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451. IMEC: The Backbone of an Indo-Mediterranean Region. Italy and the Future of Transcontinental Connectivity

Author:: Nicola Missaglia, Valeria Talbot, Angela Stefania Bergantino, Giovanni Maria Della Gatta, and Roberto Italia
Publication Date:: 03-2026
Content Type:: Special Report
Institution:: Italian Institute for International Political Studies (ISPI)
Abstract:: In an increasingly uncertain geopolitical environment, initiatives aimed at strengthening resilience, diversifying supply chains and securing alternative corridors have become more urgent than ever. The India-Middle East-Europe Economic Corridor (IMEC), announced at the G20 Summit in 2023, is among the most ambitious of these initiatives. By linking India, the Gulf and Europe through an integrated network of maritime, rail, digital and energy infrastructure, the corridor could reshape connectivity across an emerging Indo-Mediterranean region. This new ISPI Report analyses IMEC’s strategic implications across transportation, energy and digital connectivity, while examining Italy’s potential role as a central Mediterranean gateway connecting Indo-Mediterranean flows to European markets. Can IMEC become the backbone of a new Indo-Mediterranean connectivity space? And how can Italy position itself at the heart of this emerging transcontinental architecture?
Topic:: Economics, Geopolitics, Trade, Energy, India–Middle East–Europe Economic Corridor (IMEC), and Digital Connectivity
Political Geography:: Europe, India, Italy, and Mediterranean

452. Space Companies and States: A Two-Horse Race?

Author:: Clelia Iacomino and Francesco Rosazza Boneitin
Publication Date:: 06-2026
Content Type:: Special Report
Institution:: Italian Institute for International Political Studies (ISPI)
Abstract:: In what has been described as the “Century of Space”, outer space has acquired growing strategic relevance, becoming increasingly intertwined with geopolitical competition and economic security considerations. As public and private actors become more interconnected, governments are actively shaping markets through regulation, procurement and strategic investment, in response to the technological and commercial transformation of the sector. At the same time, private companies have evolved from traditional contractors into strategic partners, assuming greater autonomy and responsibility across value chains. Rather than converging towards a single model, public-private cooperation in the space sector has followed differentiated trajectories, reflecting diverse national ambitions, institutional architectures and strategic priorities. What emerges is not a process of substitution between public and private actors, but a dynamic relationship of reciprocal interdependence, in which States and firms adapt and co-evolve over time.
Topic:: Geopolitics, Investment, Economic Security, Public-Private Partnership, and Strategic Partnerships
Political Geography:: Space

453. Better regulation in the European Union needs a fresh start

Author:: Anne Bucher and Elizabeth Golberg
Publication Date:: 01-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Despite having developed a comprehensive and highly-rated regulatory policy system (so-called ‘better regulation’), involving consultation, impact assessments, evaluation, inter-institutional commitment and independent oversight, the European Union continues to face criticism for the volume, complexity, costs and administrative burden of its laws. This raises the question of whether something is wrong with the better-regulation system, or whether the EU institutions have failed to adequately apply the system. In fact, the system is robust but there are weaknesses in its application. There is no evidence that burden-reduction programmes or attempts to stem the ever-increasing flow of legislation have had desired effects. There are significant exceptions to the application of better regulation tools, including simplification efforts under the second Ursula von der Leyen Commission. Meanwhile, few assessments are conducted on legislative amendments approved by the European Parliament and the Council of the EU. The quality of assessments, particularly ex-post evaluations is wanting. Several steps could be taken to overcome these weaknesses. On the ever-increasing flow, political control could be strengthened by a dedicated Better Regulation Commissioner, the development of new conditions for preparing new laws and adoption of systematic regulatory pauses at the end and beginning of each Commission term. On coverage, the Council and the Parliament need to conduct assessments of their amendments. This could be facilitated through an inter-institutional mechanism using the initial impact assessment’s methodology. Given that they involve trade-offs and costs, some secondary legislation needs to be assessed in a proportionate manner. The quality of assessments could be improved by establishing a centre (or centres) of analytical expertise. This would build and continuously update a robust evidence base for policy areas. It could help streamline the analytical demands for impact assessments. Ex-post evaluations are key to improving the implementation of EU law. Externalising ex-post evaluations could improve their quality and facilitate better assessment of implementation gaps. In an increasingly complex, volatile and polarised political environment, better regulation is essential. The tools need to be applied consistently to support the policymaking process.
Topic:: Governance, European Union, Regulation, Institutions, and Macroeconomics
Political Geography:: Europe

454. Growth without profits: how will ‘involution’ in China end?

Author:: Alicia Garcia-Herrero and Jianwei Xu
Publication Date:: 01-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: This paper analyses China’s economic ‘involution’, a phenomenon characterised by intense competition in overcrowded markets such as electric vehicles (EVs), price wars, declining profit margins and ongoing resource misallocation via ‘zombie firms’. Using data from Chinese listed companies, we decompose firm profits and find that, while firm-level total factor productivity (TFP) has risen since 2020, markups are falling. More granularly, firms across the productivity spectrum are compressing their profit margins to compete for market share. The fact that even companies without productivity gains are lowering prices has contributed to a growing share of loss-making zombie firms, which survive on the back of bank support or government subsidies, hindering consolidation. China’s policy efforts emphasise anti-involution measures including regulation of predatory pricing and promotion of orderly exits, but they have not yet solved the fundamental problem, as unproductive firms continue to operate. For Europe, this has heightened the concern that China’s involution-driven growth model is fuelling export expansion through persistent low-price competition, increasing the likelihood that the EU will strengthen its trade-defence measures, alongside efforts to raise its own productivity.
Topic:: Industrial Policy, Bilateral Relations, European Union, Economic Growth, Trade, Trade Policy, and Global Economy
Political Geography:: China, Europe, and Asia

455. Europeans should be allowed to trade personal data

Author:: Paul Heidhues, Nick Jacobson, Giorgio Monti, and Fiona M. Scott Morton
Publication Date:: 02-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The European debate over personal data trading has become trapped between two unworkable extremes: the status quo of allowing platforms unfettered access to user data, or making data sharing so difficult it is effectively banned. Neither position serves consumers’ interests. Personal data sharing can create substantial value – enabling relevant advertising and powering digital services – but currently this value is captured almost entirely by gatekeepers, while users surrender control of their commercial, location, social network and even sensitive medical data without meaningful consent or compensation. The critical policy challenge is to enable beneficial data sharing while protecting users’ fundamental privacy rights and ensuring they are fairly compensated for data they choose to share. The solution lies in creating well-regulated data markets. European Union regulators should establish a system that prohibits trading of personal data that is sensitive, sets a default that is both safe and gives users bargaining leverage, and mandates transparent and effective choice architectures to ensure users are informed. When a default allows users to access a platform’s free service in a more private way, the platform will have a financial incentive to encourage more data sharing. Platforms will need to compensate users to make active and informed choices to share more data. Platforms may also offer paid options to users who want to opt out of data sharing and to see no ads. This menu of three options – free, subsidised and costly – will allow users to make individual choices about sharing personal data in a safe and regulated environment. Such regulation would allow platforms to continue advertising-supported business models, while giving consumers genuine control and economic benefit from their data. Without functioning data markets, Europe faces two poor outcomes: either personalised advertising collapses and valuable digital content disappears, or courts permit platforms to continue exploiting users without consent, delegitimising privacy law. Well-designed data markets would enable fairness and contestability by allowing smaller digital competitors to obtain data on the same terms as big ones, and by sharing with users some of the hundreds of billions earned annually by platforms such as Google.
Topic:: Science and Technology, Digital Economy, Microeconomics, Data, Economic Competition, and Single Market
Political Geography:: Europe

456. National plans, regional voices: cohesion policy in the next European Union budget

Author:: Zsolt Darvas, Marie-Sophie Lappe, Bo Sangers, and Jeromin Zettelmeyer
Publication Date:: 03-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: For the 2028–2034 European Union budget (Multiannual Financial Framework, MFF), the European Commission has proposed to integrate cohesion, agricultural, migration and security policies – until now, standalone budget components – into a single framework, structured around National and Regional Partnership Plans (NRPPs). Some EU spending would also be reallocated from cohesion and agriculture to competitiveness, defence and external action, while the rules for disbursing cohesion and agriculture spending would link spending to national-level reform. This policy brief assesses this proposed re-organisation of cohesion policy against the criterion of European added value. We argue that the NRPP structure is conceptually sound. Integrating multiple policy areas within unified plans can reduce long-standing overlaps and coordination failures and support more strategic investment choices. There is scope to strengthen performance-based budgeting, including by using national reform milestones in certain cases. Finally, selective reduction of cohesion funding is justifiable. However, some significant changes should be made to the Commission’s proposal. Sub-national cohesion spending should be made conditional on national reform only if such reforms have beneficial local impacts or generate cross-border benefits. Policy-specific requirements should only apply to measures within that policy area. The Council of the EU and the European Parliament, rather than the Commission, should approve milestones and targets. The European Parliament should also participate in the approval and modification of NRPPs. A robust methodology is needed to ensure that milestones and targets are sufficiently ambitious across all plans, and that plans have a clear results focus. The consistency of regional and national objectives needs to be assured, and the derivation of national milestones and targets clarified. Independent evaluation is needed of NRPPs, the Commission’s assessments of NRPPs and the actual results achieved. Minimum thresholds should be set for inclusion of cross-border projects. Addressing these issues during MFF negotiations will be crucial to ensure that NRPPs enhance the European added value of cohesion policy.
Topic:: Governance, Budget, European Union, Investment, and Cohesion
Political Geography:: Europe

457. Better coordination for a more efficient European energy system

Author:: Alexander Roth, Simone Tagliapietra, and Georg Zachmann
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Three steps should be taken to improve the efficiency of the European Union’s energy system: 1) enhance transparency through open data and modelling, 2) better integrate network planning with policy targets and across borders, and 3) strengthen alignment of national policies and plans. As the EU transitions towards greater reliance on domestically produced electricity, the economic stakes of fragmentation rise. These three elements are essential to address the weak coordination and incoherence of national system-development plans and policies. Moving beyond opaque planning by national grid companies will enable investors to set realistic expectations. A shared understanding of the system’s state and policy vision de-risks planning, accelerates deployment, lowers capital costs and reduces the risk of premature or stranded investments. To resolve the current lack of data transparency, an EU Energy Data Hub should be established to aggregate, clean and publish timely energy data, replacing the current reliance on opaque, fragmented and often private sources. EU-level integrated network planning would tie long-term energy and climate goals to strategic energy system development. While countries would continue to decide on their own energy mixes, this approach would ensure transparency and justify projects based on European welfare rather than special interests. Political cooperation should be strengthened by transforming current National Energy and Climate Plans into documents that guide public policies and investment, requiring stronger dialogue between EU countries and fostering trust between neighbours. This requires consistency across EU countries in terms of data and methodologies. The credibility of these plans would be based on links to EU policies, such as state-aid approval or subsidies for infrastructure projects. These recommendations aim to leverage the internal energy market as a strategic tool and to prevent regression to national, protectionist policies. By coordinating policies and infrastructure, the EU can ensure competitiveness and resilience, while transitioning to a decarbonised economy.
Topic:: Climate Change, European Union, Decarbonization, and Energy
Political Geography:: Europe

458. Defragmenting European Union climate policy

Author:: Michael Pahle, Darius Sultani, and Georg Zachmann
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: There is broad agreement that the European Union’s post-2030 climate policy architecture – the framework of rules to reduce greenhouse gas emissions – needs to be simpler and more flexible, with market actors less constrained in how they mitigate emissions. However, simplification should not compromise the EU’s climate goals and changing the architecture is politically contentious. Ringfencing of established climate compliance mechanisms and any delay in containing the emissions of lagging sectors could result in even more fragmentation in an already-fragmented climate-policy architecture. The cost of maintaining this fragmentation will rise, making the system even more inefficient. Higher costs and limited control over emissions in some sectors will undermine the EU’s ability to credibly signal commitment to its climate target, undermining the confidence of investors and international partners. To avoid these risks, simplicity and flexibility must mean the application of a carbon price across all parts of the EU climate architecture, with prices converging gradually. This can be achieved by linking the different systems through exchange rates that guide convergence towards a common carbon price, with the EU emissions trading system as the central hub. Climate policy is most efficient when emissions reductions take place where they deliver the greatest climate benefit at lowest cost. Today’s fragmented climate architecture prevents the efficient allocation of abatement resources, such as clean energy. Firms increasingly have incentives – arbitrage opportunities – to shift mitigation activities between differently priced compliance systems, raising overall costs. As more sectors and international links are added to the EU’s climate architecture, these distortions will grow, requiring ever more intrusive and politicised regulation. Managed convergence of different climate policies should become a core design principle of the EU’s climate policy architecture. By predictably phasing out fragmentation, overly pervasive regulation and complexity can be avoided.
Topic:: Climate Change, Industrial Policy, European Union, Sustainability, Decarbonization, and Energy
Political Geography:: Europe

459. Tackling India's jobs plight: underutilised levers and lessons from China

Author:: Alicia Garcia-Herrero and Rajeswari Sengupta
Publication Date:: 03-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Despite strong GDP growth and a favourable demographic profile, India faces an impending jobs crisis. A large share of the workforce remains employed in low-productivity agriculture, while many new labour market entrants are absorbed into the persistently large informal sector. By contrast, China’s rapid ascent was driven by manufacturing-led, export-oriented industrialisation, underpinned by large inflows of foreign direct investment and sustained technology transfer. India’s manufacturing base remains modest in contrast. The bulk of well-paid, formal employment continues to be concentrated in the high-skill services sector. This paper contrasts the development trajectories of these two economies and identifies several underutilised jobs-growth levers in India: manufacturing, goods exports, manufacturing-oriented foreign direct investment and innovation. All of these remain underdeveloped, yet together they offer a pathway to more labour-absorbing, durable growth. Leveraging them effectively would be central to achieving India’s ‘Viksit Bharat 2047’ ambition of attaining high-income status. The scale of India’s challenge to employ eight to ten million labour-market entrants per year implies that job creation must become an explicit policy priority. This calls for greater trade openness, particularly with Asia and Europe, to integrate India into Asia-centric global supply chains as an alternative to China. Labour market reform is equally critical, making the effective implementation of the new labour codes essential. Strengthening innovation ecosystems and realigning education and skills policies to support industrialisation are also key. Without these structural shifts, India’s current pattern of jobless growth risks transforming its demographic dividend into a long-term liability.
Topic:: Employment, Economic Growth, Fiscal Policy, Trade Policy, and Labor Market
Political Geography:: China, South Asia, India, and Asia

460. Risks for Europe of US dominance of global asset management

Author:: Dirk Schoenmaker
Publication Date:: 04-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Asset managers work on behalf of asset owners, such as pension funds and insurance companies, allocating their holdings of household or other savings. In Europe, the market share of United States asset managers is rising, while that of their European counterparts is declining. US asset managers may even be about to overtake European asset managers in Europe. However, there are differences between US and European asset managers, and these could play out in the context of the European Union’s savings and investment union plan. On environmental, social and governance (ESG) engagement, European asset managers remain active, while their US counterparts increasingly vote against social and environmental resolutions. This is counterproductive for Europe’s sustainable finance agenda. To preserve the efficiency and efficacy of the EU asset management market, three steps should be taken: 1) strengthen stewardship policies, 2) create a central supervisor and 3) enhance strategic autonomy. Stewardship policies should be tightened and asset managers should highlight how their ESG policies aligns with those of the asset owners for which they work. A major element of this tightening would be the requirement to publish a detailed record of voting on shareholder resolutions. Strong supervision by the European Securities and Markets Authority should ensure that US asset managers are appropriately supervised across the EU. Asset managers apply a hub-and-spoke model, operating from Dublin and Luxembourg. National supervisors cannot effectively oversee the Europe-wide operations, which may create blind spots. A successful savings and investment union needs strong European players to allocate European savings to European investments. The European Commission should act to counter a home bias towards US investments. When hiring asset managers, pension funds and insurers should evaluate not only the lowest cost in the short term, but also financial and ESG performance in the long term.
Topic:: Climate Change, Finance, Investment, Sustainability, Capital, and Banking
Political Geography:: Europe, North America, and United States of America

461. Carbon pricing beyond borders: assessing climate policy spillovers from the EU carbon border adjustment mechanism

Author:: Anna Bahí, Maximilian Fuchs, and Camille Reverdy
Publication Date:: 03-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The European Union has some of the world’s most ambitious climate policies, yet it only accounts for a small share of global carbon emissions. Achieving meaningful global emissions reductions thus depends on other countries strengthening their own climate policies. The EU’s carbon border adjustment mechanism (CBAM) incentivises EU trading partners to adopt domestic carbon pricing systems to retain carbon revenues at home. Whether this incentive is sufficient to encourage such policy diffusion is an important question for global climate governance. This paper examines whether CBAM has increased the adoption of carbon pricing policies in third countries. Using data on trade exposure to CBAM-covered sectors and the evolution of carbon pricing mechanisms in 163 countries between 2014 and 2025, we estimate the effect of exposure to CBAM on the likelihood of non-EU countries adopting carbon pricing policies. We find that countries with greater trade exposure to CBAM have significantly increased announcements of carbon pricing policies since the European Commission previewed CBAM in 2019. On average, a one-percentage point increase in a country’s CBAM exposure raises the probability of adopting a carbon pricing policy by about 2 percent. This result suggests that the EU’s CBAM can generate positive international spillovers by encouraging the wider adoption of carbon pricing policies. However, these effects are concentrated among high- and upper middle-income countries, indicating that developing countries face technical and institutional constraints in adopting similar carbon pricing policies.
Topic:: Climate Change, Trade Policy, Decarbonization, Green Deal, Energy, and Emerging Economies
Political Geography:: Europe

462. Investing for tomorrow: long-term investment, economic scale and the green transition

Author:: Philip Ushchev and Guntram B. Wolff
Publication Date:: 03-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: We seek to explain positive correlations between green investments and long-term financial holdings, the size of the economy and the variance in GDP. To this end, we develop a model for green investments that expands on a standard non-cooperative private provision of public goods game, with heterogeneous agents and intertemporal choices. Agents differ in, first, time preference and, second, wealth/income. Our model shows that: (a) green bonds tend to account for larger shares of the portfolios of long-term oriented investors, (b) larger economies tend to invest more in climate mitigation, and (c) more heterogeneity among types of agents increases climate investments. Our model has significant implications for climate policy: it points to the importance of long-term investors in the green transition and to the importance of larger groups of countries agreeing on cooperative frameworks, for example, in the form of climate clubs, to increase overall investment in climate mitigation.
Topic:: Climate Change, Investment, Macroeconomics, Sustainability, and Decarbonization
Political Geography:: Global Focus

463. EU aid for domestic revenue mobilisation after the Sevilla Commitment

Author:: Roel Dom, Costanza Greppi Maturana, and Pascal Saint-Amans
Publication Date:: 04-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Mobilising domestic revenue in lower-income countries has become more urgent in the face of rising debts, tighter global financial conditions, climate pressures and weakening aid inflows. In this context, the 2025 Sevilla Commitment, in the context of the United Nations Sustainable Development Goals, marked an important political step. Donors pledged to collectively at least double support for domestic revenue mobilisation (DRM) in partner countries by 2030, especially those countries seeking to raise tax-to-GDP ratios to at least 15 percent. This Policy Brief argues that the European Union, as one of the largest donors for DRM, should play a central role in turning that pledge into credible action. Donor support for DRM in low-income countries is justified by several closely linked goals: financing domestic development, enhancing the stability and predictability of public finances, reinforcing state-building processes, advancing donors’ own long-term financial interests and the growing empirical evidence that external assistance can effectively strengthen tax capacity. Nevertheless, aid for DRM has been volatile and insufficient. Although the Addis Tax Initiative placed DRM firmly on the international agenda in 2015, donor disbursements have fallen short of agreed targets. The EU remains one of the largest donors, but its support fluctuates and does not consistently prioritise low-income countries. The Sevilla Commitment and the related Seville Declaration on DRM create an opportunity to reverse this trend. The EU should provide stable annual funding consistent with its commitments, more effectively target low-income countries and those below the 15-percent threshold. It should also adopt a clearer strategy linking DRM aid to broader development strategies such as the Global Gateway, while strengthening international partnerships, for example with regional tax organisations, and taking into account tensions in its relationship with the Global South on international tax cooperation. Together, these steps would make EU support more credible, strategic and effective.
Topic:: Governance, European Union, Multilateralism, Tax Systems, Macroeconomics, and Emerging Economies
Political Geography:: Europe

464. The European Union’s external imbalances: past, future and policy

Author:: Zsolt Darvas, Costanza Greppi Maturana, Helder Ferreira de Mendonça, Camille Reverdy, Bo Sangers, and Jeromin Zettelmeyer
Publication Date:: 04-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: External imbalances have returned to the policy agenda, partly because current account imbalances have widened for the first time since the Global Financial Crisis (GFC) of the late 2000s. However, while China’s large surplus was the main counterpart to the United States’s deficit before the GFC, both China and the European Union are now projected to run comparable surpluses. The shift in the EU current account from broadly balanced in the early 2000s to a persistent surplus of around 3 percent of GDP reflects the elimination of deficits in southern and eastern Europe by 2012, driven largely by declining investment. These were not offset by a fall in surpluses elsewhere in the EU and the EU’s current account surplus is likely to persist well beyond the medium term, until demographic shifts reduce savings rates. This is by itself unlikely to create significant problems for the global economy. However, it highlights an internal issue for several EU countries and for the EU as a whole: structurally weak domestic investment. Not all investment-enhancing policies will reduce the surplus. For example, transitioning to fully-funded pension systems could support capital market development, investment and growth, but might also raise savings rates. But there is plenty of scope to both stimulate investment and lower the surplus: reforms to improve the business environment, further deepening and integration of European capital markets and EU fiscal rules reform to better support public investment.
Topic:: Demographics, European Union, Investment, Fiscal Policy, Trade Policy, Capital, and Global Economy
Political Geography:: China and Europe

465. A new strategy to contain stablecoin risks in the European Union

Author:: Lucrezia Reichlin, Bo Sangers, and Jeromin Zettelmeyer
Publication Date:: 05-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Stablecoins – a form of tokenised money issued primarily by non-banks – promise efficiency gains in payments but also bring new risks to financial stability and monetary control. Because of this, European Union policymakers have so far discouraged the development of stablecoins, instead favouring tokenised deposits issued by banks. This approach might well make sense in a one-jurisdiction world, but risks being counterproductive in the context of dollar-denominated stablecoins encouraged by the United States authorities. EU policy could push European demand for stablecoins outside the EU’s regulatory perimeter, leaving EU holders of dollar stablecoins exposed to US currency risks and US fiscal risks. The EU would also risk adoption by the digital settlement architecture of European financial markets of dollar-based conventions, and settlement activity may migrate away from the Eurosystem’s payments infrastructure in tokenised segments. A strategy to contain these risks without a regulatory race to the bottom should include: Acceleration of the European Central Bank’s Appia project to establish interoperability between digital ledger technology platforms and ECB payments infrastructure; Dispensing with the regulatory requirement to hold a large share of stablecoin reserves in the form of bank deposits; Allowing EU stablecoin issuers to remunerate stablecoin holders directly, as long as the remuneration rate is below the rate on ECB reserves and standard deposit rates; Giving EU-regulated stablecoin issuers access to the ECB’s balance sheet, including to lending-in-last-resort facilities.
Topic:: Science and Technology, Monetary Policy, European Union, Digital Economy, Cryptocurrencies, Digital Currency, Fintech, and Stablecoins
Political Geography:: Europe and United States of America

466. When oil is scarce and debt is binding: policy sequencing under a severe energy supply shock

Author:: Gene Frieda
Publication Date:: 06-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The 2026 Iran energy shock differs categorically from the 2022 episode, when Russia’s invasion of Ukraine led to rerouting of oil and gas supply. The 2026 shock eliminates supply, with a volume loss exceeding 1973-74 and a full energy bill running at two or more times the crude-only estimate. Two features compound the difficulty for the euro area, United States, United Kingdom and Japan: weaker fiscal positions driving term premia higher and a live inflation regime in which tightening is now binding and costly. Narrow fiscal space may therefore force temporary monetary-fiscal coordination: targeted fiscal support to stabilise output, paired with conditional yield anchor operations that prevent financing stress from crowding out that support, while leaving the long end of the curve free to carry the inflation signal. The novelty is the inflation regime. This paper defines the conditions under which such purchases remain credible when inflation, fiscal sustainability and external adjustment bind simultaneously. Three conclusions follow. First, the binding constraint is not the mechanics of bond-buying but the market’s belief in a credible exit and tightening option. Second, that belief depends on initial conditions, so coordination is not universally available: the credibility window is widest for the US, fragmentation-exposed in the euro area, foreign-exchange-cushioned in Japan and narrowest in the UK. Third, if coordination is feasible, it should be pre-committed, conditional and bounded by a published exit rule, otherwise procyclical adjustment analogous to emerging-market sudden stops becomes the default.
Topic:: Oil, Macroeconomics, Fiscal Policy, Public Debt, Energy, and 2026 Iran War
Political Geography:: Global Focus

467. Challenges to the integration of the Western Balkans into European Union supply chains

Author:: Madalena Barata da Rocha, Niclas Poitiers, and Nina Vujanović
Publication Date:: 05-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Western Balkan economic integration with the European Union has advanced significantly over the past two decades, driven by trade liberalisation and significant EU foreign direct investment in the region. Yet integration remains incomplete. Though tariffs have been eliminated, firms in the region continue to face substantial trade costs to access the EU market. These costs stem from a range of non-tariff barriers, regulatory requirements and border-related frictions, which have become more pronounced over time. This paper identifies the critical barriers currently shaping the trade relations between the EU and the Western Balkans. These include non-tariff measures, particularly sanitary and phytosanitary and technical regulations, inefficient cross-border infrastructure and the new EU regulatory frameworks, including the carbon border adjustment mechanism, the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. Building on this analysis, the paper assesses the extent to which the current EU framework addresses these barriers. It shows that existing instruments, including Stabilisation and Association Agreements with Western Balkan countries, and the New Growth Plan for the Western Balkans, amount to an incomplete and ambiguous framework for reducing non-tariff barriers prior to full membership. A more targeted and differentiated approach is needed, allowing for a more flexible integration into EU value chains, alongside increased support for regulatory alignment, border efficiency and infrastructure improvements.
Topic:: European Union, Trade Policy, Supply Chains, and Global Economy
Political Geography:: Europe

468. Defence innovation and procurement reform: an empirical evaluation of the US Defense Innovation Unit

Author:: Ethan Kapstein, Javier Ospital, and Guntram B. Wolff
Publication Date:: 05-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Battlefields are evolving rapidly, with new technologies reshaping military strategy and tactics. Many of the new technologies originate in firms outside the traditional defence sector, rather than with the existing prime contractors. In the United States, the Department of Defense (DoD) created the Defense Innovation Unit (DIU) in 2015 to incentivise commercial tech companies to work on national security challenges. How successful has this new unit been in achieving its mission? We provide the first causal evaluation of the DIU’s effects on defence procurement. Using administrative procurement data and a firm-level panel covering 2017-2025, and employing propensity score matching, additional firm-level covariates and a staggered difference-in differences design, we find that the DIU has expanded both the extensive and intensive margins of defence contracting. We find not only a significant increase in the likelihood of receiving a DoD contract because of DIU treatment, but also in the size of the contract. Our findings show that defence innovation organisations can broaden and deepen the defence-supplier base. Governments updating their defence acquisition strategies in response to the lessons from recent conflicts can benefit from reforms that facilitate firm entry into procurement, overcoming the transaction cost and information asymmetry problems typical in defence markets.
Topic:: Defense Policy, Industrial Policy, Science and Technology, Macroeconomics, and Innovation
Political Geography:: North America and United States of America

469. A plan to revitalise the World Trade Organization

Author:: Ignacio Garcia Bercero
Publication Date:: 05-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The World Trade Organization (WTO) is experiencing a serious crisis arising from tensions that are internal to the global trading system and other tensions rooted in domestic political constraints in the United States and China and the geopolitical rivalry between them. In this context, four critical areas for WTO reform can be identified: joint action to support sustainable development, improving disciplines on subsidies, facilitating the integration of plurilateral agreements into the WTO framework and, as a culmination of the reform process, reforming dispute settlement. WTO reform will require willingness on the part of the European Union to lead in establishing a coalition of middle powers based on its network of free trade agreements. Because of uncertainty about the extent to which the US and China are prepared to engage, the EU and its partners should also be ready to take plurilateral initiatives outside the WTO, provided these contribute to the reinforcement of the rules-based trading system.
Topic:: World Trade Organization, Governance, European Union, Geopolitics, Multilateralism, Trade, Trade Policy, and Global Economy
Political Geography:: Europe

470. Debt sustainability in Japan and the case for a fiscal council

Author:: Tomomi Miyazaki, Marie-Sophie Lappe, and Roel Dom
Publication Date:: 04-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: Japan combines the highest public debt ratio among advanced economies with a fiscal framework that has struggled to anchor fiscal policy. As monetary policy normalises and interest rates rise, concerns about debt sustainability have intensified. We assess Japan’s debt dynamics using stochastic debt sustainability analysis, and examine the institutional foundations of its fiscal framework. We show that debt outcomes are highly sensitive to growth assumptions. Under plausible baseline scenarios, debt does not stabilise without sustained primary surpluses and even optimistic growth assumptions require fiscal adjustment relative to the current structural primary balance. Japan’s challenge is institutional as well as economic: weak enforcement of fiscal rules and the absence of independent oversight undermine credibility. Strengthening fiscal institutions, particularly through an independent fiscal council, could support debt stabilisation.
Topic:: Economic Growth, Macroeconomics, Fiscal Policy, and Public Debt
Political Geography:: Japan and Asia

471. Beyond tariffs: why Europe and India must prioritise investment into manufacturing

Author:: Alicia Garcia-Herrero, Rajeswari Sengupta, and Nina Vujanović
Publication Date:: 07-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The signing of the EU-India Free Trade Agreement (FTA) in January 2026 represents a significant milestone in bilateral economic relations, for both sides. However, it fails to address a more critical challenge: India's persistent struggle to attract manufacturing foreign direct investment (FDI). This paper argues that India requires more manufacturing FDI not only for financial resources, but as the principal means of knowledge transfer and boosting employment creation. This paper documents India’s substantial underperformance in attracting FDI compared to China and ASEAN countries. China's manufacturing FDI ecosystem has yielded high returns for foreign investors and technological spillovers for domestic firms. In contrast, India has primarily attracted capital to the services sector, where investment has flowed largely into captive, foreign-owned offshore units with limited backward linkages to independent domestic firms, or into private equity and venture capital funds that typically acquire existing assets, thereby weakening the typical knowledge-transfer channels. The European Union, already India's largest investor and the world's leading source of outward FDI, possesses both the strategic interest and the financial means to help bridge this gap, especially as European firms re-evaluate their exposure to China, and because India offers a vast and rapidly growing consumer market. Despite this, EU FDI into Indian manufacturing remains significantly lower than what India's growth rate and investment returns would suggest. A lack of credible investor protection could be partially responsible for this, and the FTA, as it stands, lacks investment-protection provisions which could play a vital role in meaningfully redirecting European manufacturing capital towards India.
Topic:: Industrial Policy, Employment, Economic Growth, Investment, and Trade Policy
Political Geography:: South Asia and India

472. Federal Government Spending Is a Leaky Bucket

Author:: Chris Edwards and Ryan Bourne
Publication Date:: 06-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: People often hold optimistic views about federal government spending programs. They assume that new and expanded programs can fix the nation’s social and economic problems. The government is a powerful institution, and so people think that it can steer funding to individuals, businesses, and nonprofit groups to solve problems and aid those in need. However, solving problems through the federal government is not so simple. Spending programs require funding from taxation or borrowing, and both create collateral damage on the economy. As funds flow through the government, resources are wasted on bureaucracy, mismanagement, and faulty planning. As the remaining funds flow out of the government and into the private sector, they induce people to change their working and investing activities, further undermining the economy. Only a fraction of the tax dollars raised for programs ultimately delivers on the outcomes promised by policymakers. Economist Arthur M. Okun described this problem as a “leaky bucket.” When the government imposes taxes on some people to aid others, it is not a costless transfer of resources. Rather, it is like transferring water using a bucket riddled with holes. In this study, we describe the many types of holes in the government bucket, and we argue that the leakage of resources is large. We also argue that the government bucket gets leakier as federal programs and bureaucracies continue to expand. With the government running huge budget deficits, policymakers should rethink the many costly programs that it runs. Some programs are essential, and so policymakers should preserve them while reducing the types of waste or leakage that we identify. But many other programs are so leaky that their costs outweigh their benefits. These programs are spilling economic resources all over and should be eliminated from the federal budget.
Topic:: Government, Public Spending, and Fundraising
Political Geography:: North America and United States of America

473. Artificial-intelligence competition in2026 Europe: the role of DMA Article 6(7)

Author:: Fiona M. Scott Morton
Publication Date:: 07-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: The European Commission’s first Digital Markets Act Article 6(7) specification, issued in draft form in April 2026, is a substantive and well-targeted intervention. It identifies the access points that determine whether an artificial-intelligence assistant can function effectively on a Google Android device (through invocation surfaces, contextual data, on-device actions and system-level model resources) and it requires Google to share those access points with qualifying rival providers on terms equivalent to those Google’s own services receive. If the specification is finalised and enforced as drafted, it will prevent monopolisation of AI services and shortcut the need for a long and ineffective antitrust case. The specification may also create a valuable side effect: a material increase in AI innovation in Europe. European AI entrants and non-European AI providers serving European consumers will see that Europe is a level playing field on which innovators can compete. The merits of an AI service, rather than whether it already owns a distribution channel, will determine its commercial success. The expected return from founding an AI company in Europe would rise accordingly, as would the expected return from investing in one. The remaining gap is on the iOS side. It seems likely that Apple will not want to wait too long before selling Siri-enabled handsets to 500 million European citizens. Apple’s compliance with the DMA will determine if the Apple-Google Gemini partnership needs to be investigated to ensure it does not lessen competition in AI services in Europe.
Topic:: Science and Technology, Digital Economy, Microeconomics, Innovation, Artificial Intelligence, and Economic Competition
Political Geography:: Europe

474. Planning for the rising fiscal costs of climate disasters

Author:: Heather Grabbe, Ugnė Keliauskaitė, Marie-Sophie Lappe, Irene Monasterolo, Massimo Tavoni, and Georg Zachmann
Publication Date:: 06-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Climate-related disasters are affecting the public budgets of a number of European Union countries, with government spending replacing low insurance coverage in a context of more frequent and intense extreme weather in the future. The experience of the direct costs from floods and droughts in six EU countries between 2021 and 2024 demonstrates the extent to which fiscal costs are affected by reliance on ad-hoc allocations from public budgets after such events. Fewer losses would fall on the state if private insurance played a bigger role and if governments invested more in prevention, adaptation and public risk financing. The ‘integrated framework for European climate resilience and risk management’ under preparation by the European Commission can help to manage the fiscal risks by establishing national and European plans that foster: Proactive public and private adaptation, with incentives for preventive investments and avoidance of state bailouts following disasters. Narrowing the climate insurance protection gap so public budgets act less as the insurer of last resort. Incentive-compatible government relief funds with ‘build-back-better’ conditions for all reconstruction projects. Coordination of adaptation investment and potentially risk-pooling across the EU. Integration of resilience into EU economic governance, with the creation of a European risk-sharing instrument that builds on EU disaster funds and a governance framework for adaptation finance.
Topic:: Climate Change, Governance, European Union, Investment, and Fiscal Policy
Political Geography:: Europe

475. Green finance or financing green? Bridging the EU’s sustainable-finance and capital-market architectures

Author:: Rebecca Christie
Publication Date:: 06-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The European Union has not done a good job of integrating its green goals with its overall approach to finance. Sustainability disclosure and capital markets policy are too separate, even though they both operate in the same global environment. Projects that help the climate transition need money, meaning they need optimal market conditions as well as environmental credentials. Connecting market and green-finance policies would help. At their best, sustainable finance disclosures are used by companies for self-assessment, peer comparison and aligning business models with the needs of the green transition. This, in turn, can lead to innovation, jobs and growth, and more care for the natural environment. At their worst, these disclosures become compliance burdens, demanding tremendous resources to produce data that is little used. EU efforts to simplify sustainable finance rules have not reduced complexity or reconciled the EU’s departures from global sustainable finance standards. To make its sustainable finance policy more fit for purpose, the EU should prioritise the solving of technical challenges; look beyond green bonds to equities, venture capital and other asset classes; use guarantees and subsidies sparingly to incentivise investment and market tools such as securitisation; reduce the role of the EU taxonomy and simplify data collection; and pare back the role of so-called double materiality so that EU rules can be more compatible with global standards, such as those developed by the International Sustainability Standards Board.
Topic:: Finance, Investment, Sustainability, Banking, Green Deal, and Capital Markets
Political Geography:: Europe

476. Competing for inputs: how the European Union can improve critical raw materials supply security

Author:: Madalena Barata da Rocha and Camille Reverdy
Publication Date:: 07-2026
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Critical raw materials (CRMs) are essential to the European Union’s green and digital transition, underpinning technologies from batteries to semiconductors. Demand is expected to increase hugely by 2050, yet CRM supply chains remain highly concentrated and exposed to geopolitical and market risks. The EU also faces growing competition from Japan and the United States, both of which are actively securing CRM supply through third-country partnerships and domestic investment. We analyse the internal and external aspects of the EU strategy on CRMs, drawing on data on the 60 CRM strategic projects, EU CRM strategic partnerships with third countries and trade agreements with CRM provisions. We find that strategic projects are unlikely to meet EU self-sufficiency targets and strategic partnerships have not yet produced measurable trade effects. So far, provisions in trade agreements have been the EU’s most effective external instrument, leading to significant increases in CRM exports to the EU. The EU should better align CRM investments with supply risks, strengthen CRM governance through strategic partnerships and trade frameworks and ensuring support for CRM projects. It should engage cautiously with price-floor proposals led by the United States, favouring instead bilateral off-take agreements and plurilateral cooperation involving developing supplier countries, with the goal of serving broad supply-security objectives.
Topic:: Industrial Policy, European Union, Geopolitics, Investment, and Trade Policy
Political Geography:: Europe

477. A plan for a World Trade Organization sectoral agreement on semiconductors

Author:: Petros C. Mavroidis and Mario R. Palacios
Publication Date:: 07-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: To promote their economic security, or simply to inflict damage on other nations, countries are increasingly weaponising trade policy. To do so, trading nations must sidestep the rules-based system established in the aftermath of the Second World War because this system, in letter and spirit, opposes such behaviour. However, neglecting the rules-based system leads to uncertainty, and uncertainty incentivises trading nations to intensify their pursuit of national economic security, thus undermining the multilateral edifice even more. It does not have to be this way, however. Based on an analysis of trade in semiconductors (a product market in which there is clear weaponisation of trade policy), we argue that, while a comprehensive negotiation on economic security may be currently unrealistic, a sectoral agreement within the World Trade Organization would be both feasible and appropriate, and could provide a template for regulating economic security. Such an agreement should include non-discriminatory trade in high-end semiconductors and a negotiated list of segments of the covered product market, in which signatories will be allowed to erect barriers to protect economic/national security without being obliged to compensate affected parties.
Topic:: Security, Science and Technology, World Trade Organization, Governance, Multilateralism, Trade Policy, and Semiconductors
Political Geography:: Global Focus

478. To what extent can green infrastructure investment mitigate China’s clean-energy overcapacity?

Author:: Alicia Garcia-Herrero and Haoxin Mu
Publication Date:: 06-2026
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: China’s industrial policies have made it the global leader in the manufacturing of solar panels, wind turbines and other renewable technologies, but at the cost of severe overcapacity that is now compressing margins across the entire sector. This paper evaluates greater investment in power infrastructure as a potential solution to stimulate energy demand, reduce curtailment and alleviate the renewable tech manufacturing overcapacity problem. Using scenario analysis, we show that grid expansion provides meaningful near-term demand relief, though supply-side consolidation remains necessary to restore durable market equilibrium.
Topic:: Industrial Policy, Investment, Trade Policy, and Energy
Political Geography:: China and Asia

479. World Trade Without the US

Author:: James Bacchus
Publication Date:: 03-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: As the Trump administration imposes a barrage of illegal and unprecedented tariffs on an ever-increasing number of imported products, the rest of the world is showing that it can continue trading despite these tariffs and without the United States. Other countries are lowering trade barriers with each other by concluding new bilateral and plurilateral trade agreements, and exporters are reconfiguring supply chains to route around American protectionism. Regardless of whether the United States remains indispensable to the global economy, international trade is still happening—and it is happening increasingly without the United States. At the same time, these countries should not be doing what they have mostly been doing: forging new trading arrangements outside the World Trade Organization (WTO). Although the temptation to go outside the WTO legal framework is understandable, the better course of action would be for the other 165 WTO members to redouble their efforts toward trade liberalization within the institution while taking a different approach. That approach should be WTO-based plurilateralism that can build up to multilateralism, which is precisely how, over decades, the original General Agreement on Tariffs and Trade (GATT) evolved into the WTO. For this approach to succeed, WTO members must move on from their continued insistence on decisionmaking by consensus, without waiting any longer for the United States. Consensus and American engagement at the WTO is ideal, but plurilateral agreements represent an opportunity to address unfinished business and negotiate rules that meet the demands of the 21st-century economy, while also leaving the door open for other countries to join any agreements if they are willing to be bound by them. The 165 other WTO members must also stand together to defend their rights under the WTO treaty. Although the singular actions of the United States have, at least for now, reduced the Appellate Body to a paper tribunal, that does not have to mean other WTO members have no recourse for standing up to the Trump administration’s bullying and for holding the US accountable under WTO dispute settlement.
Topic:: Treaties and Agreements, Economy, Tariffs, Trade, Donald Trump, and Protectionism
Political Geography:: North America and United States of America

480. Politically Motivated Killers: 51 Years of Terrorist Murders on US Soil, 1975–2025

Author:: Alex Nowrasteh
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Politically motivated terrorists are nonstate actors who commit violence to achieve political, ideological, religious, or social goals. Charlie Kirk’s recent assassination prompted many Americans to worry about the scale and scope of politically motivated violence. However, politically motivated terrorism is a small and vastly overstated threat regardless of the ideological motivations of the attackers. The 208 terrorist attackers who killed at least one person on US soil between January 1, 1975, and December 31, 2025, murdered 3,577 people. Murders in politically motivated attacks account for about 0.35 percent of all murders during that time, which translates to an annual chance of being killed in such an attack of about 1 in 4 million per year. The deadliest motivating ideology for those attacks is Islamism, which accounts for a total of 87 percent of all deaths and includes those who were murdered in the 9/11 attacks. Right-wing ideology is the second deadliest motivation at 10 percent, left-wing ideology at 2 percent, and unknown/other, foreign nationalism, and separatism together accounting for less than 1 percent of all murders. Two attacks are responsible for most of the terror deaths on US soil: 9/11 and the 1995 Oklahoma City bombing. Those two attacks caused 3,147 deaths, which is 88 percent of all terrorist murders over the 51-year period. Of the other 430 murders, right-wing terrorists account for 45 percent of people murdered, Islamists are responsible for 32 percent, left-wing terrorists are responsible for 16 percent, and attackers motivated by the other ideologies account for the remainder. The number of politically motivated killings is not increasing over time. Of course, murders don’t capture the totality of politically motivated violence or the amorphous feelings that people have that American politics are out of control. However, they are the best measure of the actual violence and an excellent indicator that the United States is not suffering through a wave of politically motivated terrorist killings.
Topic:: Political Violence, Terrorism, Non State Actors, and Ideology
Political Geography:: North America and United States of America

481. Ending Community Development Subsidies

Author:: Chris Edwards
Publication Date:: 01-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The US Department of Housing and Urban Development (HUD) spent more than $20 billion on community development subsidies in fiscal year 2025. The spending flows to state and local governments for housing projects, welfare programs, disaster aid, sidewalk repairs, pickleball courts, business support, grants to nonprofit groups, and many other activities. Congress launched many community development programs in the 1960s to aid poor inner cities. Federal experts were supposed to skillfully help local officials grow their economies. That was the idea, but today HUD’s community development aid is spread widely to both poor and wealthy areas, and experience has shown that aid imposes costly bureaucracy on local investment activities. The Trump administration has proposed eliminating most of HUD’s community development spending. Given the need to reduce federal budget deficits, it makes sense to cut funding for local activities that local governments can fund for themselves. Also, HUD’s community development programs are plagued by intense paperwork, fraud and corruption, and pork-barrel politics. Americans would be better off funding investments such as sidewalk repairs locally, rather than sending their taxes to Washington and hoping that some of it trickles through the bureaucracies and back to their neighborhoods. Congress should end federal subsidies for community development. Local public services and investments should be funded by local governments and the private sector.
Topic:: Development, Investment, Private Sector, Public Service, Subsidies, and Local Government
Political Geography:: North America and United States of America

482. The Future of Online Expression and Innovation Depends on Robust Section 230 Protections

Author:: David Inserra
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Section 230 is a cornerstone of how online speech works in the United States. It allows websites and platforms to host user-generated content without being legally responsible for everything their users say, while still giving them the freedom to remove content that they and their users may find objectionable. This legal framework helped the internet grow into a place where millions of Americans can speak, create, organize, and do business. Section 230 removed legal incentives that discouraged content moderation, allowing online platforms to engage in the moderation of user-generated content without assuming liability for all user speech. Section 230 has enabled more free expression and innovation by protecting platforms from being held legally responsible for everything posted by their users. Weakening or repealing Section 230 would backfire, pushing platforms to over-remove lawful speech, limit features, or exit markets to manage legal risk. Expanding platform liability would entrench large incumbents by raising legal and compliance costs that small and new companies cannot absorb, ultimately reducing competition and innovation. As new technologies emerge, such as generative AI, preserving a stable speech-protective liability framework is essential for the United States to remain a leader in innovation and free expression.
Topic:: Science and Technology, Freedom of Expression, Innovation, and Speech
Political Geography:: North America and United States of America

483. COVID-19 Slowed but Couldn’t Stop the Fall in Global Inequality

Author:: Chelsea Follett and Vincent Geloso
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Over the long run, global inequality has declined dramatically across many dimensions as living standards have improved. While a substantial reduction in worldwide inequality occurred between 1990 and 2021, the last two years in that range reveal far slower progress, reflecting pandemic-era stagnation. These findings underscore the vital role of undisturbed markets in sustaining the trajectory of human progress, as well as the vulnerability of political liberty in times of perceived crisis. The Inequality of Human Progress Index reveals that pandemic-driven shocks to the global economy slowed advances, halting the momentum of earlier growth across many measures of human well-being and stalling progress toward the world becoming better off and more equal. Still, long-run global progress has been more substantial and widely shared than previously recognized. These findings challenge popular narratives of rising global inequality. Such views have inspired calls for unprecedented interventions, including global wealth taxes, expanded foreign aid programs, and massive redistributive policies—proposals that would be counterproductive to the continuation of broadly shared human advancement.
Topic:: Inequality, COVID-19, Global Economy, and Human Progress Index
Political Geography:: Global Focus

484. Understanding Debanking: Evaluating Governmental, Operational, Political, and Religious Financial Account Closures

Author:: Nicholas Anthony
Publication Date:: 01-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: This study examines the growing phenomenon of debanking—the sudden and often unexplained closure of individuals’ or organizations’ financial accounts. While media and political narratives often attribute these closures to political or religious discrimination, this study finds that the majority of debanking cases stem from governmental pressure. To identify this cause more accurately, the study distinguishes between four forms of debanking—governmental, operational, political, and religious—evaluating each form in turn. Based on public evidence, governmental debanking appears to be the most significant issue. Congress can correct this issue by reforming the Bank Secrecy Act, repealing confidentiality laws, and permanently ending reputational risk regulation. Doing so would reduce the incentives to debank, expose how widespread debanking has become, and cut out the tools that the government has used to pressure banks and other financial institutions.
Topic:: Government, Financial Institutions, Debanking, and Financial Disclosure
Political Geography:: North America and United States of America

485. How Viktor Orbán’s Hungary Eroded the Rule of Law and Free Markets

Author:: Johan Norberg
Publication Date:: 03-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Some US conservatives see Prime Minister Viktor Orbán’s Hungary as a model for America’s future. In reality, Orbán’s crude majoritarianism has undermined the rule of law and media freedom in Hungary to take control of the economy and funnel resources to loyal oligarchs. The dismantling of institutional constraints on state power has gone further than in other modern democracies, and the results have consistently disappointed, even in areas where the government claims achievements such as strengthening the economy or increasing fertility rates. Far from being a model, Orbán’s Hungary is a cautionary tale of what results from an unrestrained executive with strongly centralized power, crony capitalism, and the systematic dismantling of the rule of law.
Topic:: Capitalism, Rule of Law, Cronyism, Free Market, and Viktor Orbán
Political Geography:: Europe and Hungary

486. Addressing Civil Investigative Demand Overreach at the Consumer Financial Protection Bureau

Author:: Solveig Singleton
Publication Date:: 05-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: he Consumer Financial Protection Bureau (CFPB, or the Bureau) often issues civil investigative demands (CIDs), a type of administrative subpoena that compels businesses and individuals to produce evidence such as documents and testimony. Many observers criticize the Bureau’s CIDs for being poorly justified, overbroad, vague, and costly. Modern Supreme Court precedents leave CID recipients with few constitutional protections. Courts defer to the Bureau in legal challenges to CIDs, rendering constitutional and statutory limits on the Bureau’s powers toothless. Legislators are considering reform proposals to bring accountability to the Bureau’s CID practice. The Civil Investigative Demand Reform Act of 2025 would curb overbroad CIDs by requiring them to make specific reference to particular facts, empowering recipients to petition for relief from burdensome or unnecessary demands, and allowing petitioners to appeal directly to federal court upon the denial of a petition. Policymakers should consider additional reforms. For example, the Bureau could be required to prove that CID compliance costs are proportional to the seriousness of the violation. Reforms should ensure that petitions are decided not by the Bureau’s director but by neutral arbiters such as administrative law judges housed outside the agency. The Bureau’s CID overreach can destroy lawful enterprises without corresponding benefits to consumers. Procedural reforms to the CID process are an important step. But ultimately, protection of firms’ and individuals’ liberty will require legislators to take a skeptical view of inessential substantive rules more broadly.
Topic:: Government, Reform, and Consumer Protection
Political Geography:: North America and United States of America

487. Let 1,000 Flowers Bloom: Best Practices for Advancing Educational Freedom

Author:: Colleen Hroncich
Publication Date:: 05-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The growth of educational freedom in America has been dramatic, with more than 70 programs now operating in over 30 states. While this is welcome news for many families in need of school choice, the rapid expansion has also revealed weaknesses with program design, particularly in funding stability, administrative structure, expenditure approval processes, and family access. This paper identifies essential components for successful educational freedom programs, each of which will be explained in more detail: Universal eligibility. Any student can apply. Universal funding. Funding sufficient to cover all students who apply. Rollover. Unspent funds can be used for eligible expenses in future years. Competitive administration. Allow for multiple program managers rather than a monopoly. Streamlined expenditure approval. Offer multiple ways to pay and utilize risk-based auditing instead of prepurchase approval for most purchases. The paper also traces how we arrived at today’s choice landscape and highlights lessons for policymakers seeking to maximize opportunity while avoiding new monopolies. To sustain momentum, states must move beyond piecemeal design toward comprehensive frameworks. Only then can educational freedom deliver on its promises.
Topic:: Education, Public Policy, Freedom, and Local Government
Political Geography:: North America and United States of America

488. Improving Trump Accounts

Author:: Adam N. Michel
Publication Date:: 06-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Trump Accounts are new early-life investment accounts that include a $1,000 government-funded seed investment for Americans born between 2025 and 2028. The accounts also allow additional contributions from families, employers, and charitable organizations. Trump Accounts are the latest addition to a tax code that already includes more than a dozen similar qualified investment accounts, each with its own eligibility rules, contribution limits, and withdrawal restrictions. This policy analysis finds that Trump Accounts function primarily as a government welfare program rather than a tax-neutral investment vehicle. For most families, Trump Accounts are less tax-advantaged than existing alternatives and add considerable complexity to an already fragmented system, limiting participation. The analysis concludes by proposing reforms that build on the best features of Trump Accounts by adopting a Universal Savings Account structure and consolidating the remaining system into simpler, more flexible options that expand access and reduce complexity.
Topic:: Reform, Tax Systems, Investment, Welfare, and Donald Trump
Political Geography:: North America and United States of America

489. Federal Budget Reform Opportunities in Higher Education for 2026

Author:: Andrew Gillen
Publication Date:: 04-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Over the decades, federal programs have accumulated in higher education. Some of these programs have been rendered obsolete or redundant by subsequent developments, while others have failed to achieve their intended purpose. As a result, there are several federal policy reforms that would improve higher education policy and save taxpayers money. In this report I identify policies that would save more than $265 billion over the next 10 years, including eliminating subsidized loans, eliminating or capping Public Service Loan Forgiveness, modifying the Repayment Assistance Plan, phasing out campus-based aid, repealing ineffective tax expenditures, and benchmarking research overhead rates.
Topic:: Reform, Budget, Higher Education, and Public Spending
Political Geography:: North America and United States of America

490. Eradication of Sparrows and the Great Famine in China

Author:: Eyal G. Frank, Shaoda Wang, Qinyun Wang, Xuebin Wang, and Yang You
Publication Date:: 01-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Scientists, politicians, and popular media frequently argue that the continued degradation of ecosystems will negatively affect human well-being. Warnings regarding the devastating consequences of ecosystem collapses have emphasized the complex interactions between natural systems, particularly how agriculture connects with surrounding ecosystems. While the potentially catastrophic costs of these events have long been theorized, empirical evidence remains scarce. The rarity of ecosystem collapses, the difficulty of clearly tracing their triggers, and the lack of detailed data pose significant barriers to rigorous empirical investigations.
Topic:: Agriculture, History, Famine, and Ecosystem
Political Geography:: China and Asia

491. The Limited Effectiveness of Economic Sanctions: Evidence from the Russia-Ukraine Conflict

Author:: Raymond Fisman, Giovanna Marcolongo, and Meng Wu
Publication Date:: 01-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Economic sanctions aim to exert pressure on a target nation or region to induce policy reforms or regime change. The effectiveness of sanctions depends on whether they inflict economic pain on the target (especially the targeted elite). This, in turn, depends on several factors. For trade sanctions, these factors include how readily a sanctioned nation can obtain substitutes for needed imports, the degree to which countries imposing sanctions rely on trade with a sanctioned partner, and the extent to which either side can rely on intermediary nations outside the sanctioning blockade to evade trade restrictions.
Topic:: Economics, Sanctions, Trade, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

492. Minimum Wages and Racial Disparities

Author:: David Neumark and Jyotsana Kala
Publication Date:: 01-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: There has been substantial research on the employment effects of minimum wages. Much of this research shows that minimum wages reduce employment, with the largest effects observed in the lowest-skilled groups, usually defined in terms of age or education. This is likely because a larger share of lower-skilled workers earn the minimum wage; when the minimum wage increases, these workers are more likely to experience reduced hiring, fewer hours, and job losses. However, there has been little research on how minimum wages affect employment and other labor market outcomes for lower-skilled racial minority workers, even though these groups tend to earn lower wages and hence are more likely to be affected by the minimum wage.
Topic:: Race, Labor Market, Minimum Wage, and Earnings
Political Geography:: North America and United States of America

493. Tariffs as Fiscal Policy

Author:: Kimberly A. Clausing and Maurice Obstfeld
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: The election of Donald Trump to a second term in November 2024 indicated that tariffs would play a much larger role in US economic policy. The use of tariffs—taxes on imports— expanded significantly during Trump’s first term, with tariff revenue nearly doubling relative to the value of imports. But his 2024 campaign promised a far larger role for tariffs, and he has delivered on that promise. In early 2025, the average tariff rate soared from less than 3 percent at the end of the Biden administration to over 20 percent. As of September 4, 2025, it stood at about 17.5 percent, the highest level since 1935. While recent analysis has shown that exemptions and other factors may lower the average tariff rate below this level, this number may understate the negative economic effects of the tariffs because they vary dramatically across trade partners and goods. In any case, the future of tariffs remains unclear: Congress has yet to legislate on tariffs, and legal challenges against many of them are underway. Nonetheless, we expect these issues to be relevant to policy discussions for some time.
Topic:: Tariffs, Fiscal Policy, Donald Trump, and Trade Deficit
Political Geography:: North America and United States of America

494. The Effects of the One Laptop per Child Program in Peru

Author:: Santiago Cueto, Diether W. Beuermann, Julian Cristia, Ofer Malamud, and Francisco Pardo
Publication Date:: 05-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Developing countries have invested heavily in improving educational outcomes by expanding access to technology in schools. For example, between 2006 and 2012, 20 countries in Latin America and the Caribbean distributed nearly 10 million laptops to public school students. One highly publicized initiative was the One Laptop per Child (OLPC) program, which provided personal laptops to students in 40 countries. These types of programs have garnered renewed interest since the COVID-19 pandemic, which started the trend of remote schooling. But experiments have generally not found any short-term effects of these programs on educational outcomes. A large-scale experimental evaluation of the OLPC program in Peru found no effects on academic performance or primary school enrollment 15 months into the program.
Topic:: Development, Education, Science and Technology, and Remote Learning
Political Geography:: South America and Peru

495. Laboratories of Autocracy: Centralized Versus Decentralized Policymaking in China

Author:: Kaicheng Luo, Shaoda Wang, and David Y. Yang
Publication Date:: 02-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Afundamental question in governance concerns the merits of centralized versus decentralized policymaking. While top-down, centralized policymaking may streamline adoption, enhance efficiency, and improve coordination between regions, it often sacrifices the local suitability of bottom-up, decentralized policy initiatives. This tension is especially relevant when governing large nations with many regional differences. However, measuring centralization in policymaking is difficult because it requires tracing the origin and spread of all policies across layers of government hierarchy; as a result, most studies of centralization and decentralization focus on only one policy. Assessing centralization’s impact on policy outcomes is even more demanding because it involves linking policies to both local conditions and intended outcomes.
Topic:: Governance, Economic Development, Decentralization, Centralization, and Autocracy
Political Geography:: China and Asia

496. A Look Back and Ahead at the Federal Budget

Author:: Alan J. Auerbach and William G. Gale
Publication Date:: 04-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: After running deficits from 1970 to 1997, the US government ran a budget surplus in fiscal year 2000 for the third year in a row, reaching a post–World War II high of 2.3 percent of annual gross domestic product (GDP). The Congressional Budget Office projected that surpluses would increase over time, totaling $5.6 trillion over the next 10 years, and that all public debt would be paid off by 2006. This led to a problem for policymakers and academics: How would monetary policy be conducted, and where would investors find safe assets if no US public debt were available? Then–Federal Reserve Chair Alan Greenspan cited the need to maintain public debt in his pivotal argument in favor of tax cuts. Shortly thereafter, Congress enacted major tax-cut legislation, signed by President George W. Bush.
Topic:: Government, Budget, GDP, and Tax Systems
Political Geography:: North America and United States of America

497. Will Prohibiting Vapes Work? Evidence from a Survey in Türkiye

Author:: Asena Caner, Belgi Turan, Berna Tari Kasnakoğlu, Yenal Can Yiğit, Donald S. Kenkel, and Alan D. Mathios
Publication Date:: 04-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Smoking cigarettes poses substantial health risks. Despite global efforts to eliminate smoking, it remains troublingly prevalent; 1.3 billion tobacco users worldwide are at risk of tobacco-related diseases and death. In Türkiye (Turkey), almost 30 percent of adults are smokers, and this rate has largely remained steady. Reported smoking rates in the country were 27.4 percent in 2008, 23.8 percent in 2012, 29.6 percent in 2016, and 31.2 percent in 2022. According to Turkish government statistics, in 2022, 28.3 percent of adults were daily smokers, and 3.8 percent were occasional smokers. These trends underscore the ongoing need for effective strategies to curb smoking.
Topic:: Economics, Tax Systems, Tobacco, Public Health, Vaping, and Cigarettes
Political Geography:: Turkey and Middle East

498. Bank Competition and Entrepreneurial Gaps: Evidence from Bank Deregulation

Author:: Xiang Li
Publication Date:: 03-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Entrepreneurship plays a vital role in stimulating economic growth by promoting job creation and innovation. However, pronounced racial and gender gaps persist in entrepreneurial ventures. Addressing these gaps can boost economic growth and job creation while also reducing inequality. Therefore, understanding the barriers that impede business formation among minorities and women is crucial. My research examines how bank competition alleviates financial obstacles that disproportionately prevent women and racial minorities from becoming entrepreneurs. My findings reveal that the deregulation of interstate banking in the United States between 1994 and 2021 narrowed gender and racial disparities in entrepreneurship by expanding and improving banking services, reducing discrimination in the financial market, and narrowing gaps in firm performance.
Topic:: Entrepreneurship, Banking, Racism, and Deregulation
Political Geography:: North America and United States of America

499. Learning About Police Bias: Prosecutors and Police Before and After Body-Worn Cameras

Author:: Emma Harrington and Hannah Shaffer
Publication Date:: 04-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Each year, police arrest around seven million Americans, often after discretionary stops, and criminal courts sentence more than half a million to prison. Prosecutors wield considerable discretion in determining which arrests lead to imprisonment, typically basing their decisions on information provided by the police, especially the police report’s characterization of the crime. However, police reports may misrepresent reality and reflect racial bias. Prosecutors thus face a difficult question: To what extent do police reports reflect truth versus bias?
Topic:: Law Enforcement, Police, Racism, Bias, Incarceration, and Bodycams
Political Geography:: North America, North Carolina, and United States of America

500. Should States Reduce Teacher Licensing Requirements?

Author:: Christa Deneault and Evan Riehl
Publication Date:: 03-2026
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: All US states require training for teacher certification, making teaching the largest licensed occupation in the country. Because education is mandatory and provided by the government for free, teachers’ wages may not fully respond to supply pressures, and demand remains high regardless of quality. These factors can lead to teacher shortages, forcing some schools to hire unlicensed teachers to fill vacancies. Thus, training requirements may reduce the supply of certified teachers and increase schools’ reliance on teachers with little or no training, potentially undermining licensing laws even if training is effective.
Topic:: Education, Licensing, Teachers, and Local Government
Political Geography:: North America and United States of America

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COLUMBIA UNIVERSITY PRESS