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  • Author: Glada Lahn, Arno Behrens, Jorge Núñez Ferrer, Eike Dreblow, Mathilde Carraro, Sebastian Veit
  • Publication Date: 03-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Despite the continuous efforts of developing countries and the international community to reduce energy poverty, some 2.7 billion people around the world still rely on traditional biomass for cooking and heating and 1.3 billion people do not have access to electricity. Over 80% of the energy poor live in rural areas and roughly two thirds in sub-Saharan Africa and India. While fossil fuels will inevitably play a major role in expanding on-grid energy supply, this study shows that renewable energy sources – and especially small decentralised solutions – have huge potential for providing reliable, sustainable and affordable energy services for the poor, particularly in rural areas of developing countries. Many challenges remain, including financing, capacity-building, technology transfer and governance reforms. A careful assessment of the environmental impacts of renewable energy technologies, particularly those on water, is an important prerequisite for donor finance. With the right design, energy access projects can also bring a host of developmental co-benefits. It should be possible for international initiatives including the UN's Year of Sustainable Energy for All and the EU's partnership with Africa to build on the rich experience and lessons learned from pilot projects over the last two decades in order to optimise donor effectiveness in this area.
  • Topic: Energy Policy, Poverty, Science and Technology, United Nations, Natural Resources
  • Political Geography: Africa, Europe, India
  • Author: Paul De Grauwe, Yuemei Ji
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper tests the hypothesis that government bond markets in the eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios and fiscal space variables, and was the result of negative self-fulfilling market sentiments that became very strong since the end of 2010. We argue that this can drive member countries of the eurozone into bad equilibria.
  • Topic: Economics, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Andrey S. Makarychev, Larisa Deriglazova, Oleg Reut
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The rising generation of Russian foreign policy experts and commentators, especially outside Moscow, is increasingly sceptical about the key premises of Russian diplomacy and see more failures than achievements in Russia's relations with its closest partners, including the EU and neighbouring states. This is the conclusion that stems from a series of interviews and focus groups carried out with young Russian professionals about Russia's current foreign policies. The study reveals a strong cognitive dissonance between the official diplomatic discourse of the Kremlin and the perceptions of young experts who work in a variety of fields dealing with international cooperation either at a lower level of the state hierarchy or in different professional domains. This paper summarises the key findings of this project and discusses their practical implications.
  • Topic: Foreign Policy, Diplomacy
  • Political Geography: Russia, Europe, Moscow
  • Author: Daniel Gros, Dirk Schoenmaker
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The eurozone is caught in a 'diabolical loop' in which weak domestic banking systems damage sovereign fiscal positions and conversely, in which risky sovereign positions disproportionately threaten domestic banking stability. A European-level banking system could go a long way towards breaking this unfortunate loop and stabilising the eurozone. This would require a European safety net for cross-border banks.
  • Topic: Economics, Regional Cooperation, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Daniel Gros
  • Publication Date: 07-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper presents a simple model that incorporates two types of sovereign default cost: first, a lump-sum cost due to the fact that the country does not service its debt fully and is recognised as being in default status, by ratings agencies, for example. Second, a cost that increases with the size of the losses (or haircut) imposed on creditors whose resistance to a haircut increases with the proportional loss inflicted upon them.
  • Topic: Debt, Economics, International Trade and Finance, Markets, Financial Crisis
  • Political Geography: Europe
  • Author: Andrea Renda, Fabrizio Cafaggi
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Private governance is currently being evoked as a viable solution to many public policy goals. However, in some circumstances it has shown to produce more harm than good, and even disastrous consequences as in the case of the financial crisis that is raging in most advanced economies. Although the current track record of private regulatory schemes is mixed, policy guidance documents around the world still require that policy-makers give priority to self-and co-regulation, with little or no additional guidance being given to policymakers to devise when, and under what circumstances, these solutions can prove viable from a public policy perspective. With an array of examples from several policy fields, this paper approaches regulation as a public-private collaborative form and attempts to identify possible policy tools to be applied by public policy-makers to efficiently and effectively approach private governance as a solution, rather than a problem. We propose a six-step theoretical framework and argue that IA techniques should: i) define an integrated framework including both the possibility that private regulation can be used as an alternative or as a complement to public legislation; ii) involve private parties in public IAs in order to define the best strategy or strategies that would ensure achievement of the regulatory objectives; and iii) contemplate the deployment of indicators related to governance and activities of the regulators and their ability to coordinate and solve disputes with other regulators.
  • Topic: Economics, International Trade and Finance, Markets, Regional Cooperation
  • Political Geography: Europe
  • Author: Jonas Teusch
  • Publication Date: 09-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper analyses the interplay between shale gas and the EU internal gas market. Drawing on data presented in the 2012 International Energy Agency's report on unconventional gas and additional scenario analyses performed by the Joint Research Centre, the paper is based on the assumption that shale gas will not fundamentally change the EU's dependence on foreign gas supplies. It argues that attention should be shifted away from hyping shale gas to completing the internal gas market. Two main reasons are given for this. First, the internal gas market is needed to enable shale gas development in countries where there is political support for shale gas extraction. And second, a well-functioning internal gas market would, arguably, contribute much more to Europe's security of supply than domestic shale gas exploitation. This has important implications for the shale gas industry. As it is hard to see how subsidies or exemptions from environmental legislation could be justified, shale gas development in Europe will only go ahead if it proves to be both economically and environmentally viable. It is thus up to the energy industry to demonstrate that this is the case.
  • Topic: Security, Economics, Energy Policy, Environment, Natural Resources, Famine
  • Political Geography: Europe
  • Author: Paul De Grauwe, Yuemei Ji
  • Publication Date: 09-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper analyzes two claims that have been made about the Target2 payment system. The first one is that this system has been used to support unsustainable current account deficits of Southern European countries. The second one is that the large accumulation of Target2 claims by the Bundesbank represents an unacceptable risk for Germany if the eurozone were to break up. We argue that these claims are unfounded. They also lead to unnecessary fears in Germany that make a solution of the eurozone crisis more difficult. Ultimately, this fear increases the risk of a break-up of the eurozone. Or to paraphrase Franklin Roosevelt, what Germany should fear most is simply its own fear.
  • Topic: Economics, Regional Cooperation, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Germany
  • Author: Giacomo Luciani, François-Loïc Henry
  • Publication Date: 06-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Holding strategic oil stocks is at first sight an obvious tool to address potential disturbances in supplies. Rationally defining the desirable size of stocks and designing rules for their predictable use is an elusive task, however. A key conceptual difficulty arises in the distinction between commercial and strategic stocks, because a physical shortfall in the oil supply will inevitably lead to an increase in prices. But if strategic stocks are utilised when prices increase they become indistinguishable from commercial stocks. This paper reviews the legislation in force in the US and the EU on the use of strategic oil stocks as well as the emergency response systems of the International Energy Agency. It finds that such measures have been activated rarely and in dubious circumstances. Alternative approaches are proposed consisting of encouraging companies and major consumers to hold larger stocks and seeking a cooperative agreement with oil-producing countries for mutually beneficial stock management.
  • Topic: Security, Energy Policy, Markets, Oil
  • Political Geography: United States, Europe
  • Author: Dirk Rübbelke, Stefan Vögele
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Climate change tends to negatively affect the power sector, inter alia, by causing cooling problems in power plants and impairing the water supply required for hydro-power generation. In future, when global warming is expected to increase, autonomous adaptation to climate change via international electricity markets inducing reallocations of power generation may not be sufficient to prevent supply disruptions. Furthermore, the consequent changes of supply patterns and electricity prices might cause an undesirable redistribution of wealth both between individual power suppliers and between suppliers and consumers. This study ascertains changes in European power supply patterns and electricity prices caused by ongoing global warming as well as related redistribution of wealth for different climate change scenarios. Our results confirm that autonomous adaptation in the power sector should be complemented by planned public adaptation in order to preserve energy security and to prevent undesired distributional effects.
  • Topic: Climate Change, Economics, Energy Policy, Markets
  • Political Geography: Europe
  • Author: Consuelo Pacchioli
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: As an alternative to measuring the extent of market integration, 'home-bias' indicates the degree to which economic agents 'over-prefer' to transact with domestic agents rather than agents from other EU countries. Such an exclusive preference is measured against a benchmark of (ideal) market integration and is called 'home-bias'.
  • Topic: International Trade and Finance, Markets, Regional Cooperation
  • Political Geography: Europe
  • Author: Paul De Grauwe
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: When entering a monetary union, member countries change the nature of their sovereign debt in a fundamental way, i.e. they cease to have control over the currency in which their debt is issued. As a result, financial markets can force these countries' sovereigns into default. In this sense, the status of member countries of a monetary union is downgraded to that of an emerging economy. This makes the monetary union fragile and vulnerable to changing market sentiments. It also makes it possible that self-fulfilling multiple equilibria arise.
  • Topic: Debt, Markets, Regional Cooperation, Financial Crisis
  • Political Geography: Europe
  • Author: David Kleimann
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The first 16 months of the EU's common commercial policy (CCP) in the post-Lisbon period provide indicative insights into how the European Parliament, the European Commission and the Council of Ministers interpret their respective roles under the new legal framework introduced by the Lisbon Treaty. This paper analyses the amendments, the institutional capacities to respond to the reform challenges and the evolving institutional balance applying to Lisbon-era common commercial policy. Against this backdrop, the paper gives an overview of the changing dynamics of EU trade and investment policy in a context of enhanced politicization resulting from the European Parliament's involvement in the decision-making process. Particular importance is given to the question whether enhanced EP involvement in decision-making has the potential to lead to a scenario resembling the policy process in the United States, where congressional responsibility for trade and investment policy has resulted in the capture of the policy agenda by special interest groups and snail-paced policy progress (if any) in recent years. Accordingly, the paper scrutinizes the political preferences that the European Parliament is introducing into current European trade policy debates as well as the framework legislation and trade agreements. Finally, it is argued that parliamentary involvement in making common commercial policy has the potential to narrow the gap between European public political preferences and perceptions, on the one hand, and actual EU trade policies on the other, and to place EU trade and investment policies on a foundation of renewed public political support. In the author's view, however, it is imperative that such an achievement is based on well-informed, responsible, sustainable and clearly communicated policy proposals from the MEPs, who respond to and seek to balance the multiplicity of interests of CCP stakeholders in European civil society and respect the Union's international obligations.
  • Topic: Economics, International Trade and Finance, Treaties and Agreements
  • Political Geography: Europe
  • Author: Claudio Vicarelli, Marco Fioramanti
  • Publication Date: 03-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The recent economic and financial crises have shown the weakness of EU economic governance. A process of strengthening macroeconomic and fiscal surveillance started in the course of 2010; among other proposals, the European Commission suggested a new binding criterion of debt reduction: debt-to-GDP ratio is to be considered sufficiently diminishing if its distance with respect to the 60% of GDP reference value has reduced over the previous three years at a rate of the order of one-twentieth per year.
  • Topic: Debt, Economics, International Trade and Finance, Financial Crisis, Governance
  • Political Geography: Europe
  • Author: Felix Roth, Felicitas Nowak-Lehmann D., Thomas Otter
  • Publication Date: 02-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The financial crisis has affected trust in national and European governmental institutions in different ways. This paper analyses the determinants of trust in the national and European institutions over the last decade and comes to the conclusion that inflation reduces citizens' trust only when the economy runs smoothly. In times of crisis, citizens do not worry about inflation but rather about jobs and the effects of a recession. Declining trust in national governments is related to an increase in unemployment in the EU-15 in all time periods, whereas trust in the European Commission and the European Parliament seems to be strongly associated with the situation in the real economy (unemployment and growth of GDP per capita) only in times of crisis. Yet in the EU-27, falling levels of trust in the national and European governmental institutions during times of crisis seem to be primarily related to an increase in government debt. In an EU-15 country sample, this negative relationship appears to be driven by countries that owe a larger share of their increase in government debt to aiding/bailing out their financial sector and the implementation of significant austerity measures.
  • Topic: Debt, Economics, Financial Crisis, Governance
  • Political Geography: Europe
  • Author: Miroslav Beblavý
  • Publication Date: 10-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: In this paper, we examine two questions related to the sustainability of the major, neoliberal, economic and social reforms in the new EU member states, namely the flat income tax and private pension pillars. First, we look at the relationship between the political consensus/controversy at the time major policy reforms were passed and the future sustainability of these reforms after a change of government. Second, we explore what we call a paradox of reverse sustainability, whereby the flat income tax has been more politically resilient during the global financial and economic crisis than private pensions, even though ex ante expectations and the literature would lead us to expect the opposite.
  • Topic: Economics, Labor Issues
  • Political Geography: Europe
  • Author: Daniel Gros, Felix Roth
  • Publication Date: 12-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper analyses public support for the euro in Germany. Drawing from the results of regular Eurobarometer surveys, it finds that the ongoing financial and sovereign debt crisis has reduced support for the euro among German citizens, but not dramatically so – at least not yet. In the 1990s, the German public was sceptical towards the euro. But since the introduction of euro banknotes and coins, a clear majority of citizens supports the euro – despite the financial and sovereign debt crisis. Moreover, on average, support for the euro is at a similar level in Germany as it is elsewhere in the euro area.
  • Topic: Economics, Regional Cooperation, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Germany
  • Author: Felix Roth, Felicitas Nowak-Lehmann D., Lars Jonung
  • Publication Date: 11-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper analyses the evolution of public support for the euro from 1990 to 2011, using a popularity function approach, focusing on the most recent period of the financial and sovereign debt crisis. Exploring a huge database of close to half a million observations covering the 12 original euro area member countries, we find that the ongoing crisis has only marginally reduced citizens' support for the euro – at least so far. This result is in stark contrast to the sharp fall in public trust in the European Central Bank. We conclude that the crisis has hardly dented popular support for the euro while the central bank supplying the single currency has lost sharply in public trust. Thus, the euro appears to have established a credibility of its own – separate from the institutional framework behind the euro.
  • Topic: Economics, Regional Cooperation, Financial Crisis
  • Political Geography: Europe
  • Author: Daniel Gros
  • Publication Date: 03-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper describes the key economic variables and mechanisms that will determine the adjustment process in those euro area countries now under financial market pressure. (Greece, Ireland, Portugal, Spain and Italy = GIPSY) The key finding is that the adjustment will be particularly difficult for Greece (and Portugal) because these are two relatively closed economies with low savings rates. Both of these countries are facing a solvency problem because they combine high debt levels with low growth and high interest rates. Fiscal and external adjustment is thus required for sustainability, not just to satisfy the Stability Pact. By contrast, Ireland and Spain face more of a liquidity than a solvency problem. Italy seems to have a much better starting position on all accounts. Fiscal adjustment alone will not be sufficient to ensure sustainability. Without significant reductions in labour costs, these economies will face years of stagnation at best. Especially in the case of Greece, it is imperative that the cuts in public sector wages are transmitted to the entire economy in order to restore competitiveness, and thus ensure that export growth can become a vital safety valve. Without an adjustment of wages in the private sector, the adjustment will become so difficult that failure cannot be excluded.
  • Topic: Debt, Economics, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Greece, Spain, Italy, Portugal, Ireland
  • Author: Diego Valiante
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Investors have a longer memory than the sell‐side of the market. To regain their trust, intensive work needs to be done in the coming years. The new European Commissioner of the Internal Market, Michel Barnier, will play a pivotal role here. In the area of capital markets, he will need the support of a determined European Parliament, a strong commitment from the Council and Member States, as well as active contributions from the CESR/ESMA , other Level 3 Committees/Authorities and national supervisors. We believe that participants in capital markets share the same goal: to make them as efficient and effective as possible. The ability to collect savings and allocate them to investment, and to allow all participants to defray risk, is at the heart of any successful modern economy. This requires effective regulation that not only mandates common standards, but also promotes accountability, responsibility and transparency, while at the same time encouraging innovation. Effective regulation must not impose undue costs, if markets are to remain efficient and effective. However, we should be conscious that the crisis has been so deep that there is a collective need to go back to the basic principles of financial regulation and supervision.
  • Topic: Economics, International Trade and Finance, Financial Crisis
  • Political Geography: Europe