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  • 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: Daniel Gros, Richard Youngs, Michael Emerson, Christian Egenhofer, Nathalie Tocci, Giovanni Grevi, Jean-Pierre Cassarino
  • Publication Date: 07-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Conceptually, Global Matrix advances in a systematic and structured inter-disciplinary (matrix) framework a research agenda for examining the stance of major world actors on the key policy dimensions to world politics (political ideologies, economics, migration, climate change, security and world view); drawing out evidence of cross-cutting linkages (between sectors and among major actors); and evaluating the evolution and adequacy of existing multilateral institutions in relation to the emerging multi-polarity, and formulating recommendations.
  • Topic: Security, Climate Change, Economics, Globalization, International Cooperation, International Organization, Governance
  • Political Geography: Japan, South Africa, Brazil, Korea
  • Author: Giacomo Luciani
  • Publication Date: 06-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper looks at restrictions of passage, accidents and oil transportation norms as causes of interruption in oil supplies. The key 'chokepoints' are discussed in detail: the Straits of Hormuz, Malacca, Bab el-Mandeb, the Canals of Suez and Panama, the Turkish Straits and the entrance to the Baltic Sea. It is concluded that in most cases the danger of closure can only be temporary; nevertheless, investment in bypasses and alternatives is highly desirable, and in the case of the Turkish Straits, has not been forthcoming. The discussion then turns to threats to navigation outside the chokepoints, such as piracy and oil spills in enclosed seas, particularly the Mediterranean. The final section looks at changing international norms, especially the entry into force of the requirement of double hulls for oil tankers. The paper's main conclusion is that there is no scenario of interruption of maritime oil and gas transportation that may cause a severe physical shortage of oil, in general or specifically for Europe. In almost all cases potential tensions could be easily allayed if responsible governments took the necessary steps to create alternatives (notably pipeline bypasses) or to curb illegal activities. The main factor preventing the required investment in transportation alternatives is the lack of a well-functioning market mechanism for burden sharing. Where passage must be paid for, the resulting income stream supports investment to increase capacity and accommodate growing demand.
  • Topic: International Trade and Finance, Oil, Maritime Commerce, Piracy
  • Political Geography: Turkey
  • 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: Giacomo Luciani
  • Publication Date: 06-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The paper offers a systematic analysis of the impact of international or civil wars and violent non-state groups on global oil and gas supplies. Statistical evidence points to the fact that international wars are becoming increasingly rare, while civil wars remain frequent. The paper discusses the cases of the Iraq-Iran war and the Iraqi invasion of Kuwait, showing the limits to the damage that belligerents were able to inflict on oil installations and illustrating how the world was able to compensate for this damage. The Iraqi insurgency following international intervention to replace the Saddam Hussein regime is discussed together with other cases of civil wars in Nigeria, Angola and Sudan. The analysis supports the conclusion that oil and gas installations appear to be much more resilient to armed conflict than is normally acknowledged. History shows that civil wars have caused limited damage to existing installations, but they have hindered the desired investment in new development and attainment of target production levels. However, it is very obvious that government's inability to overcome or reabsorb violent opposition discourages international oil company investment even if the violence does not affect the areas around oil and gas installations.
  • Topic: Security, Civil War, Oil, Insurgency, Natural Resources, Infrastructure
  • Political Geography: Kuwait, Nigeria
  • Author: Giacomo Luciani
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The paper discusses the link between security of oil supplies and the functioning of international oil markets. It is argued that wide and frequent variations in price are in themselves a source of insecurity for individual consumers and national economies alike. Furthermore, the impossibility of predicting future prices discourages investment and increases the fragility of the system. The paper puts forward several policy proposals to reduce excessive price fluctuations and improve security of supply at reliable prices.
  • Topic: Security, Economics, Markets, Oil
  • Political Geography: North America
  • Author: Giacomo Luciani
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper looks at resource nationalism and political instability as potential causes of disruption to global oil supplies. It points to depletion preferences and strategies as one form of resource nationalism. In most cases, resource nationalism appears to be motivated by rent maximisation. Hence, we see the adoption of more restrictive policies when prices rise. Conversely, when oil prices are low, increasing export volumes becomes more important. Restrictions on exports are common, especially for natural gas, which is sometimes reserved for national consumption. Export taxes are a tool used by some countries to extract revenue from oil producers. Domestic prices of gas and petroleum products are frequently much lower than international prices, also in some sense reducing availability for export. Political instability has a much more elusive impact on oil and gas exports, and historical experience points to contradictory potential outcomes. This paper concludes that political instability and resource nationalism are rarely associated with acute supply crises or shortfalls. Their effect is rather gradual and normally compensated by action in other parts of the system.
  • Topic: Energy Policy, Nationalism, Oil, Politics, Natural Resources
  • Political Geography: United States