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  • Author: Clara Portela
  • Publication Date: 03-2014
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This study analyses the use by the European Union of the novel concept of 'targeted sanctions' in the framework of its Common Foreign and Security Policy. It examines two sets of sanctions regimes featuring different degrees of efficacy: in Myanmar and Zimbabwe, the EU wielded measures in support of human rights and democracy objectives in the absence of a United Nations mandate, while it supplemented UN sanctions to stop nuclear proliferation in Iran and North Korea. The study highlights a number of facilitators of, or hindrances to, the efficacy of sanctions, such as the degree of support by regional powers or the presence of UN legitimation. It concludes that the EU sanctions regimes could be optimised by using more robust measures, designing them on the basis of ex ante assessments, enabling faster upgrades, monitoring their impact and adjusting them regularly and improving outreach efforts.
  • Topic: Foreign Policy, Diplomacy, Economics, Regional Cooperation, Sanctions
  • Political Geography: United States, Europe, United Nations, Zimbabwe
  • 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: 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: 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: Daniel Gros, Cinzia Alcidi
  • Publication Date: 01-2010
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: This crisis was caused by a combination of asset price bubbles, mainly in the real estate sector, and a credit bubble that led to excessive leverage. This is wellknown. What is less well-known is that on both accounts the euro area was affected by both 'bubble' symptoms as much as the US.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States, Europe
  • Author: Karel Lannoo
  • Publication Date: 01-2010
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Since 2003, the EU and the US have conducted a vibrant regulatory dialogue on financial regulation, but domestic priorities seem to have taken precedence in response to the financial crisis. This paper compares the institutional and regulatory changes occurring on both sides of the Atlantic. On the institutional side, it compares macro- and micro-prudential reforms. On the regulatory side, it compares four key areas: bank capital requirements, reform of the OTC derivative markets, and the regulation of credit ratings agencies and hedge funds. It concludes by highlighting certain implications for the regulatory dialogue.
  • Topic: Economics, Monetary Policy, Financial Crisis
  • Political Geography: United States, Europe
  • Author: Daniel Gros, Cinzia Alcidi
  • Publication Date: 05-2009
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper explores three areas in which the experience of the Great Depression might be relevant today: monetary policy, fiscal policy and the systemic stability of the banking system. We confirm the consensus on monetary policy: deflation must be avoided. With regard to fiscal policy, the picture is less clear. We cannot confirm a widespread opinion according to which fiscal policy did not work because it was not tried. We find that fiscal policy went to the limit of what was possible within the confines of sustainability, as they existed then. Our investigation of the US banking system shows a surprising resilience of the sector: commercial banking operations (deposit-taking and lending) remained profitable even during the worst years. This suggests one policy conclusion: At present the authorities in both the US and Europe have little choice but to make up for the losses on 'legacy' assets and wait for banks to earn back their capital. But to prevent future crises of this type, one should make sure that losses from the investment banking arms cannot impair commercial banking operations. At least a partial separation of commercial and investment banking thus seems justified by the greater stability of commercial banking operations.
  • Topic: Economics, Markets, Financial Crisis
  • Political Geography: United States, Europe
  • Author: Daniel Gros, Cecilia Frale
  • Publication Date: 06-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper estimates the impact of the ongoing housing bust and oil price boom on the US and European economies. It finds that large house price movements (changes in construction investment) are useful to predict exceptionally bad and good times for the US economy, but not for most large European countries. In Europe housing market developments have led to extreme values of GDP, mainly in the UK, Spain and some Nordic countries.
  • Topic: Economics, Oil
  • Political Geography: United States, Europe
  • Author: Christian Egenhofer, Arno Behrens, Jorge Núñez Ferrer
  • Publication Date: 08-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This study focuses on the financial resources needed to fight global climate change and the implications for the EU budget. The authors apply four different methodologies to estimate global financing requirements and attempt to determine the resources that will be needed at the EU level to meet the EU's climate change objectives. The study analyses current climate change spending of the EU budget, identifies shortcomings and indicates possibilities for correcting them. It also assesses the potential of the EU emissions trading scheme to raise additional resources to finance coordinated actions at the EU level aimed at fighting climate change. Finally, it provides three case studies of national public expenditure related to climate change in Germany, the United Kingdom and the United States.
  • Topic: Climate Change, Economics, Environment
  • Political Geography: United States, United Kingdom, Europe
  • Author: Daniel Gros, Andrea Beccarini
  • Publication Date: 09-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: With inflation increasing all over the world, central banks have to consider with some care how quickly to re-establish price stability. A key issue in this context is the short-run cost in terms of foregone output and higher unemployment. The aim of this paper is to determine the 'sacrifice ratio' for the Euro Area and for the United States. The main findings are: the cost of reducing inflation is in most cases higher in the US than in the EA. For example, reducing (headline) inflation by 1% point requires a decline of output of 1.4% in the EU, but 2.3% for the US. Considering core inflation, the sacrifice ratio in terms of output is somewhat higher for the Euro Area (around 4) compared to 3.2 for the US. However, the sacrifice ratios in terms of unemployment are always much larger for the US. Reducing headline inflation by 1% requires an increase in unemployment of little more than 1% in the EA, compared to 8% in the US.
  • Topic: Economics, Foreign Exchange
  • Political Geography: United States, Europe
  • Author: Cecilia Frale, Jørgen Mortensen
  • Publication Date: 10-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The recent surge in commodity prices and the European Central Bank's decision in June to raise interest rates to combat inflation have ignited a debate about the appropriateness of raising interest rates during a phase of weakening activity. In addition, it is relevant to examine the approaches to measuring the rate of inflation, to consider the advantages and drawbacks of these methods, and finally to throw new light on the possible influence of monetary policy on the fundamental trends in prices.
  • Topic: Economics, Foreign Exchange
  • Political Geography: United States, Europe
  • Author: Paul De Grauwe
  • Publication Date: 09-2008
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The question of whether central banks should react to stock price developments has been hotly debated. This discussion has intensified since the eruption of the credit crisis. According to some analysts, including myself, the failure of the US Federal Reserve under Alan Greenspan to react to the bubbles in the stock and housing markets helps to explain the financial excesses and the subsequent crisis.
  • Topic: Economics, International Trade and Finance, Markets, Monetary Policy
  • Political Geography: United States
  • Author: Daniel Gros
  • Publication Date: 10-2007
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The downturn in the US housing market has attracted a lot of attention as it has sparked a global financial crisis. It is generally assumed that the eurozone does not face a similar problem. This paper shows that this assumption is wrong. The euro area average index of real housing prices has risen almost as much as that of the US and is now (as that of the US) about 40% above its 30-year average. This is similar to the overvaluation of Japanese real estate at the height of the Japanese bubble, which was then followed by over a decade of continuous decline. Over the last 30 years, the euro area index for real housing prices has tended to follow that of the US quite closely. The lag is now much shorter than in the 1970s or 1980s. The euro area market is thus likely to turn soon as well. One feature of housing price cycles that tends to be forgotten is their extraordinary length: many last for more than ten years. This persistence means that the downswing, which now seems to have started, is likely to last at least until the next decade. Within the euro area, there are large divergences: cases of 'froth' (Spain, for example) co-exist alongside cases of declining prices (Germany). These divergences have persisted for over a decade and have led to important macroeconomic disequilibria. The paper also develops an indicator of 'housing overhang', which shows by how much demand for new construction has to decline to bring the supply of housing back to normal levels. This indicator suggests that there is virtually no housing overhang in the eurozone on average and that it is of a manageable magnitude in the US. Spain and Ireland, however, face a massive housing overhang and thus probably a sharp deceleration of construction demand.
  • Topic: Economics, Markets
  • Political Geography: United States, Europe
  • Author: Stefano Micossi
  • Publication Date: 04-2006
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: In the spring of 2004, the European Commission approved a draft Directive on Services in the Internal Market and sent it to the Council and the European Parliament. The proposal is the cornerstone of the ailing Lisbon strategy to revive growth and jobs in the European Union: services account for 70% of GDP and employment in advanced countries, and their performance is a main determinant of overall productivity and employment growth. In the European Union, the markets for services are still organised along national lines, cross border trade remains relatively underdeveloped and competition is scarce. The productivity gap with the United States is largely explained by these obstacles.
  • Topic: Economics, International Cooperation, Regional Cooperation
  • Political Geography: United States, Europe, Lisbon
  • Author: Christian Egenhofer, Joe Kruger
  • Publication Date: 04-2006
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: Emissions trading is a market-based mechanism designed to allow firms to choose the most cost effective strategy to meet environmental standards. The success of SO2 and NOx emissions trading systems in the United States and the launch of the ambitious European Union Emissions Trading System (EU ETS) underscore the value of emissions trading as a tool for environmental policy.
  • Topic: Economics, Environment, International Cooperation
  • Political Geography: United States, Europe
  • Author: Thomas L. Brewer
  • Publication Date: 03-2006
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: The Bush administration's announcement of an 'Advanced Energy Initiative' poses challenges for the international climate change agenda as well as the US domestic energy policy agenda. The proposal is politically significant because it has altered the terms of reference in the domestic discourse about US energy and climate policy. However, while it proposes proportionately large increases in the funding levels of some programmes, it also suggests only marginal changes in several current programmes and proposes reductions or even the elimination of others.
  • Topic: Economics, Energy Policy, Environment
  • Political Geography: United States
  • Author: Wusheng Yu, Hans G. Jensen
  • Publication Date: 01-2005
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The July package of the Doha Round of trade negotiations stipulates that a tiered-formula approach should be used to significantly reduce market access barriers across countries, implying that the EU would have to make larger cuts to its high external tariffs, in comparison with many other WTO members such as the US. This paper provides a preliminary assessment of the likely impact of the tiered-formula reform approach on EU agricultural sectors. Numerical simulations of a multilateral market-access reform scenario show that such cuts would lead to across-the-board decreases in intra-EU trade flows, as compared with a baseline projection. While intra-EU trade flows would decrease, the EU's trade with the rest of the world would increase. Yet such increases would not be symmetric – imports into the EU would increase more than exports, resulting in larger external trade deficits or smaller external trade surpluses in many EU agricultural products. Further, the resulting adjustments in member states' production and net trade positions are not equal: the new member states would generally lose part of their export shares in the EU market to external competitors, as highlighted in the cases of bovine meat and dairy products.
  • Topic: Economics, Human Welfare, International Trade and Finance
  • Political Geography: United States, Europe
  • Author: Thomas L. Brewer
  • Publication Date: 07-2005
  • Content Type: Policy Brief
  • Institution: Centre for European Policy Studies
  • Abstract: With increasing Congressional support for funding climate change technology programmes, as reflected in passage of the Hagel/Pryor amendment to the energy policy bill in June 2005, issues about the climate change budget are becoming more salient. In this Policy Brief, Congressional and Presidential actions on several recent budgets are examined for the four principal areas of the climate change budget: technology, science, international and tax credits. The emphasis is on energy technology in particular, because of its salience in current policy discussions and its relative size in financial terms. Highlights of the findings include the following: Congress imposed substantial (63.3%) increases over the administration's climate change technology proposals for 2004 and then small increases for FY2005. For 2006, the administration has proposed reductions compared with the Congressionally-enacted levels in the technology component – reductions in both nominal and inflation-adjusted terms (-4.1% and -5.6%, respectively). The administration has also proposed cuts for fiscal 2006 in the science and international programmes (-2.9 and -19.0% in real terms). These and other differences in Presidential and Congressional approaches to funding climate change programs provide further evidence that the Presidential-Congressional divide on climate policy is continuing to widen. There is an emerging bi-partisan Congressional coalition in favour of increased spending on a wide range of climate change programmes. This shift will affect EU-US relations on climate change issues for the remainder of the current administration until 2008, and beyond as well.
  • Topic: Economics, Science and Technology
  • Political Geography: United States, Europe
  • Author: Leonor Coutinho
  • Publication Date: 10-2002
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper analyses alternative monetary policy rules for the ECB, using a two "country" model of the euro area and the US, that assumes monopolistic competition, sticky prices and optimizing agents. The alternative rules analyzed for the ECB are ranked by their ability to stabilize consumption, output, and inflation and maximize consumers' welfare. The analysis contributes toward understanding the trade-offs faced by policymakers in open economies and provides some support for the current design of the ECB's operational framework. The results suggest that stabilizing money-growth, in addition to inflation, gives an additional degree of freedom to stabilize output. Although price stability is likely to remain the primary objective of the ECB, monetary policy must "without prejudice of price stability (...) support the general economic policies in the Community..." (Article 2). Hence monitoring money, under certain assumptions about the shocks hitting the economy, may deliver a better outcome in terms of output stabilization which should allow the ECB to fulfill its secondary but nonetheless important commitment.
  • Topic: Economics, Government, International Trade and Finance
  • Political Geography: United States
  • Author: Roberto Perotti
  • Publication Date: 10-2002
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper studies the effects of fiscal policy on GDP, prices and interest rates in 5 OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows:1 ) The estimated effects of fiscal policy on GDP tend to be small: positive government spending multipliers larger than 1 tend to be the exception; 2) The effects of fiscal policy on GDP and its components have become substantially weaker over time; 3) Under plausible values of the price elasticity, government spending has positive effects on the price level, although usually small; 4) Government spending shocks have significant effects on the nominal and real short interest rate, but of varying signs; 5) In the post-1980 period, net tax shocks have positive short run effects on the nominal interest rate, and typically negative or zero effects on prices; 6) The US is an outlier in many dimensions; responses to fiscal shocks estimated on US data are often not representative of the average OECD country included in this sample.
  • Topic: Economics, Government
  • Political Geography: United States, Europe