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  • 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: Daniel Gros, Cinzia Alcidi
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper describes four key drivers behind the adjustment difficulties in the periphery of the eurozone: The adjustment will be particularly difficult for Greece and Portugal, as two relatively closed economies with low savings rates. Both of these countries combine high external debt levels with low growth rates, which suggest they are facing a solvency problem. In both countries fiscal adjustment is a necessary condition for overall sustainability, but it not sufficient by itself. A sharp cut in domestic consumption (or an unrealistically large jump in exports) is required to quickly establish external sustainability. An internal devaluation (a cut in nominal wages in the private sector) is unavoidable in the longer run. Without such this adjustment in the private sector, even continuing large-scale provision of official funding will not stave off default. Ireland's problems are different. They stem from the exceptionally large losses in the Irish banks, which were taken on by the national government, leading to an explosion of government debt. However, the Irish sovereign should be solvent because the country has little net foreign debt. Spain faces a similar problem as Ireland, although its foreign debt is somewhat higher but its construction bubble has been less extreme. The government should thus also be solvent, although further losses in the banking system seem unavoidable. Italy seems to have a better starting position on almost on all accounts. But its domestic savings rate has deteriorated substantially over the last decade.
  • Topic: Economics, International Trade and Finance, Financial Crisis
  • Political Geography: Spain, Ireland
  • 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: Rouzbeh Parsi
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: In the past two years the Iranian domestic political scene has undergone a major upheaval where many established norms and institutional frame-works have been abandoned or seriously weakened. A new baseline and sense of normalcy has yet to be established.
  • Topic: Democratization, Economics, Politics, Insurgency, Financial Crisis
  • Political Geography: Iran, Middle East
  • 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: Anna-Elisabeth Thum, Miroslav Beblavý, Marcela Veselkova
  • Publication Date: 12-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: In this Working Document we look at which OECD countries deliberately attempt to reproduce social stratification through educational policies, and which countries put greater emphasis on intervening in the stratification process. First, we examine the relationship between education and welfare policies as measures of intervention in this process: do countries intervene in both education and welfare – driven by a 'stratification culture'? Or is there a trade-off between intervention in education and welfare, with certain countries prioritising one over the other?
  • Topic: Economics, Education, Poverty, Social Stratification
  • Author: Noriko Fujiwara
  • Publication Date: 03-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This Working Document complements the CEPS Policy Brief, Understanding India's climate agenda, and elaborates on three key issues related to the country's energy challenges: access to energy, the future emissions trajectory and energy subsidies. This study looks into the making and framing of the country's domestic climate agenda from a political economy perspective. As long as both GDP and primary energy demand keep growing at the current rates, it may be concluded that the country's future, absolute greenhouse-gas emissions are also likely to grow but remain relatively low. Moreover, India's emissions intensity is expected to continue declining in line with the recent voluntary pledge by the Indian government. The study takes note of the national action plan launched in India, and the adoption of a flexible approach in international negotiations while maintaining a preference for several core principles, including equity. Lastly, the study explores the possibility for addressing issues such as international and intra-national equity in the context of the long-term EU–Indian partnership.
  • Topic: Climate Change, Development, Economics, Energy Policy, Industrial Policy
  • Political Geography: India
  • 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
  • Author: Arno Behrens, Anton Georgiev, Maelis Carraro
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This CEPS Working Document reviews the potential impacts of climate change on 11 key indicator categories and 3 large regions covering the entire European Union. Although there remains a considerable degree of uncertainty about local and regional effects, the paper highlights strong distributional patterns. Northern Europe might even experience some positive effects, while the Mediterranean will mostly be negatively affected. Still, the cumulative impacts of climate change on poorer countries will also affect northern European countries, as growing water scarcity and other repercussions in Mediterranean countries could pose social and security challenges through increasing risks of conflicts and migration pressures.
  • Topic: Climate Change, Energy Policy, Industrial Policy
  • Political Geography: Europe
  • Author: Caterina Giannetti, Nicola Jentzsch, Giancarlo Spagnolo
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Asymmetries can severely limit the cross-border border expansion of banks, if entering banks can only obtain incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. Asymmetrically distributed information and adversely selected pools of borrowers constitute severe barriers for foreign banks when they enter new markets. In many instances, these problems force banks to either form 'alliances with incumbents' or simply enter through mergers and acquisitions (M). Yet such entry modes do not automatically lead to intensified competition as they may leave the number of competitors unchanged. Thus, institutions that reduce information asymmetries in credit markets (thereby encouraging entry through branches) may be very important if the objective is strengthening competition in addition to market integration. Recently, these institutions – credit registers – have received greater attention among academics and policy-makers in Europe, although there is still a remarkable lack of understanding of their empirical impact on banking.
  • Topic: Economics, International Trade and Finance, Markets, Monetary Policy
  • Political Geography: Europe
  • Author: Peter Jones
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The European Education Initiative was launched as part of the EU-Central Asia Strategy in 2007. By 2009, the initiative had prioritised higher and vocational education and emphasised links with the Bologna Process. Attempts were made to establish the EU- Central Asia Education Platform – a re-branding of Tempus and Erasmus Mundus programmes within a set of specific activities – and outline the ways in which internal EU education policy development processes could be externalised to the Central Asia region. However, the slow and uncertain pace of development of the Education Initiative, with the exception of the CAREN programme, calls for an analysis of the logic, content and practice of what has been attempted. It is also necessary to examine the political and institutional context that explains the lack of traction gained with education policy actors in the EU and Central Asia, and the prospects for a more compelling vision and a concrete programme of implementation that could meet the real and urgent needs of Central Asian countries. Drawing on the evidence provided by participants in the development of the Education Initiative, this paper concludes by outlining an agenda for addressing its weaknesses.
  • Political Geography: Europe, Central Asia
  • Author: Jos Boonstra, Jacqueline Hale
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: European Union (EU) assistance in general and to Central Asia in particular is a complicated, many sided and fairly opaque business. In 2007, a few months prior to the Council's approval of an EU Strategy for Central Asia under the German Presidency, the Commission also presented two documents: an overarching Regional Strategy Paper for assistance to Central Asia over the period 2007–13 (RSP) and a more detailed and programme-orientated Central Asia Indicative Programme (IP), from 2007 until 2010.4 Over a seven-year period, 719 million Euros were to be set aside for assistance to the region through the new EU Development Cooperation Instrument (DCI). In addition, the EU has allocated more modest funds through global thematic instruments. Meanwhile, the European Bank for Reconstruction and Development (EBRD) and more recently the European Investment Bank (EIB) are stepping up activity in Central Asia and several member states have their own assistance programmes (foremost Germany) that are likely to match the DCI amount.
  • Topic: Development, Foreign Aid
  • Political Geography: Europe, Central Asia, Germany
  • Author: Bohdana Dimitrovova
  • Publication Date: 03-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This Working Document explores the implications of the European Neighbourhood Policy (ENP) as an ambitious EU foreign policy for the development of a European political community. It suggests that the ENP can be viewed as an attempt to reconcile two potentially contradictory processes. The first – 'border confirming' – is about confirming border areas of demarcation and division, in which borders are conceived as boundary lines, frontier zones or barriers that protect the European Union and its citizens. The second – 'border transcending' – consists of a challenge to open EU borders and involves the transformation of the EU's external boundaries into zones of interactions, opportunities and exchanges, with the emphasis on the transcendence of boundaries. To unravel some of the contradictions surrounding the highly contested phenomena of mobility in the neighbourhood, this paper analyses three bordering strategies: state borders, the imperial analogy and borders as networks. Each corresponds to different forms of territoriality and implies a different mode of control over the population.
  • Topic: International Relations, Foreign Policy, International Organization, International Affairs
  • Political Geography: Europe