals, however, Daniel Gros concludes in this new Policy Brief that both countries should be able to live with this level of interest rates for quite some time, but only if they mobilize domestic savings, which remain strong in both countries. For Spain, some debt/equity swaps are also needed.
  • Topic: Debt, Economics, Markets, Financial Crisis
  • Political Geography: Europe, Spain, Italy
  • Author: Stefano Micossi
  • Publication Date: 07-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Two years after the first Greek rescue in May 2010, crisis management in the eurozone has still failed to restore confidence. A vivid picture of the situation can be found in Figure 1: the constellation of spreads on ten-year sovereign debts over the Bund in the eurozone is wider than it was before monetary union, as though financial markets had already discounted its breakdown. Temporary respites, notably in the early part of 2012, have not interrupted the trend of increasing divergence that risks undermining the credibility of adjustment efforts under way.
  • Topic: Debt, Economics, Markets, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Jacques Pelkmans, Anabela Correia de Brito
  • Publication Date: 07-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Effective enforcement and compliance with EU law is not just a legal necessity, it is also of economic interest since the potential of the Single Market will be fully exploited. Enforcement barriers generate unjustified costs and hindrances or uncertainty for cross-border business and might deprive consumers from receiving the full benefit of greater choice and/or cheaper offers.
  • Topic: Economics, Markets, Monetary Policy, Law
  • Political Geography: Europe
  • Author: Daniel Gros, Cinzia Alcidi, Alessandro Giovannini
  • Publication Date: 07-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Different economic and financial structures require different crisis responses. Different crises also require different tools and resources. The first 'stage' of the financial crisis (2007-09) was similar on both sides of the Atlantic, and the response was also quite similar. The second stage of the crisis is unique to the euro area. Increasing financial disintegration within the region has forced the ECB to become the central counterparty for the entire cross-border banking market and to intervene in the sovereign bond market of some stressed countries. The actions undertaken by the European Central Bank (ECB), however, have not always represented the best response, in terms of effectiveness, consistency and transparency. This is especially true for the Securities Markets Programme (SMP): by de facto imposing its absolute seniority during the Greek PSI (private sector involvement), the ECB has probably killed its future effectiveness.
  • Topic: Debt, Economics, International Trade and Finance, Markets, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Henk L.M. Kox
  • Publication Date: 09-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: In most EU member states, the business services industry has booked no productivity growth during the last two decades. The industry's performance in the other member states was weaker than that of its US counterparts. Exploring what may be causing this productivity stagnation, this policy brief reports that weak competition has contributed to the continuing malaise in European business services. The study analyzed the persistence (over time) of firm-level inefficiencies. The evidence further suggests that competition between small firms and large firms in business services is weak. Markets for business services work best in countries with flexible regulation on employment change and with low regulatory costs for firms that start up or close down a business. Countries that are more open to foreign competition perform better in terms of competitive selection and productivity.
  • Topic: Economics, International Trade and Finance, Markets, Regional Cooperation
  • Political Geography: United States, Europe
  • Author: Stefano Micossi, Jacopo Carmassi, Carmine Di Noia
  • Publication Date: 09-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The European Commission has published its proposals for the transfer of supervisory responsibilities to the European Central Bank (ECB), under Article 127(6) of the TFEU, providing a comprehensive and courageous 'first step' towards a European banking Union, the other steps being European deposit insurance and resolution procedures. However, on a number of issues the Commission's chosen path raises questions that should be brought out in the open and fully recognized before final deliberation by the Council.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: Europe
  • Author: Anne Wetzel, Jan Orbie
  • Publication Date: 08-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: While the EU has recently upgraded its external democracy promotion policies through a set of initiatives such as the “Partnership for Democracy and Shared Prosperity with the Southern Mediterranean”, the proposal for a “European Endowment of Democracy”, and the “Strategic Framework and Action Plan on Human Rights and Democracy”, there is one challenge that it has not yet addressed: what exactly does it aim to support?
  • Topic: Foreign Policy, Civil Society, Democratization, Economics, Sociology
  • Political Geography: Europe
  • Author: Daniel Gros, Dirk Schoenmaker
  • Publication Date: 09-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Cross-border banking is currently not stable in Europe. Cross-border banks need a European safety net. Moreover, a truly integrated European level banking system may help to break the diabolical loop between the solvency of the domestic banking system and the fiscal standing of the national sovereign.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: Europe
  • Author: Alan Riley
  • Publication Date: 10-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: It may well be that the Gazprom antitrust case launched by DG Competition on September 4th will turn out to be the landmark antitrust case of this decade, as Microsoft was of the last decade. The argument of this paper is that, for a host of political and economic reasons, this case is likely to be hard fought by both sides to a final prohibition decision and then onwards into the EU courts. In the process, the European gas market and the powers of DG Competition in the energy field are likely to be transformed.
  • Topic: Economics, Markets, Natural Resources, Law
  • Political Geography: Europe
  • Author: Daniel Gros, Thorsten Beck
  • Publication Date: 12-2012
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The June 2012 European Council decided that the legal basis for the 'Single Supervisory Mechanism' should be Article 127(6) of the Treaty, and that the SSM should 'involve' the ECB. This implies only that supervision should be concentrated within the ECB. In the policy discussion it is, however, generally taken for granted that there should be 'Chinese walls' between the supervisory and monetary policy arms of the ECB. The current legislative proposal is explicit on this account.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Governance
  • Political Geography: China, Europe
  • Author: Daniel Gros
  • Publication Date: 05-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: As EU leaders muddle through the eurozone crisis, the debate about its root causes continues. CEPS Director Daniel Gros argues in this Policy Brief that the debate is important if we are to understand how to prevent future crises. In his view, external debt is the key to the turmoil in European economies and that the focus on total public debt is therefore misleading.
  • Topic: Debt, Economics, Financial Crisis
  • Political Geography: Europe
  • Author: Karel Lannoo
  • Publication Date: 04-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Two years after the London G-20, CEPS Chief Executive Karel Lannoo finds that the EU is well advanced in delivering on the commitments made for the 2013 target date. Important steps have been taken on the institutional side, and regulatory changes are moving ahead. On some issues, in fact, such as remuneration, the EU has made even greater headway than the US. But certain key sensitive matters remain, such as bank resolution or structural changes.
  • Topic: Debt, Economics, Global Recession, Monetary Policy, Financial Crisis
  • Political Geography: United States, Europe, London
  • Author: Marcello Messori
  • Publication Date: 03-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: After the Greek public debt crisis and the bilateral loans to Greece from the other members of the European Monetary Union (EMU), in May 2010 the Ecofin Council launched the European Financial Stabilization Mechanism (EFSM). In June of the same year the EMU countries instituted the European Financial Stability Facility (EFSF). These two mechanisms, which are charged with providing support to EMU countries in “exceptional difficulty”, received their baptism of fire with Ireland in January 2011 and successfully made their first bond issue on the market.
  • Topic: Debt, Economics, Monetary Policy
  • Political Geography: Europe, Greece
  • Author: Christian Kopf
  • Publication Date: 03-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The pricing of sovereign credit risk is a necessary component of the financial architecture of the European Monetary Union. However, unnecessarily high and volatile risk premia on government bonds are currently preventing effective financial intermediation within the euro area, thereby inhibiting its economic recovery. Several proposals have been made on how these risk premia should be brought down, namely i) permanent pooling of funding through joint bond issuance, ii) temporary liquidity assistance through multilateral funds, iii) debt buybacks using multilateral funds, and iv) debt restructuring.
  • Topic: Debt, Economics, Global Recession, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Stefano Micossi, Fabrizia Peirce, Jacopo Carmassi
  • Publication Date: 03-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: In recent weeks pressures on the euro and eurozone sovereign debtors have subsided. Buoyant growth in the global economy, increasingly benefiting also the European economy, has of course played an important role in calming financial markets. But even more important has been the perception that France and Germany are again working constructively for a strong economic Europe. More broadly, the acute turbulence in financial markets since the spring of 2010 may have finally convinced our political leaders, notably including the German political establishment, that the benefits of a stable currency far outweigh the costs that may have to be borne to make it work properly. The euro will only be trusted if the member states effectively coordinate their economic policies not only to ensure fiscal stability, but also to eliminate persistent divergences in productivity leading to unsustainable imbalances between national savings and investment (Schäuble, 2011).
  • Topic: Security, Economics, Regional Cooperation, Monetary Policy, Financial Crisis, Governance
  • Political Geography: Europe, France, Germany
  • Author: Jacques Pelkmans
  • Publication Date: 02-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: With the Commission's consultation period on the Single Market Act (European Commission, 2010) nearing its end, it is high time for the EU to get its act together. Priority should immediately be restored to the issue of the Single Market, and EU powers to deepen and widen the internal market, where economically justifiable, ought to be utilized to the full. This CEPS Policy Brief explains why.
  • Topic: Economics, Regional Cooperation
  • Political Geography: Europe
  • Author: Michael Emerson
  • Publication Date: 08-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: For the present UK government, full accession to the Schengen area, a passport- free travel area covering most of Europe, is a red line that it will not cross. Ireland shares a common travel area and land border with the UK and is also bound by this decision. However, it is becoming increasingly clear that the UK, along with Ireland, is suffering serious economic and reputational costs as a result of its separate visa and border management policies.
  • Topic: Economics, International Trade and Finance, Markets, Regional Cooperation
  • Political Geography: Britain, United Kingdom, Europe, Ireland
  • Author: José M. Abad, Axel Löffler, Holger Zemanek
  • Publication Date: 07-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: This paper analyses the implications of a continued divergence of TARGET2 balances for monetary policy in the euro area. The accumulation of TARGET2 claims (liabilities) would make the ECB's liquidity management asymmetric once the TARGET2 claims in core countries have crowded out central bank credit in those regions. Then while providing scarce liquidity to banks in countries with TARGET2 liabilities, the ECB will need to absorb excess liquidity in countries with TARGET2 claims. We discuss three alternatives and their implications for absorbing excess liquidity in core regions: 1) using market-based measures might accelerate the capital flight from periphery to core countries and would add to the accumulation of risky assets by the EC B; 2) conducting non-mark et based measures, such as imposing differential (unremunerated) reserve requirements, would distort banking markets and would support the development of shadow banking; and 3) staying passive would lead to decreasing interest rates in core Europe entailing inflationary pressure and overinvestment in those regions and possibly future instability of the banking system.
  • Topic: Economics, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Christian Kopf
  • Publication Date: 06-2011
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: French commercial banks are proposing a swap of €85.5 billion in Greek government bonds maturing between 2011 and 2014 into a combination of new long-term Greek bonds with principal guarantee and cash payments. If this initiative were implemented under the proposed parameters, private creditors would only suffer a minimal haircut and official lenders would be provided with cash-flow relief of around €20 billion over the next three years, but the solvency of the Hellenic Republic would worsen significantly.
  • Topic: Debt, Economics, Financial Crisis
  • Political Geography: Europe