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3131. Europe’s electricity capacity mechanisms need to be better coordinated

Author:
Pär Holmberg, Christoph Maurer, Monika Morawiecka, Fabien Roques, and Georg Zachmann
Publication Date:
11-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
A growing number of European governments believe that guaranteeing adequate energy supplies requires specific ‘capacity mechanisms’ to compensate power plants for their availability, not solely for electricity generation. Capacity mechanisms appear set to become a permanent feature of electricity market design across much of Europe. However, poorly coordinated national capacity mechanisms could undermine consumer gains from the expansion of interconnectors and years of progress in coupling Europe’s power markets. A patchwork of capacity mechanisms developed according to national preferences would erode predictability for market participants, undermine investment efficiency and weaken competition. Improving the design of capacity mechanisms and, in particular, their cross-border coordination is thus important to prevent potential distortions from spilling over to other energy market segments, which would hinder scaling up of efficient solutions for secure, affordable and sustainable electricity supplies in Europe. Conversely, joint or closely coordinated capacity mechanisms at regional level that allow access to neighbours’ portfolios will increase security of supply and save money for households and industry. Coordinating or joining up national capacity mechanisms is politically and technically challenging. EU countries prefer to retain sovereignty over their electricity mixes and adequacy levels, and national policymakers baulk at solutions perceived as sending consumers’ money abroad or as financing domestic capacity that ends up addressing adequacy shortfalls elsewhere. Technically, coordinating capacity mechanism design and ensuring confidence in delivery of power across borders in times of scarcity is an important prerequisite. Harmonising the commitments traded in national capacity mechanisms or creating interfaces between very different mechanisms is complex. Overcoming such inefficiencies requires high-level political commitment to compromise, including on rules for energy sharing during scarcity, cost-sharing, cross-border compatibility of capacity mechanisms and credible institutions that can perform regional adequacy assessments and enforcement. Compromise must emerge through a political process that builds trust among stakeholders. The EU could make approval of national capacity mechanisms conditional on engagement in regional coordination. Done right, this could reduce the cost of securing adequate capacities, reinforce the internal electricity market and strengthen broader energy-policy coordination across borders.
Topic:
Climate Change, European Union, Electricity, Green Deal, and Energy
Political Geography:
Europe

3132. Efficiency and distribution in the European Union’s digital deregulation push

Author:
Mario Mariniello
Publication Date:
11-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
To boost the European Union’s digital economy, the European Commission is seeking to reduce the burden of its digital rulebook. However, the Commission’s deregulatory strategy lacks a rigorous, evidence-based analysis of the expected effects entailed by proposed burden reductions, is insufficiently transparent and accountable in relation to potential distributive trade-offs, and is overly focused on a narrow geopolitical goal of ‘catching up’ with the United States, which may neglect Europe’s distinct social and institutional priorities. This paper introduces a framework to analyse these issues. It distinguishes between efficiency effects that enhance total societal value, and distributive effects which determine how value is shared within society. The framework explains how total factor productivity (a proxy for competitiveness) may have a complementary and a substitutive relationship with digital regulatory protection. The Commission’s deregulatory initiatives may entail both efficiency and distributive effects, but that the Commission typically only acknowledges the former. This misrepresentation leads to unrealistic goals, such as EU companies matching the same level of data use as US companies without compromising European privacy standards. Digital regulation can be designed to generate value and can distribute that value in accordance with the goals the Commission intends to pursue. A distinction should be introduced between ‘mitigating’ distributive effects, in which the proposed initiatives shift the distribution of value among players without fundamentally altering business models, and ‘steering’ distributive effects, in which proposed initiatives may encourage the development of alternative approaches to technological development. In pursuing a deregulatory strategy, the Commission should be more transparent about its aims. The Commission should ground reforms in robust impact analysis, without a preconceived goal in terms of the desired amount of reduction in regulatory burden. It should also clearly identify the end goals while detailing potential trade-offs between them, and adopt measurable indicators for efficiency, mitigating distributive effects and steering distributive effects, in order to assess the potential effectiveness of its initiatives and to understand their actual impacts.
Topic:
European Union, Digital Economy, Institutions, Microeconomics, Innovation, and Artificial Intelligence
Political Geography:
Europe

3133. Shifting priorities, slow progress: an analysis of EU tax recommendations

Author:
Roel Dom, Costanza Greppi Maturana, and Pascal Saint-Amans
Publication Date:
11-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The European Commission is increasingly emphasising tax policy as a tool to respond to emerging challenges, ranging from growth and competitiveness to the climate transition and inequality. Through the European Semester, the European Commission proposes to European Union countries annual country-specific recommendations (CSRs) in various areas of economic governance, including tax policy guidance aligned with EU priorities. This paper examines how the content, focus and implementation of tax-related CSRs changed between 2011 and 2025. We draw on the Commission’s CSR database and classify each recommendation by targeted tax instrument and policy objective, and assess implementation over time. We find a clear shift in priorities away from labour and consumption tax reforms, and towards capital taxation, tax administration and environmental taxes. This mirrors a parallel reorientation of objectives, from growth and fiscal sustainability toward environmental sustainability and tackling tax avoidance. More recently, however, growth-related objectives appear to be making a comeback, possibly linked to renewed concerns about competitiveness. However, these shifts do not appear to reflect the successful implementation of older recommendations. Few tax-related CSRs are fully or substantially implemented, with notable differences between countries in degree of implementation. These findings suggest that changes in the Commission’s tax-related advice have been driven less by the successful implementation of earlier reforms and more by a reorientation of the Commission’s policy agenda toward new objectives. This widening scope highlights the European Semester’s flexibility in integrating emerging priorities. However, poor implementation also suggests there still are challenges to soft coordination on tax. Strengthening coordination requires clearer prioritisation, more specific guidance, sustained (national) commitment and greater attention to national contexts and reform feasibility.
Topic:
Governance, European Union, Economic Growth, Tax Systems, Macroeconomics, and Fiscal Policy
Political Geography:
Europe

3134. What will it take to stabilise debt in advanced countries?

Author:
Zsolt Darvas, Gonzalo Huertas, Lennard Welslau, and Jeromin Zettelmeyer
Publication Date:
11-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper analyses the prospects for debt stabilisation in the countries of the European Union, the United Kingdom and the United States, using two methodologies. First, we estimate the level of the structural primary balance that is required to asymptotically stabilise the debt ratio with a 70 percent probability, and assess the plausibility of reaching this level over the medium term, using both historical benchmarks and stochastic forecasts centred on International Monetary Fund projections. Second, we estimate ‘fiscal reaction functions’ that measure the reaction of the primary balance to the debt level. We find that: 1) debt-stabilising primary balances are generally within historical precedent – well below 3 percent of GDP; 2) the fiscal adjustment required to reach debt-stabilising primary balances is very high in several countries – specifically, the US, France, the UK, Slovakia, Poland and Romania, which must increase their primary fiscal balances by over 5 percentage points of GDP; 3) the feedback coefficient from debt to the primary balance remains positive in all countries, but has significantly declined since the global financial crisis and is not significantly different from zero in most countries. Our main conclusion is that public debt in the countries in our sample remains sustainable in the sense that the fiscal adjustment required to stabilise the debt is feasible. However, undertaking this adjustment will require a larger and/or more protracted fiscal effort than has been typical for most advanced countries and that is currently expected by the IMF. In the meantime, countries with large adjustment needs could be vulnerable to shifts in market sentiment.
Topic:
Economic Growth, Macroeconomics, Fiscal Policy, and Public Debt
Political Geography:
Global Focus

3135. The Western Balkan energy sector: between Russia, the European Union and the green transition

Author:
Nina Vujanović, Rouven Stubbe, and Maria Catarina Louro
Publication Date:
12-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
To upgrade their energy sectors, Western Balkan countries should transition away from dependence on Russian energy, converge with the European Union through electricity market coupling and phase out coal. Significant strain characterises each of these transitions. Region-specific differences in each area are also pronounced: Serbia and Bosnia and Herzegovina still depend on Russian oil and gas, while Albania is the leader in the green transition, and Montenegro is relatively advanced in each of the three areas. Yet, all Western Balkan countries are behind on regulatory alignment with the EU, delaying market coupling that was initially planned for 2027. There are strong reasons to accelerate this process, given significant EU/Western Balkan energy integration already: up to 70 percent of electricity flows in the Western Balkans pass between EU countries, for example. Given the strategic role of the Western Balkans as a major electricity transit corridor for the EU, faster integration would also enhance system efficiency, provide security against Russian interference and bring the benefits of complementary electricity markets to both the EU and the Western Balkans. Meanwhile, the region’s green energy potential remains untapped and further investment is needed. Western Balkan countries should set goals on merging faster with the EU energy union, phasing out coal and benefitting from abundant solar and wind resources, in way that are conducive to their energy sector competitiveness and in line with the green transition.
Topic:
Industrial Policy, European Union, Geopolitics, Macroeconomics, Decarbonization, and Energy
Political Geography:
Europe

3136. How resilient is Russia’s economy after four years of war?

Author:
Marek Dabrowski
Publication Date:
12-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In 2022-2025 the Russian economy demonstrated resilience despite the increasing costs of the war in Ukraine and the extensive economic and financial sanctions imposed on Russia by the coalition of Western countries. Fiscal accounts, though under strain, have remained under control. However, after nearly four years of war, the associated fiscal and quasi-fiscal costs have grown significantly and started to challenge macroeconomic and financial stability. Inflation has been well above the Bank of Russia’s target. The high growth rates in 2023-2024, fuelled by war-related public spending and a corporate credit boom, have decelerated in 2025 due to capacity constraints. Nevertheless, the Russian government still has the fiscal capacity to continue the war in the short term. It has some fiscal reserves, can increase domestic borrowing and may seek to raise further non-hydrocarbon taxation. The long-term perspectives look much worse. Structural and institutional weaknesses, such as the adverse demographic trends, the continuous dependence on hydrocarbon production and exports and the poor business and investment climate will be magnified by the costs of the war and sanctions, increasing isolation from the West and entrenching an inward-oriented development strategy.
Topic:
Geopolitics, Economic Growth, Macroeconomics, Fiscal Policy, Public Debt, and Russia-Ukraine War
Political Geography:
Russia and Eurasia

3137. Steeled for Protectionism

Author:
Clark Packard and Alfredo Carrillo Obregon
Publication Date:
10-2025
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
ver the last 60 years, the federal government has showered the domestic steel industry with every conceivable form of protection from import competition, from tariffs, quotas, and trade remedies to voluntary export restraints, Buy American procurement preferences, and restrictions on trade and foreign investment under the guise of national security. These policies have further entrenched the steel industry as a protected constituency that wields significant influence over trade policy, which in turn has led to more—and increasingly complex—schemes for further shielding the industry from imports. As steel is an essential input for many products, from vehicles and appliances to construction materials and machinery, the unholy alliance between Washington and Big Steel has come at a high cost for steel-using firms in the United States, and therefore for Americans who consume final goods made with steel and who fund public infrastructure projects through their taxpayer dollars. Moreover, the federal government’s endeavors to protect the domestic steel industry have sowed political dysfunction both at home and abroad, with industry advocates cycling through the proverbial revolving door of Washington politics, and officials’ attempts to cater to Big Steel undermining international trade negotiations, relationships with long-standing trading partners, and even the functioning of the World Trade Organization. And yet for all the protection that the government has conferred to the industry and all its costs, the steel industry’s prospects show remarkably little improvement: Major producers are struggling to innovate and compete, output and capacity utilization have stagnated, employment continues its long-term decline, and prices are among the highest in the world. Altogether, the history of steel protectionism in the United States is yet another case study in the failures of protectionism to reinvigorate declining industries and the consequences of pursuing these policies.
Topic:
Economy, Tariffs, Trade, Protectionism, and Steel
Political Geography:
North America and United States of America

3138. Licensing Requirements Would Block Care and Justice for Sexual Assault Victims

Author:
Jeffrey A. Singer, Akiva Malamet, Spencer Pratt, and Michael F. Cannon
Publication Date:
10-2025
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Sexual assault is a deeply traumatic experience. The emotional toll often includes feelings of shame, guilt, and fear, contributing to a sense of powerlessness and vulnerability. Survivors may grapple with post-traumatic stress disorder, anxiety, depression, and other mental health challenges. Sexual assault victims typically seek care at hospital emergency departments mere hours after the most traumatic event of their lives. Entrepreneurial nurses created the specialty of sexual assault nurse examiner (SANE) to provide high-quality, compassionate care for sexual assault victims and reliable evidence collection for prosecutors. These nurses have created voluntary, third-party educational and certifying organizations to develop and revise SANE professional standards. Research shows that sexual assault nurse examiners provide high-quality, compassionate care and that sexual assault prosecution rates rise after communities establish SANE programs. Yet SANEs are in short supply. In some states, regulations block competent nurses from examining sexual assault victims. SANE licensing, mandatory training, or certification requirements increase barriers to care for sexual assault victims, slow the SANE profession’s development, and routinely subvert the needs of sexual assault victims to those of the practitioners they regulate. Worse, state licensing authorities have repeatedly and knowingly upheld or reinstated the licenses of physicians who have sexually assaulted patients. Some then go on to assault other patients. Licensing is not the right model for protecting sexual assault victims. States should avoid creating barriers to nurses who wish to develop SANE certification programs or to specialize as SANEs. States that have already done so should remove those barriers.
Topic:
Sexual Violence, Public Policy, Licensing, and Nursing
Political Geography:
North America and United States of America

3139. Their Own Two Feet: How Europeans Can Lead on Conventional Deterrence in Europe

Author:
Benjamin Giltner
Publication Date:
10-2025
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Fiscal constraints at home, China’s rise in the East, and America’s limited interests in Europe make reducing the US force presence in Europe an appealing concept for policymakers. Europe has economic and military advantages over Russia that make such action possible. As a narrow military analysis, this paper explains how a European-led NATO can deter Russia without US troops on the continent. A European-led NATO should adopt a defensive doctrine using a “defense-in-depth” force deployment. As part of a defense-in-depth deployment, European countries within NATO should eschew deep strikes into Russian territory, instead investing in and deploying light defenses in the Baltics and deploying their mechanized and armored capabilities throughout Germany and Poland. To successfully implement a defensive doctrine exercising defense-in-depth force deployment, the Europeans must spend more on defense and reduce tensions with Russia. The United States should begin withdrawing American troops from Europe for several reasons, including to induce Europe to implement such policies. This doctrine and force deployment would enable a European-led NATO to deter Russia while minimizing risks of escalation. They would also signal to Russia that it would be defeated on the battlefield should it attempt to conquer NATO territory. Although European forces likely would be incapable of fully protecting the Baltics, their lack of geographic depth makes them exceptionally difficult to defend regardless of force deployment and America’s involvement on the continent. Europe is wealthy and populous enough to carry out a defensive doctrine and defense-in-depth force deployment, and for it to do so would be less risky and costly than the status quo for the United States.
Topic:
Security, Defense Policy, NATO, and Armed Forces
Political Geography:
Europe and United States of America

3140. The $15 Trillion Emergency Spending Loophole

Author:
Dominik Lett
Publication Date:
09-2025
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Congress has designated $12.5 trillion in spending for emergencies over the past 35 years, resulting in $2.5 trillion in additional interest costs. Poorly designed emergency spending rules allow Congress to evade spending limits and routinely designate non-emergency line items as emergencies, increasing wasteful and excessive spending. High deficits, an escalating federal debt, and the insolvency of major entitlement programs mean that Congress is facing several budgetary challenges that will only grow in importance. Congress cannot afford further abuse of emergency spending. It is time for Congress to rein in the emergency spending loophole. This paper presents comprehensive estimates of emergency spending and resulting interest costs, with data going back to 1991. According to my estimates, Congress designated 9 percent of federal budget authority as emergency spending during that time. Emergency spending is roughly equal to the amount that Congress has spent on Medicaid and veterans’ programs combined. Roughly half of the emergency spending since 1991 has been discretionary spending (federal programs that receive funding through annual appropriations), mostly in response to the Great Recession and COVID-19 pandemic, and for disaster relief and military operations. Mandatory spending, also called direct spending, accounts for the other half. Five Great Recession and pandemic-related laws alone account for 87 percent of mandatory emergency spending. The budgetary share of emergency spending has grown to 11 percent of total budget authority over the past decade. In this analysis, I provide several specific reforms that would reduce emergency spending, decrease abuse, and enhance oversight.
Topic:
Reform, Budget, Public Spending, and Congress
Political Geography:
North America and United States of America