Template-Type: ReDIF-Paper 1.0 Author-Name: Corti, Francesco Author-Name: Alcidi, Cinzia Author-Name: Gros, Daniel Author-Name: Liscai, Alessandro Author-Name: Shamsfakhr, Farzaneh Title: A qualified treatment for green and social investments within a revised EU fiscal framework Abstract: The call for a European fiscal framework overhaul, already outlined by the EU�s Economic Governance review, has been strengthened by the economic and social impact of the pandemic. Building on the EU objective to achieve a green and just transition, we operationalise and compare two options for a qualified treatment of green and social public investment: exemption (the �Golden Rule�) and amortisation. As a first step, we provide a detailed classification of the eligible expenditures based on desired (green and social) outcomes, disentangle between capital and current government spending, and assess the existing green and proposed social taxonomy. As a second step, we provide quantitative estimates, according to a set of alternative scenarios, of the two types of qualified treatment (exemption and amortisation) for social spending and determine their legal feasibility with and without amendments to the Treaties. We conclude that a proper effort to categorise green and social public investment is still lacking, as well as the capacity to quantify the budgetary impact of these investments. Moreover, we raise concerns about the technical possibility of including human capital expenditures within the label of public investment and the need for a case-by-case identification of investments. Finally, we state that an amortisation rule on the entire capital stock would be more restrictive for social investment, whereas a golden rule applied to net investments would possibly have a broader scope. Length: 56 pages Creation-Date: 2022-05 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/05/RR2022-02_Green-and-social-investments.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36574 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Optimal tariff versus optimal sanction: The case of European gas imports from Russia Abstract: Europe has set itself the aim of reducing its dependency on Russian gas imports. This paper provides an economic analysis of a tariff on imports of natural gas into the EU which would help achieve this goal. The starting point is Gazprom�s monopoly on exports of gas from Russia and pricing power on the European market. Standard trade theory implies that a tariff on Russian gas imports would be beneficial for Europe even on purely economic grounds because it would lower the demand curve Gazprom faces and induce it to lower prices. The standard linear model used here takes into account the availability of Liquified natural gas (LNG) supplies and confirms the general rule that it pays to levy a tariff on imports from a foreign monopoly. It yields the following numerical results: - Only one half of the tariff would result in higher prices for European consumers and the tariff revenue would be more than sufficient to compensate them for this loss. - The tariff, which maximises Europe�s welfare, would be close to one third of the price at which Europe would stop importing from Russia. This would cut Gazprom�s net revenues by approximately half. - If the tariff is used as a sanctions weapon to reduce revenues for Russia, the tariff should be higher (around 60 %) and would cut Gazprom�s revenues to one fourth of the free trade level. The overall conclusion is thus that an EU import tariff on Russian gas would have a major impact on Russia�s earning from gas exports and would certainly improve the European terms of trade. Length: 18 pages Creation-Date: 2022-05 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-12_Optimal-tariff-versus-optimal-sanction_.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36006 Template-Type: ReDIF-Paper 1.0 Author-Name: Sipiczki, Agnes Title: A critical look at the ESG market Abstract: Environmental, social and governance (ESG) investing has been practised in Europe for more than two decades, during which it has moved from niche to the mainstream market. The rapid growth in the number of sustainability-related financial products and service providers over the past decade has also attracted regulators� attention. The EU�s regulatory capacity on sustainability represents a hidden treasure that echoes the realisation that to achieve the EU�s environmental and social goals, a sharp departure from the current predominant model of capitalism and corporate governance is required. It has been argued that an increasing amount of capital is misallocated due to the inadequacy of ESG criteria and the ESG services market�s lack of transparency. The rankings produced by ESG rating agencies create a false sense of security, and investors who buy into ESG funds with dubious credibility need protection. Considering the potential implications of ESG exposures for long-term financial stability, it is in the public interest to critically evaluate ESG criteria and reporting requirements to clear a path for more meaningful and more operational corporate objectives that contribute to the green, digital and just transition. Whilst in the context of the EU sustainable finance package many regulatory measures are already underway, it is imperative that the Commission fixes the blind spots and completes the additional steps needed. Length: 18 pages Creation-Date: 2022-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-12_Optimal-tariff-versus-optimal-sanction_.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36111 Template-Type: ReDIF-Paper 1.0 Author-Name: Rizos, Vasileios Author-Name: Righetti, Edoardo Title: Low-carbon technologies and Russian imports: How far can recycling reduce the EU's raw materials dependency? Abstract: The term �strategic autonomy� denotes the political goal of building a self-reliant EU economy with limited exposure to supply disruptions, like those stemming from the Covid-19 crisis. Securing access to the non-energy minerals required for building a new industrial ecosystem consistent with the EU�s decarbonisation objectives is important to achieving this goal. Rising demand for these materials has created an arena for geopolitical competition. Moreover, the war in Ukraine has brought forward the need to take a closer look at the external supply of minerals, including from Russia, and potential risks involved. This Policy Insight first provides a brief overview of EU import dependency on raw materials and Russia�s share among EU sources of key supplies for low-carbon technologies. It then looks at prospects for meeting future material demands though circularity for three technologies, namely lithium-ion batteries, wind turbines and fuel cell electric vehicles. The analysis is based on two scenarios with different levels of ambition. They aim to give an indication of the scale of potential benefits that can be achieved through circularity and recycling approaches for components and materials used in these technologies. The estimates suggest that establishing collection and recycling facilities in the EU, through the appropriate policy frameworks in place, can contribute to meeting future EU material demands for them and reduce import dependency. Still, recycling alone will not suffice to cover the increasing material requirements. Other options will therefore need to be considered, including developing strategic partnerships and joint projects with resource-rich countries (also in light of efforts to cut economic ties with Russia). The EU will further need to source from its own mining reserves, seek improvements in material efficiency and foster material substitution options where possible. Length: 19 pages Creation-Date: 2022-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/04/CEPS-PI2022-17_Low-carbon-technologies-and-Russian-imports.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36180 Template-Type: ReDIF-Paper 1.0 Author-Name: N��ez Ferrer, Jorge Title: Where the (euro) buck stops: Facing the next big crisis with a better EU budget Abstract: The EU budget�s current financial architecture is inappropriate to effectively address the various crises it has faced in recent years. This CEPS Policy Brief presents some immediate actions to raise overall funding and to address the impacts of the war in Ukraine with unspent EU funds. It also calls for longer term reforms to support the creation of a budget fit to respond to the next wave of future challenges that the EU will undoubtedly have to face. Length: 6 pages Creation-Date: 2022-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/04/PB2022-05_Where-the-euro-buck-stops.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36148 Template-Type: ReDIF-Paper 1.0 Author-Name: Benaglia, Stefania Author-Name: Macchiarini Crosson, Dylan Title: A pillar of stability in an unstable world: Strengthening EU-Japan security cooperation in the Indo-Pacific Abstract: The rising centrality of the Indo-Pacific is self-evident. What remains to be defined is the potential role the EU could play, notably as a security actor. Given capacity constraints, the EU�s objectives in the region should focus on credibility and on safeguarding shared interests � for example securing sea lines of communication, an objective also shared by Japan. Hard power remains the preferred language in the Indo-Pacific region. Australia unceremoniously dumping the French contract over US nuclear technology in the AUKUS affair, as well as India�s reluctance to take a position against Russia, a major provider of defence equipment, over its full-blown invasion of Ukraine demonstrate that being able to speak the language of power in a credible and reliable way takes precedence. While the EU will unlikely become a defence security provider � la the United States, it is now clear that it must evolve its global stance. The adoption of the EU Indo-Pacific Strategy and cross-references to it in the EU�s Strategic Compass represent an important milestone for bolstering its security and defence posture. The EU would do well to support its efforts to be a more credible security and defence actor in the Indo-Pacific by upgrading relations with its strategic partners, Japan in primis. Further operational, capabilities development, and industrial cooperation with Japan must be considered and reinforced by triangulation with other strategic partners in the region. Length: 11 pages Creation-Date: 2022-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/04/CEPS-PB2022-04_Strengthening-EU-Japan-security-cooperation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36074 Template-Type: ReDIF-Paper 1.0 Author-Name: Blockmans, Steven Author-Name: Macchiarini Crosson, Dylan Title: The EU�s Strategic Compass: A guide to reverse strategic shrinkage? Abstract: Taking their fate into their own hands, EU heads of state and government endorsed the Strategic Compass on 24 March 2022, a roadmap for becoming a stronger security and defence actor. The shared threat assessment, a first in the history of the EU, is a positive development. Rewritten over the last month to emphasise the impact of Russia�s war of aggression against Ukraine, the Strategic Compass reveals a newfound consensus among EU Member States on the danger Russia poses, but also a lack of strategic foresight. This raises the question of whether the final document might contain shortcomings regarding the threat posed by China and the importance of the Indo-Pacific. As such, the document essentially characterises the EU�s security and defence actorness as that of a regional � not a global � power. Divided into four baskets, �Act�, �Secure�, �Invest�, and �Partner�, the Strategic Compass appears at times bogged down in policy details rather than answering the tough questions that might reveal an overarching vision for EU security and defence. However, if the measures outlined in the document are reinforced by more effective implementation and duly complemented by NATO�s forthcoming Strategic Concept, then the EU may yet appear more credible in the eyes of others and ultimately, the Strategic Compass will have been ink well spent. Length: 11 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-14_EU-Strategic-Compass.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36032 Template-Type: ReDIF-Paper 1.0 Author-Name: Brender, Anton Author-Name: Pisani, Florence Title: Fiscal rules and the macroeconomic constraint Abstract: The need to revise the eurozone fiscal rules now seems widely accepted and many amendments are being discussed. They are still meant to impose discipline on governments� financial behaviour but are trying to define smarter ways to constrain public deficits or spending. The purpose of this policy insight is neither to dispute the need for fiscal discipline nor to formulate a new proposal to enforce it. It is rather to draw attention to an often-overlooked issue that has come to the forefront during the last decade: when monetary policy has lost most of its leverage on private demand, trying to meet a fiscal target that does not take into account the spending behaviour of private agents can unduly constrain economic activity. The argument rests on a simple logic: if the private sector tends to accumulate more financial assets than it issues liabilities, the government has to provide the debt liabilities that will allow economic activity to remain close to its potential. A look at the data shows that when households set money aside, they mainly acquire � directly or indirectly � debt claims while, contrary to what is often expected, firms are hardly net issuers of debt liabilities. Public indebtedness hence plays a key role in providing the counterpart to the financial assets households tend to accumulate. In one way or another, our revised fiscal rules should also take into account the reality of this macroeconomic constraint. Length: 10 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-13_Fiscal-rules-and-the-macroeconomic-constraint.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:36018 Template-Type: ReDIF-Paper 1.0 Author-Name: Elkerbout, Milan Author-Name: Bryhn, Julie Author-Name: Righetti, Edoardo Author-Name: Chapman, Francesca Title: From carbon pricing to climate clubs: How to support global climate policy coordination towards climate neutrality Abstract: Carbon pricing has been adopted as a key climate policy measure in an increasing number of jurisdictions. With much of the world moving towards net-zero targets since the entry into force of the Paris Agreement, carbon pricing instruments now operate in a different context for climate policy than when economists first proposed them. This report re-examines the theory of diverse models of carbon pricing, especially for industrial decarbonisation, where concerns about carbon leakage risk and competitiveness play an important role in the policy debate. The report reviews implications for the effectiveness of climate policy and the need to reach climate neutrality in other regions when adopting measures to mitigate the risk of carbon leakage. It then discusses the concept of climate clubs and the potential for more inclusive ways of cooperating on climate policy beyond just carbon pricing. Length: 44 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-RR2022-01_From-carbon-pricing-to-climate-clubs.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35998 Template-Type: ReDIF-Paper 1.0 Author-Name: Akhvlediani, Tinatin Author-Name: De Groen, Willem Pieter Title: Sanction-proof or sanction-hit: How can the EU make Putin�s evil war even more costly Abstract: After President Vladimir Putin madly went ahead with the full-scale invasion of Ukraine, it is clear that sanctions will no longer have a deterring effect on the outbreak of war. However, imposing sanctions can still make this war very costly for Putin and perhaps make him and his inner circle reconsider continuation of the war and find a negotiated solution. The EU, together with its allies, has shown impressive unity in imposing severe sanctions against Russia, yet some options remain open for the EU to further exploit its economic leverage over Putin�s regime. This Policy Insight reviews the EU�s imposed sanctions against Russia and looks at the possibilities to increase their effectiveness, drawing upon lessons learned in the past. Length: 31 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/PI2022-10_Sanction-proof-or-sanction-hit.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35899 Template-Type: ReDIF-Paper 1.0 Author-Name: Corti, Francesco Author-Name: N��ez Ferrer, Jorge Author-Name: Ruiz de la Ossa, Tom�s Author-Name: Liscai, Alessandro Title: Comparing and assessing recovery and resilience plans � Second edition Abstract: One year has now passed since the adoption of the RRF Regulation and most of EU Member States have now started to implement their recovery plans. Yet, many questions remain unanswered about the plans� actual capacity to deliver their stated objectives. The complexity and heterogeneity of the plans makes it not only difficult to compare and assess them, but also raises doubts on existing capacity to monitor their implementation. Building on the methodological approach and the experience gained from the previous study we presented in September 2021, this updated paper further expands our initial analysis, including two new countries (Austria and Belgium), and introduces new insights on how far the plans cover entirely new investments or are being simply earmarked for previously budgeted expenditure. This paper is part of the ongoing CEPS Recovery and Resilience Reflection Project. Length: 104 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/RRRP-No-7_NRRPs-comparison-IT-DE-ES-FR-PT-SK-AT-BE.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35879 Template-Type: ReDIF-Paper 1.0 Author-Name: Elkerbout, Milan Author-Name: Bryhn, Julie Title: Carbon removals on the road to net zero: Exploring EU policy options for negative emissions Abstract: Negative emissions will be needed on an increased scale to meet the EU�s climate targets, in particular climate neutrality by 2050. This Policy Insight examines different policy options for the EU to support the deployment of negative emissions technologies. After presenting an overview of measures to support negative emissions around the world, the EU�s climate policy frameworks are reviewed from the perspective of (potentially) integrating negative emissions. This is followed by a review of specific policy measures to support negative emissions in the EU. The paper recommends a wide portfolio of policy measures over time, to account for technology differences and the changing demands of climate policy for different time horizons as climate neutrality approaches (followed by net-negative emissions thereafter). This Policy Insight builds on a scoping paper by CEPS (Elkerbout & Bryhn, 2021) that discussed the need for negative emissions more in detail, as well as various options for negative emissions technology. Length: 28 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-08_Carbon-removals-on-the-road-to-net-zero.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35831 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: When the taps are turned off:How to get Europe through the next winter without Russian gas Abstract: There is no silver bullet. Renewables or new conventional energy supplies will take years to become available at the scale needed. However, high prices do induce substitution to other fuels and encourage energy savings � not only in Europe, but also in other markets, thus potentially freeing up gas for Europe. This CEPS Policy Insights paper makes the calculations to show that by considering Europe and Asia as one interconnected energy market, high gas prices could, on their own, bring about the necessary reduction in (global) gas demand to free up enough resources for Europe. This could be achieved even over a period as short as 9-12 months, thus in time to keep Europe warm and fully operational through the next winter, without having to rely on Russian gas. Length: 6 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-07_How-to-get-Europe-through-the-next-winter-without-Russian-gas.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35815 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Ounnas, Alexandre Title: Can the Pay Transparency Directive close the gender pay gap? Abstract: Today, our thoughts go out to all women who have had to flee Ukraine to escape horror and to save their children, and to all those women who have remained behind to help defend their homeland. To those men and women who have the chance to live in (still) peaceful EU countries, we want to recall that gender equality remains a top priority. In the EU, major progress has been made in advancing women�s rights over the past 25 years but challenges still remain, especially on the labour market. The gender pay gap is definitely not yet closed. Despite progress over the past few years, women in the EU are still paid less than men for equal work of equal value. In 2018, the gap was on average 14 %, and it is likely to have increased during the pandemic. In 2019, President von der Leyen put gender equality among the six priorities of her new Commission. In March 2021 the Commission published a proposal for a Directive to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms. Is pay transparency important to close the gender pay gap? The short answer is yes. Over time women have been closing gaps relative to men in education, labour market participation, and attitude; areas which typically (used to) explain the gap. Yet pay differences persist. New research points to within-company dynamics as one of the most significant contributors to the pay gap. The directive proposes to address it through transparency and information sharing. This is expected to reduce the gender pay gap, even though the implementation, and in particular the operationalisation of the concept of equal work, will pose challenges to companies, and eventually can negatively weigh on the overall benefits. Length: 11 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-06_gender-pay-gap.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35738 Template-Type: ReDIF-Paper 1.0 Author-Name: Perarnaud, Cl�ment Author-Name: Fanni, Rosanna Title: The EU Data Act: Towards a new European data revolution? Abstract: On 23 February 2022, the European Commission published its long-awaited legislative proposal for a new Data Act. The proposal marks a significant shift in the EU�s approach to the data economy. It aims to challenge the constitution of data monopolies across various sectors, by reshaping existing power structures that favour large data incumbents and moving to solidify data as a non-rival good. Drawing on desk research and a series of interviews conducted with key experts in Brussels, this CEPS Policy Insights paper proposes to unpack this new legislative proposal by exploring its genealogy, the key policy issues at stake, and identifying the main expected political drivers for the negotiations to come. Despite the Commission�s intentions to address market concentration and limit the EU�s over-reliance on foreign companies in data-intensive sectors, Member States and European industry�s cautious approach to the proposal is indicative of greater challenges to come. The Data Act�s broad territorial reach, revolutionary approach to data access, and extensive technical specifications is expected to have broad implications for citizens, companies and public authorities alike, inside and outside the EU. Upcoming negotiations will be shaped primarily by the outcome of fierce battles between large US-based data incumbents and European actors over the control of their data, complex arbitrages at the Member States� level in prioritising the contradictory interests of dominant national champions and smaller companies in relation to data access, and strong political divides on the opportunity to further the digital sovereignty agenda at EU level. Length: 8 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-05_The-EU-Data-Act.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35693 Template-Type: ReDIF-Paper 1.0 Author-Name: Hu, Weinian Title: Future-proofing pandemics: Analysing the EU�s proposal to clarify and simplify the compulsory licensing procedure Abstract: The �TRIPS waiver� proposal, first submitted by India and South Africa to the WTO TRIPS Council in October 2020, has resulted in diametrically split positions amongst WTO members. But the EU has chosen a middle way. Its three-fold response seeks to provide answers to the concerns raised by the proposal that developing countries may face �institutional and legal difficulties� when using the policy flexibilities provided by the TRIPS Agreement. Thus, the EU wishes to clarify and simplify the authorisation procedure of compulsory licensing, a policy flexibility that could provide affordable generic versions of patented pharmaceutical products. However, an onerous procedure is a long-heard complaint against compulsory licencing. Consequently, the EU�s response is more focused on improving the administrative procedure of compulsory licensing rather than on responding directly to the Covid-19 pandemic. Thus, the effect of the EU�s response to the proposed waiver agreement on the wider battle against the pandemic will be limited, not least because since the beginning of the outbreak, the international community had already rallied itself to combat Covid-19. A recent case in point is that, in February 2022, six African countries received the technology needed to produce mRNA vaccines on the continent. After all, there is no proof that the TRIPS Agreement has undermined efforts in technology transfer, pharmaceutical manufacturing, etc. as the �TRIPS waiver� proposal suggests. Overall, this CEPS Policy Insights paper finds that the EU�s proposed solutions have shifted the focus from Covid-19 vaccines supply to the compulsory licensing procedure. Thus, the merit of the �TRIPS waiver� proposal is no longer about taking moral decisions but rather it�s about technical aspects. The real impact of the EU�s response will most likely benefit future users of compulsory licensing, especially when the next pandemic strikes, whenever that may be. Length: 8 pages Creation-Date: 2022-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/03/CEPS-PI2022-04_EU-compulsory-licensing-procedure.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35667 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: The EU is homing in on dirty money Abstract: The EU is getting serious in the fight against dirty money. It is currently grappling with a huge legislative package in the domain of anti-money laundering (AML), a package that includes four proposals overall. Each needs to be carefully scrutinised to ensure that they bring real improvements. One of the most striking proposals is the creation of a new Anti-Money Laundering Agency (AMLA), to be operational by 2026. Many questions remain, however, on how it will ensure the better implementation of rules across the EU (and beyond) and guarantee closer cooperation between national competent authorities (NCAs) and financial intelligence units (FIUs), all envisioned within the European Commission�s proposal. This CEPS Policy Insights paper discusses the four individual proposals and dives deep into the subsequent questions that they raise, such as whether a new agency is really the best solution. It concludes that the European Parliament and the Council of the EU definitely have their work cut out for them to ensure that a well-functioning structure for AML supervision is the true end result of this arduous legislative process. Length: 8 pages Creation-Date: 2022-02 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/02/CEPS-PI2022-03_The-EU-is-homing-in-on-dirty-money.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35459 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Managing sovereign debts held by the ESCB: Operational and legal constraints Abstract: Following the proposal by Avgouleas and Micossi (2021) and Micossi (2021), several authors (Amato and Saraceno 2022, Baglioni and Bordignon 2022, Cottarelli and Galli 2021, D�Amico et al. 2022) have engaged in the debate on how to manage the sovereign debt portfolio accumulated by the European System of Central Banks (ESCB) as a result of their purchase programmes undertaken since 2015 to fight deflation in the eurozone and provide emergency support to the economy in response to the Covid-19 pandemic. These proposals share the common goal of addressing an important and urgent public policy problem but differ in their specific institutional solutions. This paper provides an assessment of their consistency with present European legal and institutional arrangements in order to assess their practical relevance. The conclusion is that a new mechanism is needed to free the ESCB of the encumbrance of the sovereigns acquired following their assets purchase programmes. The ESM could perform that task while respecting all relevant European law. Length: 10 pages Creation-Date: 2022-02 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/02/CEPS-PI2022-02_Managing-sovereign-debts.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35443 Template-Type: ReDIF-Paper 1.0 Author-Name: Blockmans, Steven Title: Why the Ukraine crisis should push the UK and EU into a tighter embrace on security policy Abstract: One of the costs of Brexit is the weakened ability of both the UK and the EU to shape a strong joint response to Russia�s threats to pan-European security. In the standoff over Ukraine, the need for close cross-Channel cooperation is particularly acute for any effective sanctions package negotiated with the US. Yet, post-Brexit relations between the UK and the EU are currently governed by a narrow Trade and Cooperation Agreement (TCA) which does not include a designated chapter on political dialogue and that, barring a handful of exceptions, does not contain any provisions on cooperation on foreign and security matters. Fortunately, the preparatory work undertaken to reach the bilateral accord contains the answer to the question on how trust between the parties can be regained through procedural means. This policy brief highlights the embers of the Brexit bonfire that might be raked up to rekindle the flame of dialogue and cooperation between the UK and the EU in foreign affairs and security policy. Length: 10 pages Creation-Date: 2022-02 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/02/CEPS-PB2022-03_Why-the-Ukraine-crisis-should-push-the-UK-and-EU-into-a-tighter-embrace-on-security-policy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35406 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: A (E)U-turn from Nord Stream 2 towards a European Strategic Gas Reserve Abstract: The EU does not have an army. It thus cannot defend Ukraine from a Russian invasion, but it can at least put itself in a situation in which it does not depend on gas deliveries from a potential aggressor, a dependence that many argue would only become more severe with the formal opening of the controversial Nord Stream 2 pipeline connecting Russia with Germany. Diminishing Europe�s dependence on Russian gas requires the creation of a credible European Strategic Gas Reserve for emergency situations. This cannot be achieved overnight but some first practical steps can be taken quickly and, importantly, cheaply. Such action, which should be spearheaded at the European level, would send a powerful signal that the EU is indeed willing to act and put its money where its mouth is, namely in the defence of its core values and strategic interests. Length: 8 pages Creation-Date: 2022-02 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/01/CEPS-PB2022-02_A-EU-turn-from-Nord-Stream-2-.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35125 Template-Type: ReDIF-Paper 1.0 Author-Name: Schaus, Malorie Title: Reviving the WTO and rules-based trading: The EU�s role Abstract: The rules-based multilateral trading system has proven essential in restraining protectionist tendencies and in helping to expand international trade and maintain world peace. The challenges it faces, related to weakening global governance structures, geopolitical tensions and changing global realities, should not be allowed to break such a robust system. They should rather be seized as opportunities for reviving the WTO. If appropriately grasped, they would contribute to the modernisation and multilateralisation of trade disciplines, to enhanced benefits in terms of economic performance, non-trade objectives, transparency and predictability, as well as to the limitation of any protectionist policies currently on the rise. In this respect, the EU, based on its extensive experience with trade and cooperation, has a global leadership role to play. The WTO reform process should start with the improvement of the WTO dispute settlement system and integration of a plurilateral negotiating approach. This would open the window to opportunities offered by modernising WTO substantive disciplines, i.e. their alignment with the changing nature of trade (global value chains, foreign direct investments, services and e-commerce) and sustainability objectives, and limitation of trade-distortive practices linked to state involvement in the economy. These actions should furthermore be accompanied by the WTO�s institutional reinforcement regarding transparency, regulatory cooperation and negotiations. With its postponement, the 12th WTO Ministerial Conference can possibly lead to more mature results in accomplishing its crucial mission, which is crystallising the negotiating efforts by WTO members � the pursuance of which is highly recommended � and providing a roadmap for achieving an ambitious and realistic WTO agenda. A positive outlook is supported by its coinciding, in 2022, with the 75th anniversary of the GATT 1947, at the origin and foundation of everything. Length: 21 pages Creation-Date: 2022-01 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/01/PI2022-01_WTO-and-rules-based-trading.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35091 Template-Type: ReDIF-Paper 1.0 Author-Name: Elkerbout, Milan Title: Can ETS free allocation be used as innovation aid to transform industry? Abstract: The EU may distribute free ETS allowances worth hundreds of billions of euros over the next two decades. This policy brief proposes an addition to free allocation rules, so that the free ETS allowances given to industry can be turned into innovation aid for very low-carbon producers, thereby helping companies transition to climate neutrality. Free allowances exist to mitigate carbon leakage risk, but current rules can put innovative climate neutral producers at a disadvantage vis-�-vis the carbon-intensive incumbents with which they need to compete. While the EU�s proposed carbon border adjustment mechanism would gradually reduce free allocation, many sectors may be excluded from this new mechanism at first, while transitional periods also result in continued free allocation to large industry sectors. Therefore, ensuring that free allocation (to the extent that it continues) benefits, and not harms, very low-carbon producers is important. In summary, the key points and recommendations discussed within this policy brief are: - ETS free allocation could in part actively support low- and zero-carbon production by introducing a new �zero-carbon� benchmark. - The zero-carbon benchmark would reward zero-carbon producers with additional free EU ETS allowances (EUAs), to (partly) cover their investment costs. The zero-carbon benchmarks can then be defined by applying a multiplication factor to existing benchmark values (e.g. 1.5 or 2.0). Every tonne of climate-neutral goods a producer puts on the market would be rewarded by this higher benchmark. - No additional free allowances are needed (the existing cross-sectoral correction factor would still apply). The available supply of EUAs would simply be redistributed in such a way that it benefits very low-carbon producers, so long as they produce climate neutral goods. Length: 8 pages Creation-Date: 2022-01 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/01/PB2022-01_ETS-free-allocation-.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:35063 Template-Type: ReDIF-Paper 1.0 Author-Name: Corti, Francesco Author-Name: Gros, Daniel Author-Name: Ruiz de la Ossa, Tom�s Author-Name: Liscai, Alessandro Author-Name: Kiss-G�lfalvi, Tam�s Author-Name: Gstrein, David Author-Name: Herold, Elena Author-Name: Dolls, Mathias Title: The Recovery and Resilience Facility: A springboard for a renaissance of public investments in Europe? Abstract: This Policy Brief analyses to what extent the funds distributed through the EU�s Recovery and Resilience Facility (RRF) are used by Member States to finance new projects, thus boosting their economic recovery from the Covid-19 pandemic, which is the primary goal of the RRF. Specifically, this Policy Brief provides an in-depth analysis of the National Recovery Resilience Plans submitted by Austria, Belgium, Germany, Spain, Italy and Portugal. Overall, the analysis shows that there is no significant relationship between the total amount of RRF grants (in terms of the percentage of GDP) and an acceleration in public investment. This suggests that RRF funds are mainly being used to finance existing investment projects. Length: 11 pages Creation-Date: 2022-01 File-URL: https://cdn.ceps.eu/wp-content/uploads/2022/01/RRRP-2022-06_-Renaissance-of-public-investments-in-Europe.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:34969 Template-Type: ReDIF-Paper 1.0 Author-Name: Blockmans, Steven Title: Lithuania, China and EU lawfare to counter economic coercion Abstract: Without any formal notification, China recently declined customs clearances for shipments from Lithuanian firms in the pharmaceutical, electronics, and food sectors, and warned multinationals of secondary sanctions if they did not sever their ties with Lithuania. These covert actions were taken in response to Lithuania�s invitation to Taiwan, which the People�s Republic of China (PRC) claims as its own territory, to open a �representative office� in Vilnius. No other country has ever found itself at the receiving end of such intense and politically motivated Chinese economic pressure. These actions on the part of the PRC are politically explosive because it raises serious questions about the international conduct of the Chinese Communist Party (CCP). If it can simply wipe a country off its trade book, a state belonging to the EU�s customs territory no less, then what does it mean to be a member of the WTO, or a signatory to any other number of international agreements? And, given the lamentable state the WTO is in: could the European Commission�s newly proposed anti-coercion instrument bring any solace to Lithuania and the EU? Length: 6 pages Creation-Date: 2021-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/12/PI2021-20_Lithuania-China-and-EU-lawfare.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:34908 Template-Type: ReDIF-Paper 1.0 Author-Name: Barnes, Sebastian Author-Name: Oliinyk, Inna Title: The EU�s economic governance review: Road-testing alternative fiscal rules? Abstract: The European Commission has recently re-launched the Economic Governance Review, following its suspension due to the start of the Covid-19 crisis in early 2020. However, there has been an active policy debate about the EU�s fiscal rules for several years and several proposals have been subsequently made. Options include debt rules, spending rules and continuing the existing focus on the structural budget balance. A recent paper from the EU Network of Independent Fiscal Institutions (Network of EU IFIs, 2021) underlined the importance of comprehensively testing any new set of rules. Fiscal rules should not be designed based on a priori reasoning alone, but they need to be expected to deliver reasonable outcomes across the full range of countries and circumstances. Similar rules can have very different outcomes for countries. This paper uses simple simulation analysis to explore three alternative versions of common reform proposals. It shows that, while these proposed rules would achieve a debt reduction over the next 10 years, the extent of the reduction and the path of the budget balance to achieve it differs across the rules with more-or-less frontloading. Outcomes under the rules also vary in the debt reduction and budgetary effort required between high- and lower-debt countries. Furthermore, the same rule can have very different implications for countries that are mostly similar in terms of debt ratio given differences in growth, interest rates and the initial budgetary position. While a full assessment of the rules would require a pseudo-real time framework and would need to consider compliance with the rules, this simple exercise sheds some new light on how different proposals would work and points out the way to a more comprehensive analysis. Length: 12 pages Creation-Date: 2021-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/12/PI2021-19_The-EUs-economic-governance-review.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:34802 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Author-Name: Oliinyk, Inna Title: How to refine the contributions to the Single Resolution Fund? Proposal for an alternative methodology Abstract: The Single Resolution Fund (SRF) needs to provide the necessary funding for resolutions, avoiding the need to bail out banks with taxpayers� money. The SRF relies on the banks that are part of the Banking Union to collect the funds. However, the current methodology used to determine the SRF contributions is difficult to replicate, overly complex and not fully coherent with the remainder of the resolution framework and capital requirements. This study proposes an alternative methodology that could potentially address the challenges with the current SRF contribution methodology. The alternative methodology reduces and simplifies the number of indicators used, as well as the number of contributors. Additionally, the proposed alternative methodology significantly reduces the number of risk-adjusted contributors and is more aligned with other bank requirements. Length: 77 pages Creation-Date: 2021-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/12/Refine-contributions-to-the-SRF.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:34788 Template-Type: ReDIF-Paper 1.0 Author-Name: Catuti, Mihnea Author-Name: Righetti, Edoardo Author-Name: Egenhofer, Christian Author-Name: Kustova, Irina Title: Is renewable hydrogen a silver bullet for decarbonisation? A critical analysis of hydrogen pathways in the EU Abstract: Clean hydrogen will offer decarbonisation solutions for sectors where direct electrification would be either technologically impossible or too costly, though future demand should not be overestimated. Hydrogen will most likely be used in hard-to-decarbonise industrial processes, some segments of the transport sector, as well as for long-term energy storage. For hydrogen to contribute to decarbonisation, it needs to be produced with minimal greenhouse gas emissions. Therefore, hydrogen obtained through electrolysis using renewable electricity will represent the priority for the EU. However, this does come with a set of trade-offs, all of which are explored at length in this report. A key challenge will be the interaction with the already-strained electricity market. New renewable energy installations are facing deployment obstacles, therefore the decarbonisation of the electricity mix and the deployment of renewable hydrogen need to be developed together to avoid tensions. This report also focuses on two other potential hydrogen sources. Nuclear hydrogen could create more opportunities for producing low-carbon hydrogen from electricity, whilst imports could cover potential supply deficits and provide further access to inexpensive renewable hydrogen for domestic consumption. Robust criteria will be needed for certifying the renewable nature of hydrogen, based on clear temporal and geographical connection requirements between the electrolyser and the renewable installations. However, the separate certification of low-carbon hydrogen produced from electricity that meets similar emissions savings requirements should also be established, without labelling it as renewable. Length: 45 pages Creation-Date: 2021-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/12/CEPS-RR2021-02_Is-renewable-hydrogen-a-silver-bullet-for-decarbonisation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:34767 Template-Type: ReDIF-Paper 1.0 Author-Name: Corti, Francesco Author-Name: N��ez Ferrer, Jorge Title: Steering and Monitoring the Recovery and Resilience Plans: Reading between the lines Abstract: This paper provides an extensive account of the procedures and rules of the Recovery and Resilience Facility. It analyses the European Commission�s guidance and offers insights into how the process is being steered and how the implementation of the NRRPs will be monitored. The aim is to highlight not only the opportunities, but also the pitfalls of the RRF governance system. We find a number of difficulties on which member states and the European Commission should focus. A major risk is getting lost in administrative procedures and taxonomy exercises, and neglecting the fundamental pillar for a successful recovery, namely structural reforms that have a direct and lasting impact on the stability and resilience of the European economies and that are in line with EU priorities. Length: 20 pages Creation-Date: 2021-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/04/Recovery-and-Resilience-Reflection-Paper-No-2.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:33011 Template-Type: ReDIF-Paper 1.0 Author-Name: N��ez Ferrer, Jorge Title: Avoiding the Main Risks in the Recovery Plans of Member States Abstract: This is the first of a series of reports dedicated to the preparation and implementation of the Recovery and Resilience Facility of the EU. It sets out some of the main risks to the success of the recovery programmes, such as a lack of focus and mistargeting, maintaining unsustainable sectors, delays in implementation, and the lack of both a European dimension and the capacity to implement such a complex programme over and above the normal EU budget. These risks can be mitigated or avoided, however. The report also presents a number of solutions to ensure that aspects critical to the recovery programmes � and the key objective of longer-term resilience � are implemented. It highlights the necessity for serious structural reforms in member states, better management and control systems at EU level, well-designed active labour market policies, and a clear framework for public private partnerships to ensure that they are used more effectively. Length: 20 pages Creation-Date: 2021-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/03/Recovery-and-Resilience-Reflection-Paper-No1.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:32463 Template-Type: ReDIF-Paper 1.0 Author-Name: Avgouleas, Emilios Author-Name: Micossi, Stefano Title: On selling sovereigns held by the ECB to the ESM: Institutional and economic policy implications Abstract: A repetition of austerity policies of the early 2010s is not consistent with maintaining adequate growth and sovereign debt sustainability in the post-pandemic environment, argue the authors of this CEPS Policy Insight. Likewise, a debt restructuring process with deep haircuts will just upset the fragile state of the markets and create a run on the debt of the most vulnerable member states, forcing the ECB to buy even more debt. Common policies are thus required to keep the sovereigns acquired by the ECB with its Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP) programmes out of financial markets for an indefinite period. The European Stability Mechanism (ESM) can offer the appropriate instrument by purchasing the ECB-held sovereign debt and issuing own liabilities to fund the purchases. The programme could develop gradually, over several years, to ensure the smooth rollover of expiring securities. As the purchases would be funded by the ESM�s own liabilities, backed by the sovereign holdings, ESM debt would become the long- sought-after European safe asset. The authors argue that this ESM action could be conducted without an ESM Treaty change. It would be premised on the legal framework of the revised Article 14 (precautionary financial assistance). The ESM could then gradually evolve into a debt management agency for the euro area. The transfer of much of ECB sovereign holdings to the ESM would restore monetary policy independence and ease any frictions in this field, thereby allowing EU policymakers� focus to shift to the completion of the European Banking Union. This paper follows up on a CEPS Policy Insight of October 2020, in which Stefano Micossi argued that the increase in sovereign indebtedness under way in the euro area should be managed through collective policy actions. Length: 20 pages Creation-Date: 2021-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/03/PI2021-04_Selling-sovereigns-held-by-the-ECB-to-the-ESM.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:32673 Template-Type: ReDIF-Paper 1.0 Author-Name: Garcia Bercero, Ignacio Author-Name: Nicola�dis, Kalypso Title: The power surplus: Brussels calling, legal empathy and the trade-regulation nexus Abstract: The EU may not be a superpower but it holds a �power surplus� when it comes to the trade-regulatory nexus. The strategic challenges posed by the deployment of this power surplus are the subject of this paper, which argues that in order to be a responsible regulatory power and positively influence the multilateral agenda, the EU needs to develop a coherent overall approach to the external dimension of its regulatory policies. In this spirit, and in most cases, the EU would be ill advised to project itself as a model or to seek to �weaponise� its regulatory powers in pursuit of unrelated foreign policy goals. Instead, it should wield this power to enhance the regulatory compatibility between its own and others� jurisdictions through cooperation rather than relying on the passive market-based influence of the so-called Brussels effect. This is simply a way to be faithful to its core defining philosophy of legal empathy. The CEPS Policy Insight by authors Ignacio Garcia Bercero and Kalypso Nicola�dis offers a typology of different forms of external EU regulatory impact, a discussion of the risks of either underuse or overuse of the regulatory power surplus, and considers the �good global governance� model implied by a principled geopolitical role. It moves on to discuss a unifying conceptual framework to encompass this approach, under the umbrella of �managed mutual recognition� as the operationalisation of legal empathy. It concludes with six specific suggestions as to how the EU can best exercise its regulatory power through a closer integration of trade and regulatory policies. Length: 17 pages Creation-Date: 2021-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/03/PI2021-05_The-power-surplus.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:32752 Template-Type: ReDIF-Paper 1.0 Author-Name: Kustova, Irina Author-Name: Egenhofer, Christian Author-Name: N��ez Ferrer, Jorge Author-Name: Popov, Julian Title: From coal to low carbon: Coal region development opportunities under EU Recovery programmes Abstract: The Covid-19 crisis has laid bare the vulnerability of coal regions. Economic recovery and associated funding, as well as the need for new low-carbon solutions, offers a unique opportunity to address the transition of coal regions. The combination of worsening economics of coal and the increasingly universal move towards carbon neutrality makes redeveloping coal regions a priority. The EU is home to a large number of successful coal region transitions, many of which are ongoing. In one way or another, long-term environmental, sustainable and low-carbon technologies and business solutions are becoming a central element of the transition. Special Economic Zones (SEZ) are geographically limited areas where companies� operations are governed by specific rules on taxation, public funding for infrastructure, simplified planning procedures, the provision of specialised business services and attractive living and working conditions. They can play a decisive role in accelerating the economic development of regions affected by economic decline or stagnation. Effective planning and programming, good governance and the engagement of local stakeholders and the local economy are preconditions for attracting long-term sustainable private investment. Getting governance right has proved to be one of the key determinants of successful transition. Public funding will also be required, but only as one of the enabling tools, for example to build infrastructure, clean up sites for training and retraining and, more generally, to ease the transition.The EU Recovery and Resilience Facility together with EU budgetary sources, based on the Territorial Just Transition Plans for example, will be able to provide sufficient public money to catalyse private investment where regional plans are sufficiently developed. Length: 15 pages Creation-Date: 2021-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/04/PI2021-06_From-coal-to-low-carbon.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:32801 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Ounnas, Alexandre Title: Labour market responses to the Covid-19 crisis in the United States and Europe Abstract: Labour markets have reacted very differently to the Covid-19 crisis. In the US, the impact on unemployment rates was rapid across all states. They increased sharply in March and April 2020 and recovered steadily thereafter. In Europe, by contrast, unemployment increased far less, and the adjustment was more gradual. This difference in unemployment responsiveness is most likely a consequence of the widespread use of short-term work schemes in Europe, given that the transatlantic differences in hours worked overall are much smaller than for unemployment. Using data from US states and EU member states, an econometric analysis of the impact of the restrictions (lockdowns) implemented by governments to contain the spread of the virus reveals that in the case of the US, unemployment appears to have been driven mostly by the aggregate shock generated by the pandemic as it played out between March and November 2020. In the EU, unemployment showed little variation. The Non-Pharmaceutical Interventions (NPIs) used in different US states and EU countries, as can be demonstrated through a regression analysis, did not always have significant effects on unemployment. Length: 20 pages Creation-Date: 2021-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2021/04/WD2021-01_Labour-market-responses-to-Covid.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:32985 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Author-Name: Peirce, Fabrizia Title: Overcoming the gridlock in EMU decision-making Abstract: The completion of EMU, and banking union as its critical component, requires that certain taboos in the policy debate are brought out in the open. First, the Commission must stop pretending that Italian public debt is sustainable under current policies and shift from politically motivated forbearance to serious implementation of the SGP and notably its debt rule. Second, it is necessary to acknowledge that crisis management by the ESM is crippled as long as its financial assistance can only be granted after the country in need is close to losing market access and, in addition, this threatens the financial stability of the entire euro area. The already-existing alternative to assist a country that is not respecting the SGP is to utilise the enhanced conditional credit line (ECCL) introduced by the ESM reform, approved by the European Council and awaiting national ratifications, in order to agree on a full-fledged adjustment programme before any euro area member (Italy) comes to the brink again � without any preventive conditions on the sustainability of public debt. And, third, the completion of the banking union requires a reduction of banks� home sovereign portfolios, that can be incentivised by the introduction of mild concentration charges. However, the system will not work without simultaneously offering the banks and financial investors in general a true European safe asset, fully guaranteed by its member states. Our proposal is that such a safe asset could be offered by the ESM, which would purchase in exchange the sovereigns held by the ESCB as a result of the quantitative easing asset purchase programme. The risk of losses on these sovereigns would continue to lie with the national central banks, thus avoiding the transfer of new risks to the ESM. This Policy Insight is being published simultaneously as a LUISS SEP Policy Brief. Length: 22 pages Creation-Date: 2020-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/03/PI2020-03_Overcoming-the-gridlock-in-EMU-decision-making.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26688 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblavy, Miroslav Title: Protecting employment in the time of coronavirus - What is the EU�s �100 billion going to buy? Abstract: This paper briefly analyses the proposal by the European Commission to establish SURE, the �European instrument for temporary support to mitigate unemployment risks in an emergency�. The SURE facility would borrow up to �100 billion on the financial markets, lend it to member states to finance short-time work schemes and similar measures, using guarantees from the member states themselves. The analysis makes the point that the scheme should be seen, first and foremost, as a proof of European solidarity to counter hostile propaganda from Russia and China about the EU�s ineffectiveness. It can also have an impact on national policies to deal with the coronavirus and to assist the most damaged and/or fiscally weak member states, but this effect is likely to be limited. Potentially, the most important feature of SURE is that it explicitly refers to itself as the forerunner of a future European Unemployment Insurance scheme. Length: 6 pages Creation-Date: 2020-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/04/PI2020-09_Preserving-employment-in-the-time-of-coronavirus.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:27036 Template-Type: ReDIF-Paper 1.0 Author-Name: Hu, Weinian Title: Dinner for three - EU, China and the US around the geographical indications table Abstract: China is the EU�s second biggest agri-food exports market. It is also the second destination for the export of EU products protected by geographical indications (GI), accounting for 9% of its value, including wines, agri-food and spirits. The EU-China Agreement on the Protection of Geographical Indications, concluded in November 2019, is expected to realise higher potential for exporting EU GIs to the country since market access is now guaranteed. But the US-China Economic and Trade Agreement, signed in January 2020, has set down a couple of precautionary measures, including a consultation mechanism with China before new GIs can be recognised for protection in the Chinese market because of international trade agreements. As a result, EU GIs could be brought under tighter US scrutiny before being recognised for protection in China. Analysis reveals, however, that only a handful of EU GIs may be affected by the latter Agreement, if at all. Length: 24 pages Creation-Date: 2020-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/04/PI2020-07_EU-China-and-the-US-around-the-geographical-indications-table.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26988 Template-Type: ReDIF-Paper 1.0 Author-Name: Messori, Marcello Title: Europe�s debate on fiscal policy - Too much yet too little Abstract: The initiatives taken by the ECB in mid-March 2020 flatten the structure of interest rates and ensure short-term sustainability for the EMU countries with high government debt/GDP ratios. But the challenges posed by the pandemic require a huge amount of public spending and therefore threaten this sustainability in the long term. This paper proposes �contractual arrangements� between high-debt countries and European institutions, namely the Commission and the ESM as financial donor, which transfer grants (a �gift�) to high-debt countries to cover the national public expenditures resulting from the impact of the pandemic. In exchange, the beneficiary countries would share the design and implementation of these public expenditures with the European institutions, thereby giving up a portion of their fiscal sovereignty. Length: 9 pages Creation-Date: 2020-04 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/04/PI2020-08_The-Current-European-Debate-on-Fiscal-Policy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26976 Template-Type: ReDIF-Paper 1.0 Author-Name: Elkerbout, Milan Author-Name: Egenhofer, Christian Author-Name: N��ez Ferrer, Jorge Author-Name: Catuti, Mihnea Author-Name: Kustova, Irina Author-Name: Rizos, Vasileios Title: The European Green Deal after Corona - Implications for EU climate policy Abstract: Climate change policy cannot be the first priority of the EU for the immediate future. However, in spite of the corona-crisis the urgency of climate change mitigation has not disappeared. The post-corona recovery can both put the EU�s decarbonisation progress back on track � after low-carbon investments will inevitably take a hit � but the EU�s Green Deal proposals can likewise support the general economic recovery. It will be important to ensure that recovery measures are compatible with global climate change and European Green Deal priorities so that stimulus money will flow to economic activities that have a place in a climate-neutral world. As time passes, the re-launch may actually offer a unique opportunity for the EU to live up to the Green Deal�s promise of economic modernisation along the Paris decarbonisation objectives. The period we have until the relaunch should be used to develop a new agenda. These ideas will not per se be off-the-shelf but go beyond current solutions for decarbonisation. Instead of tinkering around the margins, the EU should focus on transformational technologies, and for example go big on low-carbon infrastructure, efficient buildings, and lead markets to boost demand for climate-neutral industry. Length: 12 pages Creation-Date: 2020-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/03/PI2020-06_European-Green-Deal-after-Corona.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26869 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Author-Name: J. Castro, Rosa Title: Chronicle of a Pandemic Foretold Abstract: In just a few weeks, COVID-19 appeared in China and quickly spread to the rest of the world, including Europe and the United States. Many have rushed to describe the outbreak as a �black swan� � an unpredictable event with extremely severe consequences. However, COVID-19 was not only predictable ex post: it was amply predicted ex ante. This allows us to draw some preliminary lessons: First, economic policy will need to shift from its current focus on efficiency, towards a greater emphasis on resilience and sustainability. Second, a more centralised governance to address health emergencies is needed. Third, Europe should create a centre for the prevention of large-scale risks. Fourth, digital technologies, if handled with care, can be an important part of both a mitigation and a response strategy. Fifth, Europe should improve its science advice and communication functions. Finally, there are many ways to pursue enhanced resilience and responsiveness, but not all of them are compatible with sustainability and democratic values. The challenge is to find an adequate policy mix, which safeguards individual rights and liberties, protects the economy, and at the same time strengthens government preparedness for cases of epidemics and pandemics. Length: 8 pages Creation-Date: 2020-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/03/CEPS-PI2020-05_Chronicle-of-a-pandemic-foretold.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26752 Template-Type: ReDIF-Paper 1.0 Author-Name: Cernat, Lucian Author-Name: Kutlina-Dimitrova, Zornitsa Title: Public Procurement - How open is the European Union to US firms and beyond? Abstract: A recent report on public procurement published by the United States Government Accounting Office (GAO) attempted to provide a range of estimates for the EU and the US, among others, and argued that the EU awarded a low share of public procurement contracts to US firms ($300 million) compared to a much higher value of US public procurement ($3 billion) awarded to EU firms (GAO 2019). However, the methodological approach used by GAO was partial and misrepresented the level of EU openness, as it only looked only at the �tip of the procurement iceberg� and missed out other main avenues for international government procurement. Once these other two main procurement modes are taken into account, EU openness in procurement is much higher, vis-a-vis both for US and third countries. Overall, the EU has awarded over �50 billion worth of public contracts to foreign firms, out of which �11 billion to US firms. Comparable data across all modalities do not yet exist for the US, but we do have clear evidence that, since 2009, the US has introduced the largest number of protectionist procurement measures severely affecting international procurement. Against this background, this Policy Brief makes four basic points: i. Public procurement is a key area of trade negotiations, and the EU remains committed to promoting further non-discriminatory access to procurement markets both at home and abroad. ii. The existing levels of openness in procurement markets need to be assessed across all three procurement modalities and not only on direct cross-border procurement, which is not the main procurement avenue. According to a comprehensive approach, such as the one used in this brief, the EU market already has a high foreign penetration rate, including by US companies. iii. Unfortunately, similar procurement data (at both federal and sub-federal level) does not exist for the US market. But there is growing evidence of discriminatory measures introduced in recent years, which impede the ability of EU and other foreign firms to compete on a level-playing field in US procurement markets. iv. The importance of procurement as a key negotiating area requires better data and a greater analytical engagement internationally. Length: 10 pages Creation-Date: 2020-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/03/PI2020-04_EU-procurement-openness.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26698 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Author-Name: Laurer, Moritz Title: IoT 4 SDGs - What can the Digital Transformation and IoT achieve for Agenda 2030? Abstract: Digital technologies can drive growth, connect people and help us protect the environment. At the same time, they can lead to market concentration, fuel precarious working conditions and consume vast amounts of energy. The Internet of Things (IoT) is a perfect example of this tension, and embodies both the promise and the peril of digitalisation. Its emergence offers unique opportunities to achieve the Sustainable Development Goals (SDGs) and the European Green Deal, but policymakers need to be aware of the need for tailored policies and investments, if they want to maximise the benefits of the IoT revolution while mitigating the risks. This report illustrates the key features and evolutions of the IoT, and provides an overview of how the IoT is mostly used today in sectors such as manufacturing, healthcare, energy and smart cities. We conclude that the IoT can massively contribute to several SDGs, especially through its capacity to increase efficiency and save costs. As the IoT is still a relatively young and complex technology, its use is mostly driven by wealthy cities and businesses. Its potential for more vulnerable populations in the global south and the environment remains underdeveloped. This points to an important dilemma for the IoT today from a sustainability perspective: while the main driver for IoT adoption is cost reduction and increased efficiency, sustainability goals such as poverty reduction and environmental protection often remain a secondary thought in its development. The role of public policy and investment will be essential to ensure that IoT solutions contribute to other SDGs in the near future and we outline different approaches for measuring this contribution. This report discusses in particular the policy measures that could be adopted in the European Union to boost the potential of the IoT for sustainability, in light of the European Green Deal and the upcoming 2021-2027 financial framework. This report was created in cooperation with Hitachi, Ltd. Length: 57 pages Creation-Date: 2020-03 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/03/IoT4SDG-report.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26658 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Barci, Giovanni Author-Name: N��ez Ferrer, Jorge Title: Towards a new MFF - New priorities and their impact on Italy Abstract: Using 102 sovereigns rated by the three largest credit rating agencies (CRA), S&P, Moody�s and Fitch between January 2000 and January 2019, we are the first to document that the first mover CRA (S&P) in downgrades falls into a commercial trap. Namely, each first-mover downgrade by one notch by S&P results in a 2.4% increase in the probability of a rating contract being cancelled by the sovereign client, and a 1.2% decrease in the ratio of S&P�s sovereign rating coverage relative to Moody�s. The more first-mover downgrades S&P makes, the more their sovereign rating coverage declines relative to Moody�s. This paper interrelates three themes of the literature: herding behaviour amongst CRAs, issues of conflict of interest and ratings quality. Keywords: Sovereign credit ratings, herding behaviour, conflict of interest JEL classification: G15, G24 Length: 33 pages Creation-Date: 2020-02 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/02/CEPS-MFF-2021-2027_LUISS-final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26492 Template-Type: ReDIF-Paper 1.0 Author-Name: Kraemer, Moritz Author-Name: Klusak, Patrycja Author-Name: Vu, Huong Title: First-mover disadvantage - The sovereign ratings mousetrap Abstract: Using 102 sovereigns rated by the three largest credit rating agencies (CRA), S&P, Moody�s and Fitch between January 2000 and January 2019, we are the first to document that the first mover CRA (S&P) in downgrades falls into a commercial trap. Namely, each first-mover downgrade by one notch by S&P results in a 2.4% increase in the probability of a rating contract being cancelled by the sovereign client, and a 1.2% decrease in the ratio of S&P�s sovereign rating coverage relative to Moody�s. The more first-mover downgrades S&P makes, the more their sovereign rating coverage declines relative to Moody�s. This paper interrelates three themes of the literature: herding behaviour amongst CRAs, issues of conflict of interest and ratings quality. Keywords: Sovereign credit ratings, herding behaviour, conflict of interest JEL classification: G15, G24 Length: 48 pages Creation-Date: 2020-02 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/02/WD2020_02_first-mover_disadvantage.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26352 Template-Type: ReDIF-Paper 1.0 Author-Name: Pupillo, Lorenzo Author-Name: Ferreira, Afonso Author-Name: Fantin, Stefano Title: Artificial Intelligence and Cybersecurity - Task Force Evaluation of the HLEG Trustworthy AI Assessment List (Pilot Version) Abstract: The Centre for European Policy Studies launched a Task Force on Artificial Intelligence (AI) and Cybersecurity in September 2019. The goal of this Task Force is to bring attention to the market, technical, ethical and governance challenges posed by the intersection of AI and cybersecurity, focusing both on AI for cybersecurity but also cybersecurity for AI. The Task Force is multi-stakeholder by design and composed of academics, industry players from various sectors, policymakers and civil society. The Task Force is currently discussing issues such as the state and evolution of the application of AI in cybersecurity and cybersecurity for AI; the debate on the role that AI could play in the dynamics between cyber attackers and defenders; the increasing need for sharing information on threats and how to deal with the vulnerabilities of AI-enabled systems; options for policy experimentation; and possible EU policy measures to ease the adoption of AI in cybersecurity in Europe. As part of such activities, this report aims at assessing the High-Level Expert Group (HLEG) on AI Ethics Guidelines for Trustworthy AI, presented on April 8, 2019. In particular, this report analyses and makes suggestions on the Trustworthy AI Assessment List (Pilot version), a non-exhaustive list aimed at helping the public and the private sector in operationalising Trustworthy AI. This report would like to contribute to this revision by addressing in particular the interplay between AI and cybersecurity. This evaluation has been made according to specific criteria: whether and how the items of the Assessment List refer to existing legislation (e.g. GDPR, EU Charter of Fundamental Rights); whether they refer to moral principles (but not laws); whether they consider that AI attacks are fundamentally different from traditional cyberattacks; whether they are compatible with different risk levels; whether they are flexible enough in terms of clear/easy measurement, implementation by AI developers and SMEs; and overall, whether they are likely to create obstacles for the industry. Length: 34 pages Creation-Date: 2020-01 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/01/CEPS-TF-Ethics-Guidelines-Assessment-for-AI-and-Cybersecurity.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26204 Template-Type: ReDIF-Paper 1.0 Author-Name: Asshoff, Sina Author-Name: Belke, Ansgar Author-Name: Osowski, Thomas Title: Unconventional monetary policy and inflation expectations in the Euro area Abstract: With the ECB�s policy rate having reached the zero lower bound, traditional monetary policy tools became ineffective and the ECB was forced to adopt a set of unconventional monetary policy (UMP) measures. This paper examines the effects of the ECB�s UMP on inflation expectations in the Euro area as inflation expectations play a key role for achieving the inflation target of below, but close to 2%. Quantifying the impact of UMP is not straightforward, as standard empirical tools such as VAR cannot be applied. Hence, we use the Qual VAR approach pioneered by Dueker (2005) to overcome this problem. We indeed find that UMP leads to a rise in inflation expectations in the short run but that this effect appears to evaporate in the medium term. Our results put some doubt on the common claim that UMP has consistently contributed to a re-anchoring and a stabilisation of inflation expectations at the zero lower bound. Nevertheless, they indicate a rise in medium-term real GDP growth triggered by UMP. Keywords: Bayesian VAR, Qual VAR, inflation expectations, Euro area, Quantitative Easing, unconventional monetary policy JEL-codes: C22, E31, E44, E52 Length: 35 pages Creation-Date: 2020-01 File-URL: https://cdn.ceps.eu/wp-content/uploads/2020/01/CEPSWD2020_01_UMP_Inflation_expectations.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:26098 Template-Type: ReDIF-Paper 1.0 Author-Name: Akg��, Mehtap Author-Name: Baiocco, Sara Title: Comparative policy recommendations on improving social dialogue articulation and effectiveness in Europe Abstract: Bringing together five consortium partners, the 2017-2019 EESDA project advances current knowledge and expertise on the articulation of social dialogue in Europe and its effectiveness. It studies the ways in which social dialogue at different levels functions and the channels through which EU-level social dialogue � across and within sectors � affects the actors, decisions and outcomes at national and sub-national level, and vice versa. This document summarises the comparative findings, covering both cross-sectoral and sectoral levels, from previous EESDA research outputs and provides policy recommendations to make social dialogue more effective in Europe. It also highlights specific areas where the articulation and effectiveness of social dialogue could be improved as well as including suggestions and initiatives by social partners and other stakeholders to take matters forward. Length: 8 pages Creation-Date: 2019-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/12/EESDA_policy_recommendations.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25974 Template-Type: ReDIF-Paper 1.0 Author-Name: Akg��, Mehtap Author-Name: Jacquot, Manon Author-Name: Lopez-Uroz, Nina Title: Social Dialogue Articulation and Effectiveness - Country Report for France Abstract: This report presents a country study analysing the articulation and effectiveness of social dialogue in France. The methodological approach relies on desk research and semi-structured interviews with social partners in France, aiming at obtaining deeper insights into how issues are articulated in French social dialogue, actors are interacting, and how social dialogue outcomes are achieved � and ultimately implemented. Following a brief historical background on the industrial relations system and the evolutions in the French context after a series of reforms, the report then provides both a cross-sectoral overview of social dialogue articulation and the interaction with European-level social dialogue. It also offers a sectoral perspective by looking at four sectors with a particular focus on four occupations within these sectors: commerce (sales agents), construction (construction workers), education (teachers) and healthcare (nurses). The research suggests a diversity of experiences both in cross-sectoral and sectoral social dialogue articulation and their effectiveness depending on the type of actor (e.g. trade unions, employer organisations, etc.) and on the sector of focus. The perceptions of social dialogue effectiveness are mixed in the face of continuous reforms over recent decades. Interaction with European-level social dialogue and social partners is considered as important (particularly in some sectors), but the intensity of the interaction is limited when it comes to involvement in the European Semester process. Length: 47 pages Creation-Date: 2019-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/12/EESDA_report_FRANCE.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25900 Template-Type: ReDIF-Paper 1.0 Author-Name: Akg��, Mehtap Author-Name: Marti�kov�, Monika Author-Name: Sz�di, G�bor Author-Name: Nordlund, Carl Title: Stakeholders� views on and experiences with the articulation of social dialogue and its effectiveness Abstract: Bringing together five consortium partners, the EESDA project, implemented during 2017-2019, advances the current knowledge and expertise on the articulation of social dialogue in Europe and its effectiveness. It studies the ways in which social dialogue at different levels functions and the channels through which EU-level social dialogue � across and within sectors � affects the actors, decisions and outcomes at national and sub-national level, and vice versa. Research conducted within the EESDA project includes an assessment of social dialogue articulation between national and European level across 27 EU member states by means of desk research, an online survey among national social partners and interviews with EU-level social partners as well as other national stakeholders. It then concentrates on the effectiveness of social dialogue in six EU Member States (i.e. Estonia, Ireland, France, Portugal, Slovakia and Sweden � with distinct industrial relations models and traditions) and four sectors (i.e. construction, commerce, education and healthcare, with a focus on a specific occupation in each sector). Findings from interviews, case studies and discourse analysis are completed using network analysis that sets out to visualise and reveal strong and weak ties between different actors and to draw lessons for experiences and best practices in other sectors and countries. The analysis considers efforts that have a direct and indirect impact on social dialogue, such as EU Directives, Autonomous Agreements, Framework of Actions, joint projects, joint statements or programme funding. Length: 76 pages Creation-Date: 2019-11 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/10/D2.2_EESDA_Stakeholders-views.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25211 Template-Type: ReDIF-Paper 1.0 Author-Name: Akg��, Mehtap Author-Name: Westhoff, Leonie Title: Social Dialogue Articulation and Effectiveness - Country Report for Ireland Abstract: This report presents a case study analysing the articulation and effectiveness of social dialogue in Ireland. The analysis relies on desk research and interviews with key stakeholders including social partners, aiming at obtaining deeper insights into how issues are articulated in social dialogue, actors are interacting, and social dialogue outcomes are achieved � and ultimately implemented. Following a brief historical background on the industrial relations system and the evolutions in the Irish economy in the aftermath of the financial crisis, the report then provides both a cross-sectoral overview of social dialogue articulation and the interaction with European-level social dialogue. It also offers a sectoral perspective by looking at four sectors with a particular focus on four occupations within these sectors: commerce (sales agents), construction (construction workers), education (teachers) and healthcare (nurses). The research suggests a diversity of experiences both in cross-sectoral and sectoral social dialogue articulation and their effectiveness depending on the type of actor (e.g. trade union, employer organisation or else) as well as on the topic of priority. Interactions with European-level social dialogue and social partners is considered as important (particularly in some sectors), but the intensity of the interaction is limited when it comes to involvement in the European Semester process. Length: 37 pages Creation-Date: 2019-11 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/11/EESDA_Country-Report-for-Ireland.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25368 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblavy, Miroslav Author-Name: Baiocco, Sara Author-Name: Kilhoffer, Zachary Author-Name: Akg��, Mehtap Author-Name: Jacquot, Manon Title: Index of Readiness for Digital Lifelong Learning - Changing How Europeans Upgrade Their Skills Abstract: Digitalisation � or the transformation of processes through new digital technologies � is changing the skills required to work and live, but also how we acquire, assess, and demonstrate our skills and education. This broad trend is known as the digitalisation of learning. The Index of Readiness for Digital Lifelong Learning (IRDLL) attempts to shed light on the issue by creating a scoring system and ranking EU Member States. The Index is composed of three �pillars� � composite indicators developed to capture the different dimensions and challenges of digital learning: 1) Individual�s learning outcomes; 2) Availability of digital learning; and 3) Institutions and policies for digital learning. The report details the Index�s construction as well as results, alongside current trends in digitalisation of learning in Europe, providing timely policy pointers to European- and national-level policy makers. The Index of Readiness for Digital Lifelong Learning (IRDLL) is a result of collaboration between the Jobs & Skills Unit of CEPS and Grow with Google. It arose from a long-standing interest of both parties in digitalisation of education and the labour market. Length: 70 pages Creation-Date: 2019-11 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/11/Index-of-Readiness-for-Digital-Lifelong-Learning.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25419 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Author-Name: Laurer, Moritz Author-Name: Modzelewska, Ada Author-Name: Zarra, Antonella Title: Feasibility Study: Introducing �One-In-One-Out� in the European Commission - Final Report for the German Ministry for Economic Affairs and Energy Abstract: The need to consolidate and streamline the stock of legislation and reduce the unnecessary costs associated with legal rules has been increasingly felt by regulated stakeholders and governments in many developed and emerging economies. In many OECD countries, including many EU Member States and Canada, Korea, Mexico, the United States, this has led governments of various political orientations to introduce forms of regulatory budgeting, in which administrations are asked to identify, whenever new provisions introduce regulatory costs, existing provisions that could be repealed or revised, thereby offsetting the cost increase. In some countries these rules have implied a one-to-one offset, whereas in other countries the provisions imposed also a reduction, as in the case of UK�s one-in-two-out and one-in-three-out rules, and the US one-in-two-out rule. This is why we generically refer to these rules as �One-In-X-Out�, or OIXO. Overall, national experiences with OIXO rules have led to positive results: hence, many EU member states have started to advocate the adoption of a similar strategy also at the EU level. Most recently, the new President of the European Commission, Ursula von der Leyen, announced that the institution will apply the ��One-In, One-Out� (OIOO) principle �to cut red tape�, making it now officially part of its better regulation agenda. However, its contours and modus operandi must still be defined. Based on the results of our analysis, we developed a proposed system, which would be likely to achieve the positive results observed in member states and other OECD countries, while at the same time mitigating or fully addressing the concerns expressed by the previous Commission. Length: 144 pages Creation-Date: 2019-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/12/Feasibility-Study.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25815 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Author-Name: Reynolds, Nicole Author-Name: Laurer, Moritz Author-Name: Cohen, Gal Title: Digitising Agrifood: Pathways and Challenges Abstract: As climate change increasingly poses an existential risk for the Earth, scientists and policymakers turn to agriculture and food as areas for urgent and bold action, which need to return within acceptable Planet Boundaries. The links between agriculture, biodiversity and climate change have become so evident that scientists propose a Great Food Transformation towards a healthy diet by 2050 as a major way to save the planet. Achieving these milestones, however, is not easy, both based on current indicators and on the gloomy state of global dialogue in this domain. This is why digital technologies such as wireless connectivity, the Internet of Things, Artificial Intelligence and blockchain can and should come to the rescue. This report looks at the many ways in which digital solutions can be implemented on the ground to help the agrifood chain transform itself to achieve more sustainability. Together with the solution, we identify obstacles, challenges, gaps and possible policy recommendations. Action items are addressed at the European Union both as an actor of change at home, and in global governance, and are spread across ten areas, from boosting connectivity and data governance to actions aimed at empowering small farmers and end users. Length: 152 pages Creation-Date: 2019-12 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/12/Digitising-Agrifood.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25701 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel (ed.) Title: Policies for an Ageing Workforce: Work-life balance, working conditions and equal opportunities Abstract: Extending average working lives by 10 years, while ensuring an adequate social safety net for those unable to work into their late 60s and 70s, is a major social policy challenge today and for the coming decades. Tackling this challenge involves delving into policy areas that range from working conditions, skills and lifelong learning, pensions, socio-economic inequalities in health and life expectancy to the design of a much broader agenda on active ageing. This edited volume covers these issues in succinct chapters based on in-depth research by the authors. Despite the challenges of demographic ageing, as Commissioner Thyssen says in her Foreword to this book: �� ageing does not just pose challenges. If Member States promote the right active ageing approach, this also offers opportunities. Firstly, active ageing means more social opportunities. Older people contribute to society too. We should empower them to work, learn and volunteer, according to individual needs, preferences and capacities. Secondly, active ageing means economic opportunities. Older people represent a growing market. Servicing this market will lead to business opportunities and innovations in which Europe could be a leader. And the experience and expertise of older people is an indispensable asset for our economies � an asset that increases further when they can properly pass the torch by mentoring younger generations.� This booklet was produced under the FACTAGE project. Length: 79 pages Creation-Date: 2019-11 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/11/Policies-for-an-ageing-work-force-1.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25657 Template-Type: ReDIF-Paper 1.0 Author-Name: Pelkmans, Jacques Title: Just a little Brexit? �Alternative (customs) arrangements� and the Withdrawal Agreement Abstract: With the five-week closure of the UK Parliament, the highly entertaining sessions of the House of Commons have been adjourned. Could this artificial breathing space provide a realistic opportunity to deliver the now infamous �alternative customs arrangements�, making the backstop unnecessary? And without the backstop, could the Withdrawal Agreement be ratified soon, opening at long last the way to genuine negotiations about the treaty on the future relations between the UK and the EU-27? This Policy Insight examines the implications of current options for the Irish border and assesses the recent proposal by Jonathan Faull et al. in light of considerations of �mutual trust� and compatibility with EU law. Length: 12 pages Creation-Date: 2019-09 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/09/PI2019-13-JP_BREXIT-alternative-customs-delivery.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:24541 Template-Type: ReDIF-Paper 1.0 Author-Name: Bryhn, Julie Author-Name: Elkerbout, Milan Title: An enabling framework for carbon capture and storage (CCS) in Europe: An overview of key issues Abstract: There are few credible scenarios for reaching the EU�s long-term climate policy objectives, such as net-zero by 2050, without the large-scale deployment of CCS technology. Carbon capture and storage technology is a pre-requisite for the decarbonisation of energy-intensive industries, which in the EU are responsible for about a fifth of all greenhouse gas emissions. At the same time, carbon capture technologies have only been tested at smaller scales and are not yet available at scale for the multiple energy-intensive industries that need them. To prepare for larger-scale CCS deployment in the period after 2030, steps should be taken today to address economic as well as political barriers, and thereby support development of key infrastructure and technology. In doing so, policy should focus on improving the investment case for both CCS as well as low-carbon industrial products that carbon capture makes possible. This includes specific financing models that account for the high capital intensity of CCS, regional variation in industrial clusters, infrastructure and storage availability as well as the need to combine both private and public money. Recommendations: Plans for CCS deployment should be developed in parallel with analysis on the expected demand for negative emissions, as well as how to deliver these negative emissions. Imperfect capture rates and bio-energy with CCS (BECCS) use will impact this demand. Policy support should target the improvement of capture rates in major energy-intensive industries so that theoretical potentials can be demonstrated. To support scale-up, initial focus should be on industrial clusters where various sources of CO2 can be combined into larger volumes. EU state aid rules (e.g. environmental state aid guidelines) should facilitate member state spending to support CCS infrastructure development. Political choices should be made as to the market and financing models that will apply to CCS development, both on the capital investment side as well as on the operational financing side. Length: 10 pages Creation-Date: 2019-09 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/09/RB2019_03_An-enabling-framework-for-carbon-capture-and-storage-in-Europe.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:24601 Template-Type: ReDIF-Paper 1.0 Author-Name: Dr�ge, Susanne Author-Name: Karsten Neuhoff uthor-Name: Egenhofer, Christian Author-Name: Elkerbout, Milan Title: How EU trade policy can enhance climate action: Options to boost low-carbon investment and address carbon leakage Abstract: In her Political Guidelines, Commission President-elect Ursula von der Leyen sets climate neutrality as one of the central objectives of a proposed European Green Deal. EU member states are now discussing whether to formally agree an objective for climate neutrality in 2050. Some have already set deadlines � Finland as early as 2035. This has triggered reflection on the adequate policy mix, notably with a view to making a business case for low-carbon innovation and investment while addressing carbon leakage. The Commission President-elect thinks that this will require a carbon border tax. To address the strategic need for a robust EU framework for low-carbon investment, we recommend that the European Commission i) investigates the economic, legal, and administrative viability and implementation timeline of carbon price adjustments at the border, ii) examines the possibility to extend the EU ETS to include consumption of carbon intensive materials and the potential of product standards to achieve the same aim. All these approaches have different advantages and shortcomings in terms of political acceptability, effectiveness and implications for the world trade system. To support partner countries in advancing climate action, both bilateral and multilateral measures should be prepared. Length: 12 pages Creation-Date: 2019-09 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/09/EU-trade-policy-can-enhance-climate-action.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:24613 Template-Type: ReDIF-Paper 1.0 Author-Name: Akg��, Mehtap Author-Name: Baiocco, Sara Author-Name: Beblavy, Miroslav Author-Name: Kilhoffer, Zachary Title: Labour Market and Social Policy Abstract: The mega-trends of digitalisation and automation have already changed labour markets and value chains around the world, with their inevitable economic and social consequences. And the pace of change is accelerating; job markets and skills requirements are evolving faster than traditional labour market practices and institutions. But what exactly are these changes, and how will governments, industry leaders, social partners and workers react to them? The current Commission has initiated substantial research and analysis into the topic, and the next incumbents should decide how to take this research forward. In order to make informed decisions, policymakers should bear in mind a number of issues. Length: 9 pages Creation-Date: 2019-10 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/10/Priorities_Labour-Market-and-Social-Policy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:24771 Template-Type: ReDIF-Paper 1.0 Author-Name: Pelkmans, Jacques Title: The single market remains the decisive power of the EU Abstract: The EU�s single market should not just be one among several priorities for the new Commission and Parliament. The single market was and is the core business of the EU. Much of what goes on or is proposed under elaborate titles is actually part and parcel of the single market. The striking revelation of Brexit for many EU citizens and all businesses is precisely the centrality of the single market (including the customs union) to EU membership. Its value is first of all economic, of course, as it yields higher prosperity. However, it is critical in other arenas where �EU clout� derived from the single market matters, such as multilateral and bilateral trade negotiations, global climate deals, standard setting, rule-making for international financial stability and even foreign policy. However, this unique asset deserves more explicit EU and member state attention and action in a number of its composite areas. The new Commission and the new Parliament should not and cannot take the EU single market for granted. And the member states or the Council should make sure that their endorsement of the importance of the EU single market is followed up and substantiated in dossiers where �market integration deficits� (like in services) still prevail. With respect to the latter, the Council has clearly underperformed. Member states should also be much more vigilant in matters of implementation and enforcement, even though this might not be so visible politically. For while the EU is built upon decentralised implementation and enforcement, this gives member states an inescapable responsibility to ensure the proper working of the single market. These core issues are briefly addressed below. The single market is first discussed in a more analytical fashion, for the simple reason that the Juncker Commission relabelled many single market initiatives under new headings (often �unions�). Whether or not President-elect von der Leyen keeps those labels, it is crucial to distinguish the single market forest from the trees as the relevant terrain for the near future. This is followed by a brief discussion of the persistent difficulties in accomplishing the single market for services. The quality of the single market, in particular how competitive it is and how well it serves consumers, is dealt with subsequently, followed by the issue of �fairness� in several appearances, e.g. in EU competition policy and for workers, including intra-EU cross-border workers. This paper ends by discussing the challenges with respect to the single market that the EU must address effectively. We refer to the recent �strategic agenda�, Brexit, economic convergence, the �domestic� governance of the single market by member states, the services conundrum and the critical significance of the single market (and not just �more money� and R&D networking) for fostering new technologies and related start-ups. Altogether, the three EU institutions ought to give unwavering priority to the single market in all its dimensions. Length: 12 pages Creation-Date: 2019-10 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/10/The-single-market-remains-the-decisive-power-of-the-EU.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25044 Template-Type: ReDIF-Paper 1.0 Author-Name: Carpentieri, Loredana Author-Name: Micossi, Stefano Author-Name: Parascandolo, Paola Title: Overhauling corporate taxation in the digital economy Abstract: Is the corporate income tax (CIT) still an efficient system for taxing companies today? The CIT was introduced when economies were characterised primarily by tangible assets and goods and by limited international trade. Globalisation, digitalisation and the increasing weight of immaterial goods in company transactions and balance sheets have rendered that system outdated. These radical changes call for equally radical reflections on how to reform the CIT, bearing in mind the need for a corporate tax system that is fit for both the digital and the traditional economy, in developing and developed countries alike. Rather than offering a complete solution, this paper discusses various approaches that could contribute to a solution. First, we suggest that the CIT base should always be strictly aligned with the accounting profit and loss account, eschewing special adjustments for tax purposes. Second, a more radical possibility would be to abandon altogether the reference to corporate income and tax companies instead on cash flow, based on destination. And, third, the possibility could also be explored to tax companies with reference to �presumptive� indicators of activity, rather than on the basis of public accounts. Presumptive indicators are already used in federal systems to allocate corporate income among decentralised jurisdictions. These propositions would not be viable without international agreement, at least at the level of the European Union. Such an agreement may prove difficult given the conflicts of interest between EU member states and between them and the United States. Length: 20 pages Creation-Date: 2019-10 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/10/PI2019_15_Overhauling-corporate-taxation-in-the-digital-economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25090 Template-Type: ReDIF-Paper 1.0 Author-Name: Hu, Weinian Title: China as a WTO developing member, is it a problem? Abstract: The developing member status is an area identified for WTO reform by the US, the EU and the Trilateral Trade Ministerial Cooperation. The grievance is that some of the world�s top trading nations that declared themselves as developing members are taking advantage of the 155 special and deferential treatment provisions embedded to date across the range of WTO agreements, resorting to weaker commitments, undermining the functioning of the multilateral trading system and impeding the negotiation of future agreements. The developing member status per se is not a problem in relation to China�s commitments undertaken at its WTO accession, neither following accession as far as the three agreements that China participated in are concerned. China relinquished most special and differential treatment provisions at its accession, and many of its commitments are WTO-plus in nature. Within this remit, the problem lies in China�s lack of faithful compliance with certain accession commitments, such as notification and transparency. However, China�s developing member status could be a problem for the ongoing fisheries subsidies negotiations, especially given its world-leading fishing capacity. This presumption could also be true for other negotiations, for example those regarding the joint initiative on the trade-related aspects of e-commerce. China�s persistent claim of developing member status at the WTO may be understood as a result of political positioning, too, because championing �South-South cooperation� is a strategic priority for China�s diplomacy. Length: 28 pages Creation-Date: 2019-11 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/11/PI2019_16_WH_China-as-a-WTO-developing-member.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25627 Template-Type: ReDIF-Paper 1.0 Author-Name: Rizos, Vasileios Author-Name: Egenhofer, Christian Author-Name: Elkerbout, Milan Title: Circular economy for climate neutrality: Setting the priorities for the EU Abstract: The previous Commission policy on resources management was part of the priority for jobs and growth and economic competitiveness. The circular economy will be no less important for the new political priority of climate neutrality; it will become one of the indispensable elements for meeting the EU�s ambitions. EU climate policy and the circular economy are by and large complementary and mutually reinforcing. The circular economy is more than just another �product standards� policy. In order for this to happen, � there is a need for a framework that is able to systematically address trade-offs, such as between the circular and the bioeconomy, but also between material efficiency and energy use, as well as � a mechanism to steer and monitor progress, touching upon the question of whether and if so, how to increase ambition and develop tools to monitor progress, for example via targets, and � the new Commission will need to develop and then scale up successful products and processes to create opportunities for new value chains while addressing risks, such as dependency on raw materials. Circular economy products for the foreseeable future will require both technology push and market pull policies. Both the circular economy and low-carbon economy will require new and often yet unknown business models. This will also require new methods of regulation. The principal challenge will be to create �lead markets� for the circular economy in combination with low-carbon products. Many ideas for this exist. They include, for example, �carbon contracts for difference�, carbon budgets for projects, consumption charges, taxes and tax exemptions, sustainable finance, product standards and public procurement. Ideas now need to be tested to see whether they could work in practice. Finally, the EU circular economy will need to be underpinned by a robust and transparent carbon accounting system. If effective, such as system can at the same time act as a catalyst for investment in the circular economy and low-carbon products and processes. Length: 11 pages Creation-Date: 2019-11 File-URL: https://cdn.ceps.eu/wp-content/uploads/2019/11/PB2019_04_Climate-Change_Circular-economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:25584 Template-Type: ReDIF-Paper 1.0 Author-Name: Egenhofer, Christian Author-Name: Drabik, Eleanor Author-Name: Alessi, Monica Author-Name: Rizos, Vasileios Title: Stakeholders� Views on the Ecodesign Directive Abstract: The Ecodesign Directive (ED) provides consistent EU-wide rules for improving the environmental performance of products, such as household appliances, information and communication technologies or engineering. This report summarises the responses of 27 stakeholders who were interviewed to obtain their assessment of the implementation of the ED, particularly the successes and shortcomings, the results and the processes and the Directive�s contribution to encouraging the circular economy. The objective was to gather the views of both EU-level and Member State experts and stakeholders on the following questions: To what extent has the Directive met its objectives? What are the main obstacles in the implementation? How does the ED interact with other policies? How does the Directive contribute to the circular economy? Full Title: "Stakeholders� Views on the Ecodesign Directive: An assessment of the successes and shortcomings" This paper was written at the request of the Ex-Post Evaluation of the Directorate for Impact Assessment and European Added Value, within the Directorate General for Parliamentary Research Services (DG EPRS) of the General Secretariat of the European Parliament, and can be downloaded from the Parliament�s website. It is republished as a CEPS Research Report with the kind permission of the European Parliament. Length: 44 pages Creation-Date: 2018-03 File-URL: https://www.ceps.eu/system/files/RRNo2018_02_EcoDesignDirective.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13508 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: How safe is a safe asset? Abstract: This contribution focuses on a recent proposal put forward by the European Systemic Risk Board to create a �safe asset� for the eurozone based on a repackaging of the risks of sovereign bonds, in the hope of stabilising an otherwise unstable system of sovereign bond markets. In the present paper, however, authors Paul De Grauwe and Yuemei Ji argue that a financial system that is fundamentally unstable cannot be stabilised by financial engineering. To this end, they first describe the nature of the instability of the government bond markets in a monetary union and then analyse whether this proposal of creating a safe asset will succeed in stabilising government bond markets in the eurozone. Length: 8 pages Creation-Date: 2018-02 File-URL: https://www.ceps.eu/system/files/PDG_SafeAssetEZ.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13472 Template-Type: ReDIF-Paper 1.0 Author-Name: Faure-Schuyer, Aur�lie Author-Name: Egenhofer, Christian Author-Name: Elkerbout, Milan Title: Value Chains based on Mineral Raw Materials: Challenges for European Policy and Industry Abstract: This report is meant to provide background and serve as a starting point for a series of stakeholder discussions on the future of the EU�s value chains based on mineral raw materials. It describes the transformation the industry is currently undergoing, and identifies both the challenges and the opportunities it faces. This report is not intended to give a complete analysis or draw final conclusions, but rather to stimulate further discussion on the most relevant challenges. It attempts to anticipate the controversies and to identify different stakeholder positions. Keywords: mineral raw materials, value chains, trade, Europe, skills, employment Length: 22 pages Creation-Date: 2018-02 File-URL: https://www.ceps.eu/system/files/PI2018_07_ECH_RawMaterials.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13468 Template-Type: ReDIF-Paper 1.0 Author-Name: Pupillo, Lorenzo Author-Name: Noam, Eli Author-Name: Waverman, Leonard Title: The Internet and Jobs: Opportunities and ambiguous trends Abstract: Virtually all of the empirical literature on the impact of the internet on jobs indicates that the internet has indeed created many new jobs, but that a large number of jobs may also have been destroyed or downgraded in the process, at least in the short run. Furthermore, studies suggest that routinisation, job market polarisation and new labour market inequalities have emerged in recent years. Thus, while the diffusion of the internet is generating opportunities, the phenomenon also comes with ambiguous trends that by themselves will not generate a more resilient and inclusive labour market. These changes cannot be treated as business-as-usual developments by governments and the private sector. Failing to mitigate short-term job losses risks triggering pushbacks and restrictive policy responses that threaten to slow down the ICT (information, communication and technology) revolution. Length: 18 pages Creation-Date: 2018-02 File-URL: https://www.ceps.eu/system/files/PI2018_06_LP-EN-LW_InternetAndJobs.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13471 Template-Type: ReDIF-Paper 1.0 Author-Name: Pupillo, Lorenzo Title: EU Cybersecurity and the Paradox of Progress Abstract: Technological revolutions bring opportunities, but sometimes even greater threats. This �paradox of progress� affects cyberspace and threatens the very principle and foundation of the open internet. The global debate on cyber-governance is currently in a stalemate on the norms for global stability of cyberspace and the fight against cybercrime, although the EU is making considerable efforts to strengthen cyberspace resilience and the critical information infrastructure. The author argues that the newly proposed Cybersecurity Act should be supported by additional measures to increase awareness, devise smarter policy and enable effective governance. Too many users and businesses are still failing to take cybersecurity and computer hygiene seriously. And there is a need to strengthen the pan-European coordination of deterrence, detection, and defence. This paper looks at the possibilities for the EU in this domain and argues that at a time of American diplomatic and political retrenchment from Europe and the world, it has an opportunity to play a leading role in global cybersecurity policy and governance. Length: 8 pages Creation-Date: 2018-02 File-URL: https://www.ceps.eu/system/files/PI2018_06_LP_ParadoxProgress.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13456 Template-Type: ReDIF-Paper 1.0 Author-Name: Messori, Marcello Author-Name: Micossi, Stefano Title: Counterproductive Proposals on Euro Area Reform by French and German Economists Abstract: In this contribution, Marcello Messori and Stefano Micossi find that the latest proposals by a group of French and German economists for euro area reform, despite the authors� best intentions, would heighten the risks of financial instability and weaken defences against financial shocks. In their CEPR Policy Insight No. 91, B�nassy-Qu�r� et al. (2018) offer a comprehensive and sophisticated attempt to bridge the gap separating French and German policy-makers on European Economic and Monetary Union by completing Banking Union and establishing a credible system to enforce budgetary discipline and bring down sovereign debt-to-GDP ratios. Our comparison between B�nassy-Qu�r� et al. and Sch�uble�s October 2017 non-paper � which we have taken as the unmitigated expression of the German ordoliberal view � indicates a quasi-complete coincidence of policy recommendations. Prior sovereign debt restructuring is at the centre of the proposed new governance arrangements, a sure harbinger of renewed instability. The understandable concern to establish a harder budget constraint on national fiscal policies has in our view been pushed too far. Even more worrisome, in their quest to uproot moral hazard, B�nassy-Qu�r� et al. propose to eliminate from the euro-area governance arrangements all room for meeting shocks with liquidity instruments. They want banks to be �structurally� excluded from purchasing own national sovereigns in situations of distress. And they want to all but remove the financial stability exceptions for the activation of bail-in in the Bank Recovery and Resolution Directive (BRRD) and the related provisions for state aid to the banks. They would thus create an environment in which any idiosyncratic shock hitting a highly-indebted country would push it into the arms of the European Stability Mechanism (ESM), where its sovereign debt would be mercilessly restructured before any financial assistance could be considered. Investors would no doubt take notice and flee well in advance. Their proposed new lending window at the ESM does not address this issue since the new facility is limited to member states that are not at risk of losing market access. Thus, far from succeeding in their stated goal of making the euro area more stable, these proposals heighten the risks of financial instability and weaken euro area defences against financial shocks. Therefore, in our view they do not offer a basis for a viable compromise on the future governance of the euro area between France, Germany and the other member states of the euro area. Length: 12 pages Creation-Date: 2018-02 File-URL: https://www.ceps.eu/system/files/PI2018_04_MMandSM_PI91.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13438 Template-Type: ReDIF-Paper 1.0 Author-Name: Alessi, Monica Author-Name: N��ez Ferrer,Jorge Author-Name: Egenhofer, Christian Title: Suspended in legal limbo: Protecting investment in renewable energy in the EU Abstract: This paper focuses on the damage � and the potential for inflicting further damage � to investor confidence arising from legal uncertainties surrounding renewable energy support in some EU member states. A higher-than-expected expansion of the renewables sector, resulting in higher costs of the support, combined with the financial crisis, has driven some member states to radically curtail renewable energy support schemes. Loss-making investors unsuccessfully challenged these EU governments in national courts, arguing that their rights had been violated and denounced reforms that they considered to be retroactively punitive in nature. A number of EU-based international investors turned to international arbitration courts under the provisions of the Energy Charter Treaty (ECT), which protects cross-border investment in the energy sector. This move, however, has called into question the legal framework of the single market and EU state aid rules. A dispute on the jurisdiction of the ECT within the single market has ensued, which highlights a complex and unresolved situation. While the legal disputes accumulate, the concern is that investors may shy away from the EU as a result of the regulatory and legal uncertainties. The main aim of the paper is to provide some clarity for non-specialists on a complex situation, and to highlight the need to find workable solutions that de facto restore investor confidence. Keywords: Energy Charter Treaty, ECT, retroactive changes, RES, renewables, renewable energy Directive, investors, single market, arbitration, state aids Length: 17 pages Creation-Date: 2018-01 File-URL: https://www.ceps.eu/system/files/PI2018_03_Alessi_Nunez_Ferrer_RenewableInvestors_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13373 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Title: Ethics, algorithms and self-driving cars � a CSI of the �trolley problem� Abstract: Many experts argue that focusing on how automated cars will solve the dilemma known as the �trolley problem� isn�t going to get us very far in the debate about the ethics of artificial intelligence (AI). But it�s hard to resist if you are a philosopher, an ethicist, a futurist, or simply a geek � and it�s fun. Still, this dilemma can reveal a number of outstanding policy issues that are often neglected in the public debate. This paper performs a �crime scene investigation� to find some of the missing parts in the ethics/AI quandary. These include the need to preserve human control over machines; the need to take data governance and ownership seriously; algorithmic accountability and transparency; various forms of user empowerment and their tension in relation to overall system control; the need for modernised tort rules; and more generally, a discussion about whether algorithms should reflect, exacerbate or mitigate the biases existing in our society. The investigation concludes that current legal systems are insufficiently equipped to cope with most of these issues, and that a mapping of outstanding ethical and policy dilemmas is a useful starting point for a thorough overhaul of public policies in this complex and ever-expanding domain. Length: 17 pages Creation-Date: 2018-01 File-URL: https://www.ceps.eu/system/files/PI%202018-02_Renda_TrolleyProblem.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13361 Template-Type: ReDIF-Paper 1.0 Author-Name: Kilhoffer, Zachary Author-Name: Beblav�, Miroslav Author-Name: Lenaerts, Karolien Title: Blame it on my youth! Policy recommendations for re-evaluating and reducing youth unemployment Abstract: Youth unemployment has ranked high on the agenda of European policymakers since the onset of the crisis. Ten years later, youth unemployment remains stubbornly high in a number of member states. This paper offers policy recommendations for rethinking and reducing youth unemployment in Europe. To this end, it filters and summarises the results of the STYLE research project on youth unemployment in Europe, and supplements these with additional literature. The paper explores three sets of questions: i) How to define and measure youth employment? ii) What are its causes and effects? and iii) What can be done about the phenomenon? The findings indicate that youth unemployment is poorly understood and the most common measurements are insufficient. Its causes are diverse, arising from both the inherent disadvantages suffered by younger people in the labour market as well as from structural changes occurring in the labour market. The effects of youth unemployment are detrimental and significant at both the societal and individual level. Based on our analysis, we put forward 13 broad policy recommendations to address youth unemployment in Europe. Length: 49 pages Creation-Date: 2018-01 File-URL: https://www.ceps.eu/system/files/RR2018_01_BlameItOnMyYouth.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13342 Template-Type: ReDIF-Paper 1.0 Author-Name: Baas, Timo Author-Name: Belke, Ansgar Title: Oil price shocks, monetary policy and current account imbalances within a currency union Abstract: For more than two decades now, current-account imbalances are a crucial issue in the international policy debate as they threaten the stability of the world economy. More recently, the government debt crisis of the European Union shows that internal current account imbalances inside a currency union may also add to these risks. Oil price fluctuations and a contracting monetary policy that reacts on oil prices, previously discussed to affect the current account may also be a threat to the currency union by changing internal imbalances. Therefore, in this paper, we analyze the impact of oil price shocks on current account imbalances within a currency union. Differences in institutions, especially labor market institutions and trade result in an asymmetric reaction to an otherwise symmetric shock. In this context, we show that oil price shocks can have a long-lasting impact on internal balances, as the exchange rate adjustment mechanism is not available. The common monetary policy authority, however, can reduce such effects by specifying an optimum monetary policy target. Nevertheless, we also show that there is no single best solution. CPI, core CPI or an asymmetric CPI target all come at a cost either regarding an increase in unemployment or increasing imbalances. Keywords: Current account deficit, Oil price shocks, DSGE models, Search and matching labor market, Monetary policy JEL Classifications: E32, F32, F45, Q43 Length: 42 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/WD2018-01_TB-AB_Oil.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13334 Template-Type: ReDIF-Paper 1.0 Author-Name: Behrens, Arno Author-Name: Rizos, Vasileios Title: The Interplay between the Circular Economy and the European Semester: An assessment Abstract: The European Semester is the European Union�s annual cycle of economic policy guidance and oversight. Although monitoring the achievement of Europe 2020 Strategy targets, some of which focus on energy and climate change, is among the key actions of the European Semester, the reviewers so far have concentrated on economic policies in the aftermath of the financial and economic crisis. The circular economy is currently part of the European Commission�s agenda for jobs, growth and investment, which are important themes of the Semester. Against this background, this paper assesses the extent to which the European Semester genuinely takes the circular economy into account in its review process. Based on a close examination of the 2017 cycle of the Semester and interviews with experts in the field, our analysis shows that the exercise has devoted limited attention to the circular economy. Several explanations are offered for this situation, along with recommendations for the way forward. Keywords: circular economy, European Semester, resource efficiency, macroeconomic impacts Length: 23 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/No%202017-16%20VR-CircularEconomyAndEuropeanSemester.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13331 Template-Type: ReDIF-Paper 1.0 Author-Name: Barnes, Alex Title: Nord Stream 2 � Friend or enemy of energy security in Europe? Abstract: Nord Stream 2 is criticised on grounds that it undermines the functioning of the European gas market and makes European gas consumers worse off. Its critics also claim that the project has no economic rationale, would reduce security of supply, weaken European solidarity and the Energy Union, and also destabilise Ukraine. This CEPS Policy Insight, contributed by a Nord Stream 2 AG market expert, attempts to counter these criticisms by presenting recent economic analysis bearing on these matters. It explains how Nord Stream 2 cannot undermine the European gas market because of the rules already in place. It concludes that the project will be beneficial to European gas consumers by strengthening gas-to-gas competition between piped gas and LNG for supply to the EU. It also finds that fears that Nord Stream 2 will further destabilise Ukraine are exaggerated and sees a continued role of the country in gas transit to the EU. Length: 7 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/PI2017_46_Barnes_NordSteam2.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13325 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Gros, Daniel Title: How to strengthen the European Semester? Abstract: The emphasis of the European Semester should shift from economic policy coordination � intended as the process through which member states commit to common rules and recommendations adopted by the Council of the European Union under the surveillance of the European Commission � to a stronger national ownership. Coordination of national policies may be essential at times of crisis, when cross-country spillover effects tend to be large, but it may not be very effective when economic conditions return to normal, as spillovers tend to be small and the incentives for governments to coordinate are diminished. Stronger national ownership should lead to better enforcement of commonly agreed rules, regardless of economic conditions and remove the perception that rules are hierarchically imposed. National ownership could be improved by involving the national fiscal councils and the national productivity boards explicitly in the elaboration of EU recommendations for national governments. This should be done without increasing the complexity of an already complicated EU governance system of governance or damaging their reputation as independent bodies. Reforms aimed at improving the structural functioning of EU�s economies are of critical importance for member states, yet the reasons why specific reforms should be embedded in the Semester are not always clear. Moreover, strengthening the Semester by further linking the EU budget to reforms undertaken in the member states is fine in theory but very difficult to implement in practice. Reforms cannot be �bought� as such and it would be extremely difficult to measure the implementation of so-called country-specific recommendations (CSRs) with sufficient precision to make implementation a condition for funds. The primary role of the Commission should remain to foster coordination in case of economic crisis and to provide technical support for reforms when needed. Keywords: European semester, Policy coordination, Reforms Length: 29 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/RR2017_15_CAandDG_EuropeanSemester.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13292 Template-Type: ReDIF-Paper 1.0 Author-Name: Egenhofer, Christian Author-Name: Stroia, Cristian Title: Is security of energy supply possible without deeper cross-border market integration? Lessons from the cold spell in South-Eastern Europe Abstract: In late December 2016 and early 2017, South Eastern Europe experienced an extended cold spell lasting almost six weeks and triggering an electricity �crisis�, which seriously affected EU member states as well as Energy Community countries, notably Bulgaria, Romania, Greece and FYR of Macedonia. These countries opted to tackle the actual or perceived supply situation via a traditional path of administrative interventions, based on a purely national perspective and requiring the addition of considerable capacity. This approach departed sharply from the solutions discussed within the Central and South Eastern Europe Energy Connectivity (CESEC) initiative, launched by the European Commission in 2015 with the aim of integrating markets to address energy security in the region. One of the possible outcomes from the cold spell might well be that governments in the region come to realise that they have few options other than to integrate with their neighbours, increase energy efficiency and support renewable energy, whose cost by now is comparable to conventional sources and, given its scalability, poses less economic risks for investors. Keywords: electricity crisis, regional cooperation, energy security Length: 8 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/PI_No2017_44_ColdSpell.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13285 Template-Type: ReDIF-Paper 1.0 Author-Name: Elkerbout, Milan Title: Transforming Energy-Intensive Industries: Reflections on innovation, investment and finance challenges Abstract: The clean energy transition � necessitated by the Paris Agreement and implemented in the EU through the Energy Union strategy � is changing the industrial landscape in Europe. Viewed through the lens of competitiveness, this transition brings about threats as well as opportunities. This transition also leads to increased integration and linkages between climate and energy policies, on the one hand, and industrial policies, on the other. The short report is a first attempt to describe these linkages and thereby make a step towards identifying key issues and emerging policy questions while starting to hint at possible answers. It is meant as a background for discussion upon which to build further research. Keywords: Energy Union; energy transition; EU ETS; climate and industrial policy; innovation finance Length: 8 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/PI2017_44ME_TransformingEnergyIntensiveIndustries.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13274 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Mayer, Thomas Title: A European Monetary Fund: Why and how? Abstract: As early as 2010, at the outset of the sovereign debt crisis, Daniel Gros and Thomas Mayer argued that Europe needed a European Monetary Fund (EMF). In the meantime, the European Stability Mechanism (ESM) has been created, which performs the function of an EMF. It was critical in containing the cost of the crisis and four of its five country programmes have been a success. But the case of Greece shows that one needs to be prepared for failure as well. They propose in this paper to keep the ESM essentially as it is, but would empower it to set conditions on countries receiving its financial support. Such support would have a limit, however, to prevent situations in which the ESM would �own� a country. The authors conceive of the ESM/EMF literally as a financial stability mechanism, whose main function is to ensure that a bailout is no longer �alternativlos�, as Chancellor Angela Merkel used to say. In 2010, the rescue of Greece was presented as TINA (There Is No Alternative) because the stability of the financial system of the entire euro area appeared to be in danger. With financial stability guaranteed by the ESM/EMF in combination with the Banking Union, default becomes an alternative that should be considered dispassionately. Whether the debt of a country is sustainable is rarely known with certainty beforehand. Accordingly, they argue that it is proper that the Union, in the �spirit of solidarity�, initially gives a country the benefit of the doubt and provides financial support for an adjustment programme, but caution that the exposure should be limited. If the programme goes awry, the ESM/EMF could be of great help, as it could provide bridge financing to soften the cost of default. Keywords: European Monetary Fund; European Stability Mechanism; EMU reform; debt restructuring in EMU; EMU exit Length: 20 pages Creation-Date: 2017-12 File-URL: https://www.ceps.eu/system/files/WD2017_11_DGandTM_EuropeanMonetaryFund.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13267 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Busse, Matthias Author-Name: De Wispelaere, Frederic Title: Posted workers � for some it matters Abstract: The European Council, Parliament and Commission are about to start trilogue negotiations over the revision of the posting of workers Directive (PWD) of 1996. The aim of the revision is to ensure, among others, the principle of equal pay for equal work at the same place, limit the maximum posting duration and address increasing involvement of temporary work agencies in the business. The past year has shown how acutely sensitive these issues are and arriving at this point has required substantial political capital. Some have argued that this energy would have been better spent elsewhere, but in fact for some member states a lot is at stake. Postings have a large impact on (net) receiving countries such as Belgium, particularly when looking solely at its construction sector where posted workers make up 25% of the Belgian workforce. Likewise, in some (net) sending countries, such as Slovenia, outgoing posting makes up 7% of overall employment. A restriction on posting would have significant ramifications in these labour markets and for fiscal/social security revenues. The proposed revision is unlikely to render the majority of postings unprofitable, but some postings may disappear. In any case, those participating in the upcoming trilogue on posting will have to be mindful of the consequences for the single market while addressing the shortcomings in the current PWD. Length: 11 pages Creation-Date: 2017-10 File-URL: https://www.ceps.eu/system/files/PI%202017-37%20Posted%20Workers.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13117 Template-Type: ReDIF-Paper 1.0 Author-Name: Mitsilegas, Valsamis Author-Name: Giuffrida, Fabio Title: Raising the bar? Thoughts on the establishment of the European Public Prosecutor�s Office Abstract: The creation of a European prosecuting authority is a historic achievement for the European Union, especially at a time when populism, as epitomised by Brexit, has undermined the process of integration. After nearly four years of negotiations and 20 years of academic and political debate, the Council Regulation setting up the European Public Prosecutor�s Office (EPPO) was approved in October 2017, in the framework of the enhanced cooperation established in April of this year. The EPPO Regulation is probably the most ambitious instrument of EU law adopted so far, since it creates the first EU body with direct powers regarding individuals in the field of criminal law. The Office will be empowered to investigate and prosecute crimes affecting the financial interests of the EU. Recent calls, including those from Commission President Juncker and French President Macron, for an extension of the EPPO�s powers to cases of cross-border terrorism bode well for the likely acceptance of this Office in the EU in years to come. Yet the final text of the Regulation raises several concerns, argue the authors, such as those relating to the impact of supranational investigations on human rights and, more generally, about the expected effectiveness of the Office, given its cumbersome and multi-layered architecture. This paper looks at the main provisions of the Regulation and the challenges it poses, focusing on the structure, powers, and competence of the EPPO. It also considers the judicial review of its acts, the protection of the rights of suspects and accused persons, and relations between the Office and its partners. The analysis shows that the Commission�s innovative vision of a centralised prosecution at EU level, with its echoes of federalism, has been watered down in negotiations in the Council and replaced with the usual intergovernmental, collegiate vision that underpins numerous EU judicial cooperation structures and instruments. Length: 8 pages Creation-Date: 2017-11 File-URL: https://www.ceps.eu/system/files/PI%202017-39%20Mitsilegas_Giuffrida_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13227 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Banks as buyers of last resort for government bonds? Abstract: A key remaining issue for the completion of the Banking Union is the concentrated exposure of banks in many countries to their own sovereign. This paper examines the belief that banks should be allowed to buy large amounts of their own sovereign in the expectation that they can stabilise the market in a crisis and argues that it is mistaken. The author cites two reasons for this conclusion: banks are only intermediaries for private savings, and banks have a higher cost of funding than do their sovereign. The overall conclusion is that governments should make it more attractive for households (and other real money investors) to hold government debt directly. Length: 8 pages Creation-Date: 2017-11 File-URL: https://www.ceps.eu/system/files/DG_BanksAsBuyers.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13226 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: A Blueprint for Completing the Banking Union Abstract: Completing the banking union is an urgent project facing the EU, given the eurozone�s continued vulnerability to idiosyncratic liquidity shocks to national banking systems. The proposed changes to the European deposit insurance scheme (EDIS) under consideration by the European Commission could open the way to a satisfactory compromise between the twin needs to reduce legacy risks in banks� balance sheets and to provide greater risk-sharing and a fiscal backstop for both the Resolution and the EDIS Funds � while continuing to exclude any sharing of past losses. With such a compromise, financial fragmentation would likely recede rapidly, leading to a larger role by private capital in cushioning real and financial idiosyncratic shocks. EDIS could move forward immediately by providing in its early phase that the European Stability Mechanism would provide a liquidity line to national deposit guarantee schemes that had exhausted their funds, with no sharing of losses. Meanwhile, risk-reduction would accelerate through the stronger policies already established by the Single Supervisory Mechanism for the reduction of non-performing loans and a fresh approach to the reduction of banks� sovereign exposures, based on a modified version of the large exposure prudential policy. Direct risk-weighting of national sovereigns would be excluded. The ultimate anchor of a stable banking union would be credible policies to reduce excessive sovereign debt-to-GDP ratios. This paper argues that a combination of a strengthened debt rule in the Stability and Growth Pact and a market discipline mechanism entailing the obligation to issue junior bonds, subject to restructuring, for the countries violating the common budgetary rules, could offer a suitable way forward to restore the credibility of the Pact. It also argues that effective policy coordination within the eurozone also requires greater symmetry of policy obligations by the member states, which may be built into the European Semester through an appropriate revision of the macroeconomic imbalance procedure. Length: 22 pages Creation-Date: 2017-11 File-URL: https://www.ceps.eu/system/files/PI_2017_42_SM_BlueprintCompletingBU.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13212 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Target imbalances at record levels: Should we worry? Abstract: The imbalances within the Eurosystem�s Target 2 payment system are an indication that financial markets are not fully integrated. But the increase in these imbalances in the wake of the large asset purchases (often called QE, for quantitative easing), which started in early 2015, should not be a particular cause for concern. The imbalances had declined until the start of QE, accompanied by a reduction in risk premia. QE was associated with a further reduction in financial stress. There is thus little reason to believe that the increase since 2015 reflects renewed fears about a euro break-up. The �technical� nature of the increasing imbalances in the wake of QE is illustrated by the fact that the European Central Bank (the central institution of the Eurosystem) has also run up a negative Target balance of over �200 billion. No one would argue that this is motivated by a fear of a break-up of the euro area. And there are reasons to believe that the recent run-up in the negative balances of Italy and Spain is due to similarly technical reasons. This contribution does not pretend to make a new contribution to the large literature on the imbalances within the Target 2 payment system of the Eurosystem. Its main purpose is to analyse the reasons for the renewed increase in the �T2� imbalances since the start of the bond purchases in early 2015. Length: 17 pages Creation-Date: 2017-11 File-URL: https://www.ceps.eu/system/files/PI%202017-41DG_TargetImbalances.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13209 Template-Type: ReDIF-Paper 1.0 Author-Name: Ben, Shenglin Author-Name: Bosc, Romain Author-Name: Jiao, Jinpu Author-Name: Li, Wenwei Author-Name: Simonelli, Felice Author-Name: Zhang, Ruidong Title: Digital Infrastructure: Overcoming the digital divide in China and the European Union Abstract: This study is the result of collaboration among a group of researchers from CEPS and Zhejiang University (ZJU), who decided to team up and analyse the experience of China and the EU in bridging the digital divide. While acknowledging that both China and Europe have undertaken major efforts to reduce socio-economic and geographical disparities by providing network access to ever more citizens, the authors found that investing in physical access alone is not sufficient to enhance inclusion in the information society. They argue that public authorities should also adopt corollary policies to spur social and economic cohesion through innovations that enable disadvantaged regions to catch up with more developed urban areas. In this context, the report calls upon governments to promote digital innovation and entrepreneurship, foster coordinated efforts and adapt their educational systems to the changing labour market. Length: 55 pages Creation-Date: 2017-11 File-URL: https://www.ceps.eu/system/files/G20DigitalDivideChinaEU_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13194 Template-Type: ReDIF-Paper 1.0 Author-Name: Echikson, William Title: The Internet and Jobs: A giant opportunity for Europe Abstract: Over the past two decades, digitalisation has unleashed deep-seated fear among workers for the future of their jobs. Many of our daily activities, from entertainment to shopping, are being transformed. Uber drivers replace taxi drivers, artificial intelligence programmed legal review software replaces lawyers, and robots replace blue-collar manufacturing workers. Some studies predict that digitalisation and robotisation will cause job losses up to 50% of all jobs over the next few decades. Yet new research argues that such assertions are mere fear-mongering and that in reality the internet is creating more jobs than it destroys � and that these new jobs are better paid and less physically strenuous than their predecessors. Although most studies look at the United States and still need to be �Europeanised�, this optimistic view of future work suggests that this technology-fuelled job creation is not limited to tech hubs such as London and Berlin, but is moving quickly into provincial cities and is even reaching into the hinterlands long dominated by traditional industries such as coal, steel and farming. The internet reduces distances. By allowing access to the world with a few clicks, it lowers barriers to entry and gives provincial and rural dwellers new opportunities to communicate, engage and reach a global market. Thanks to the new sharing economy, it permits immigrant and marginalised populations to re-join the workplace. And finally, digitalisation powers new personalised manufacturing, opening the horizon to repatriating lost factory jobs from Asia to Europe. The full benefits of the digital transformation only will be achieved if correct policies are implemented. Our key recommendation is to enable, not to try and stop, the digital labour market revolution. Policymakers should resist giving into incumbent interests who want to protect their privileges. If anything, they should speed up the rate of creative destruction in order to raise living standards for all. Length: 17 pages Creation-Date: 2017-11 File-URL: https://www.ceps.eu/system/files/PI2017-38InternetAndJobs.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13135 Template-Type: ReDIF-Paper 1.0 Author-Name: de Jong, Jacques Author-Name: Hassel, Arndt Author-Name: Egenhofer, Christian Author-Name: Jansen, Jaap Author-Name: Xu, Zheng Title: Improving the Market for Flexibility in the Electricity Sector Abstract: Electricity will play a greater role in the transport and building sectors and all decarbonisation scenarios point to the increasing electrification of the energy system. To reach EU climate change targets, however, electricity will need to come increasingly from low carbon sources, especially (but not only) from variable renewable energy sources. Both trends - the electrification of sectors and the need to integrate electricity from variable renewables - mean that the electricity sector should become more flexible. This report reflects the discussions held in the CEPS Energy Climate House Task Force on Creating a Market Design for Flexibility in EU Electricity Markets, which met between April and September 2017. The Task Force formulated a number of recommendations in the areas of short-term and balancing markets; grid reinforcement and cross-zonal capacity allocation; aggregation; priority dispatch; DSOs (distribution system operators); and sectoral integration. Length: 42 pages Creation-Date: 2017-10 File-URL: https://www.ceps.eu/system/files/CEPS_TFR_Flexibility_Electricity_Markets.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13093 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The Single Monetary Policy and Its Decentralised Implementation: An assessment Abstract: The statutes of the European Central Bank (ECB) stipulate that it should have recourse to national central banks (NCBs) to carry out monetary policy operations. Such a structure would not be a problem if these operations were all identical across member states and if the resulting profits and losses were shared. But this is not the case today. In this sense, the euro area no longer has a �single� monetary policy. There is little one can do about this situation, except to wait until the government purchase programme ends and is then reversed. However, two steps could be undertaken already now: i) the granting of emergency liquidity assistance should be shifted to the ECB, and ii) the NCBs should be forbidden to undertake any financial operation that is not a direct consequence of their execution of the ECB�s monetary policy decisions. The existing stocks of assets (and liabilities), the so-called ANFA (Agreement on Net Financial Assets) holdings, which are not related to monetary policy, should be transferred to either national finance ministries or national special purpose vehicles. Length: 15 pages Creation-Date: 2017-09 File-URL: https://www.ceps.eu/system/files/PI2017-36DG_SingleMonetaryPolicy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13047 Template-Type: ReDIF-Paper 1.0 Author-Name: Egenhofer, Christian Author-Name: Stroia, Cristian Title: CESEC 2.0: Opening the door to a new level of regional cooperation Abstract: The Central and South-Eastern Europe Gas Connectivity (CESEC) initiative brings together EU and non-EU countries under a single regional framework promoting energy policy cooperation. All states in the region share common challenges in the areas of energy security and energy market development that can best be addressed via a joint regional approach. To date, the initiative has been a major political success for all those participating � the European Commission, the member states and the Energy Community contracting parties � which together have taken ambitious steps towards the creation of a regional energy security framework on the back of a regional energy market. Essential elements include the high-level political commitment, the prioritisation of a limited number of key infrastructure projects and the smart mobilisation of available EU funding. These accomplishments are relevant for the successful implementation of the initiative�s next phase, CESEC 2.0, which will see its extension to electricity markets, renewables and energy efficiency, for which the high-level meeting in Bucharest on 27-28 September 2017 is expected to lead the way. Length: 8 pages Creation-Date: 2017-09 File-URL: https://www.ceps.eu/system/files/CEandCS_CESEC.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:13039 Template-Type: ReDIF-Paper 1.0 Author-Name: Schelkle, Waltraud Title: Hamilton�s Paradox Revisited: Alternative lessons from US history Abstract: Armed with the knowledge of today, a scholar revisits the US historical experience with fiscal federalism and learns how it avoided three pitfalls now facing the euro area. The lingering crisis of the euro area has made leading observers call for the completion of the economic and monetary union with fiscal federalism. They point to the US federation as the example to emulate. Opponents can point to evidence from US history that strong fiscal capacities at the federal level lead to free-riding at the member state level, with �spectacular debt accumulation and disastrous failures of macroeconomic policy� (Rodden, 2006: 2) in its wake. This paper revisits the historical US evidence with the knowledge of today. It takes lessons from the euro area crisis to see whether they apply to the history of the US dollar area. The first lesson asks whether political-fiscal union should come before monetary union; a second lesson concerns the need for fiscal union; and the final lesson is about the question where fiscal discipline should be located in a monetary union. Lessons from the euro area crisis reveal trade-offs that neither monetary union can evade. This becomes apparent if one looks at the interfaces of a fiscal federation with financial and monetary integration. Length: 24 pages Creation-Date: 2017-09 File-URL: https://www.ceps.eu/system/files/WD2017_10%20WSchelkle%20HamiltonsParadox.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12963 Template-Type: ReDIF-Paper 1.0 Author-Name: Riley, Alan Title: US Sanctions: No conflict, no Nordstream threat � An opportunity for greater EU-US cooperation Abstract: The new US sanctions law � Countering America�s Adversaries through Sanctions Act 2017 � is not a legal monster threatening European interests. In the view of Alan Riley, it stems from specific and legitimate concerns on Capitol Hill about the threat to the integrity of US democratic institutions flowing from cyber-attacks by the Russian Federation and the behaviour of the current President. The law�s most substantial legislative footprint merely codifies into law the Obama-era executive orders already agreed with the European Union. On a more positive note, the sanctions law provides opportunities for the US and the EU to cooperate to protect the West�s democratic institutions against future cyber-warfare attacks and to enhance European supply security. Length: 8 pages Creation-Date: 2017-08 File-URL: https://www.ceps.eu/system/files/CEPS%20Policy%20Insights%202017-31%20ARiley%20US%20Sanctions%20Law.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12908 Template-Type: ReDIF-Paper 1.0 Author-Name: Kilhoffer, Zachary Author-Name: Lenaerts, Karolien Author-Name: Beblav�, Miroslav Title: The Platform Economy and Industrial Relations: Applying the old framework to the new reality Abstract: How do platforms such as Uber and Deliveroo � and corresponding new modes of work � mesh with unions and European models of industrial relations? This paper investigates the intersection of the platform economy, industrial relations and social dialogue. It provides strong evidence that workers in the platform economy are organising into new employee associations (unions) and are also being brought into existing employee associations. None of the evidence surveyed indicates that platforms are organising into employer associations or being incorporated into existing employer associations. Anecdotal evidence suggests that actors in the platform economy are beginning to engage in tripartite dialogue. The authors conclude that i) no overarching framework exists for governing or facilitating social dialogue between the parties involved in the platform economy, and ii) even if the existing framework is applied to parties in the platform economy, it offers a poor fit due to differences between platform workers and employees, and platforms and employers. Length: 53 pages Creation-Date: 2017-08 File-URL: https://www.ceps.eu/system/files/RR2017-12_PlatformEconomyAndIR.pdf%20Economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12881 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Klose, Jens Title: Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro-Area Member Countries Abstract: Is secular stagnation�a period of persistently lower growth such as that seen following the financial crisis of 2008-09�a valid concern for euro-area countries? We tackle this question using the well-established Laubach-Williams model to estimate the unobservable equilibrium real interest rate and compare it to the actual real rate. In light of the considerable increase in heterogeneity among EU member countries since the beginning of the financial crisis, we apply our approach to 12 euro-area countries to provide country-level answers to the question of secular stagnation. The presence of secular stagnation in a number of euro-area countries has important implications for ECB decision-making (e.g. voting power in the Governing Council) and EU governance. Our results indicate that secular stagnation is not a significant threat to most euro-area countries, with the possible exception of Greece. Keywords: equilibrium real interest rate, secular stagnation, euro-area countries, heterogeneity JEL-codes: E43, F45, C32 Length: 28 pages Creation-Date: 2017-08 File-URL: https://www.ceps.eu/system/files/WD2017_09%20ABelke%20and%20JKose%20Equilibrium%20Real%20Interest%20Rates%20and%20Secular%20Stagnation.pdf%20Economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12786 Template-Type: ReDIF-Paper 1.0 Author-Name: Lenaerts, Karolien Author-Name: Kilhoffer, Zachary Title: Government Responses to the Platform Economy: Where do we stand? Abstract: The introduction of the platform economy in Europe has sparked debate on the challenges it raises for workers, companies, social partners, governments and other stakeholders, and how these challenges can be addressed. This paper assesses government responses to the platform economy in seven EU countries: Belgium, Denmark, France, Germany, Hungary, Slovakia and Spain. It shows that, owing to the lack of a specific framework governing the platform economy, countries generally attempt to apply existing legislation, regulations and policies to the new challenges that the platform economy brings. This holds for the status of workers, working conditions, and industrial relations and social dialogue. Nevertheless, this strategy is not necessarily successful. The status of platform workers, for example, remains unclear in most member states. Some member states consider all platform workers to be self-employed, while in other member states, their status is much more dependent on the specific circumstances. There seems to be little debate on the idea of introducing a new status in the countries studied. On working conditions, the results confirm that most countries have applied the existing framework to platform work. In many of the member states, this has turned out to be problematic in several dimensions (e.g. taxation and social protection). In the area of industrial relations and social dialogue, there is much less evidence of specific actions or initiatives. Length: 17 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/PI2017-30_Government%20Responses%20to%20the%20Platform%20Economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12773 Template-Type: ReDIF-Paper 1.0 Author-Name: Kilhoffer, Zachary Author-Name: Beblav�, Miroslav Title: The Great Recession�s Biggest Losers: The euro area�s jobless Abstract: The euro area continues to recover from the Great Recession, with several recent publications offering optimistic assessments of the euro area�s economic performance. The European Commission�s �Employment and Social Developments in Europe 2017� report, for example, praises moderate economic growth and �solid net job creation� in a �job-rich recovery�. While the European Commission acknowledged ongoing challenges such as youth unemployment, it must also be recognised that the euro area�s recovery has been piecemeal. Economic growth is encouraging, but it obscures the unemployed millions who have not tasted the fruits of the recovery. The euro area�s labour market, while posting gains, remains in a worse state than before the Great Recession. Nearly half of the unemployed in the euro area have been jobless for over a year. In contrast with the United States, Japan and other regions hit hard by the crisis, the euro area�s labour market exemplifies the most enduring damage of the Great Recession. This CEPS Policy Insight argues that European lawmakers need to soberly acknowledge the job market�s failures and take targeted action, addressing the regions and demographics for whom the recovery is not working. Length: 8 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/PI2017-29_ZKandMB_EALabourMarket.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12771 Template-Type: ReDIF-Paper 1.0 Author-Name: Benedetto, Giacomo Author-Name: Rinaldi, David Author-Name: Aden, Hartmut Title: Transparency and Oversight of the Council�s Budget: Council executive powers Abstract: This briefing introduces the challenges that have been faced in delivering a discharge of the Council�s budget over the last decade, with particular regard to the Council�s executive activities. The authors analyse the institutional and legal constraints and put forward a number of recommendations aimed at achieving more accountability regarding the Council�s budget and executive expenditure without resorting to treaty reform. Length: 28 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/RR%20No%202017-11_DR_OversightEUBudget.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12756 Template-Type: ReDIF-Paper 1.0 Author-Name: Blockmans, Steven Author-Name: Viaud, Astrid Title: EU Diplomacy and the Iran Nuclear Deal: Staying power? Abstract: The nuclear deal with Iran is often hailed as one of the few diplomatic successes of EU foreign policy. While the convening power of the European Union in �the making of� phase of the Joint Comprehensive Plan of Action (JCPOA) has indeed been critical and well documented, there has so far been no independent assessment of the EU�s facilitating and mediating role in the implementation of the nuclear agreement. This Policy Insights paper by Steven Blockmans and Astrid Viaud seeks to plug that gap. It analyses the tasks entrusted to the EU as the coordinator of the Joint Commission, the executive body overseeing the implementation of the agreement, evaluates how the EU has performed its duties and assesses whether the economic benefits that the EU derives from the lifting of nuclear-related sanctions and the opening of the Iranian market risk undermining its role as an honest broker. This paper finds that the EU is accepted in the Joint Commission as a primus inter pares among the five permanent members of the Security Council, Germany and Iran. But two years since the signing of the nuclear deal, the real stress test is about to come. How the EU will cajole the administration of President Trump to keep the US wedded to the JCPOA will determine the future effectiveness of the nuclear deal, and also colour the legacy of the EU and its High Representative as a diplomatic actor on the global stage. Length: 15 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/PI2017-28-SBandAVonIran.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12749 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Di Salvo, Mattia Title: Revisiting Sanctions on Russia and Counter-Sanctions on the EU: The economic impact three years later Abstract: On June 28th, the European Council took a decision to prolong the economic sanctions imposed on Russia until 31 January 2018. These sanctions: 1) limit access to EU capital markets for major Russian state-owned financial institutions and energy and defence companies, 2) ban both the export and import of arms, 3) ban the export of dual-use goods for military use to Russia and 4) curtail Russia�s access to certain sensitive technologies and services that can be used for oil production and exploration. Length: 3 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/CEPS%20Commentary_Sanctions%20on%20Russia%20_Gross_Di%20Salvo.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12745 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Title: Introducing EU Reduction Targets on Regulatory Costs: A Feasibility Study Abstract: This report looks at the feasibility of a European Commission initiative aimed at adopting net reduction targets for regulatory costs. As many as 14 alternative options are compared in terms of their comprehensiveness, accuracy, methodological simplicity, timeliness of implementation and compatibility with existing political commitments. The study calls for the adoption of a sequential approach to cost reduction, which implies that the Commission starts setting reduction targets in selected policy areas as early as the end of 2017, and gradually builds capacity over time on the quantification of regulatory costs for all the relevant EU acquis. The report was commissioned by RegWatchEurope, the banner under which Europe�s seven independent national advisory boards coordinate to address and maximise the benefits of Europe�s �smart regulation� agenda and reduce regulatory burdens. Length: 106 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/RR_%20REGULATORY%20COSTS.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12740 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: Uneven progress in implementing cross-border bank resolution in the EU Abstract: Implementing the framework for cross-border bank resolution in the EU is a work in progress, but it is not necessarily proceeding in a consistent way. Three banks were recently resolved in the EU, in which the rules were applied in a different way in each case. These varying results suggest that there remain important differences in supervisory approaches that will continue to have a large bearing on how problem banks are dealt with across the EU. This situation, in turn, raises questions about the EU's commitment to ensuring a level playing field. Length: 10 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/KL_CrossBorderResolution.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12733 Template-Type: ReDIF-Paper 1.0 Author-Name: Stefan, Marco Title: The Transatlantic Dispute over Visas: The need for EU action in the face of US non-reciprocity, moving targets and the harvesting of EU citizens� data Abstract: This Policy Insight investigates the multiple policy, legal and inter-institutional ramifications of the dispute arising from the persisting lack of visa reciprocity between the EU and the US. The ever-stringent US requirements for member states� admittance and stay in the Visa Waiver Programme discriminate against European passport holders on the basis of nationality and justify preventive policing through the harvesting of EU citizens� personal data. It is important that all EU institutions responsible for the implementation of EU common visa policy loyally cooperate in dealing with the current state of affairs in transatlantic visa non-reciprocity. Such an approach could offer a way out of the EU�s current inter-institutional dispute regarding the measures to take under a post-Lisbon regulatory framework. This would allow increasing the effectiveness and democratic accountability in EU-US cooperation on visas, and help address issues arising from US requests for personal information, which may be tantamount to the introduction of visa requirements and travel restrictions for EU citizens. Length: 27 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/PI2017-27_MS_EU-US%20Visa%20Controversy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12734 Template-Type: ReDIF-Paper 1.0 Author-Name: Jansen, Jaap Title: Does the EU renewable energy sector still need a guarantees of origin market? Abstract: The European Commission�s Renewable Energy Directive of 2001 mandated EU member states to develop a system for the guarantees of origin (GOs) of renewable electricity. In 2016, this market had an estimated value of �120 million per year across the EU, of which �100 million was income for generators of renewable electricity. Yet the GO system has been criticised for lacking environmental credibility and having little impact. The current legislation of the GO instrument leads to an oversupplied GO market and a double-counting problem. This enables suppliers who want to launch renewable electricity products, and corporations seeking to make their electricity demand more renewable, to do so in a legally correct and cheap but environmentally questionable way, which leads to little or no extra generation of renewable electricity. The author argues that well-designed reforms could address these weaknesses and provide additional, consumer-driven income streams to help realise new renewable energy projects in the future. He proposes a number of recommendations for action. Length: 9 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/CEPS%20Policy%20Insights%202017-25%20Guarantees%20of%20Origin%20J%20Jansen.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12714 Template-Type: ReDIF-Paper 1.0 Author-Name: Hassel, Arndt Author-Name: Stroia, Cristian Author-Name: Egenhofer, Christian Author-Name: Jansen, Jaap Author-Name: Behrens, Arno Title: Improving Cooperation among EU Member States in Handling Electricity Crises: Lessons for the Regulation on risk-preparedness Abstract: As part of the �Clean Energy for All Europeans� package, the European Commission has proposed a Regulation on risk-preparedness in the electricity sector that aims to improve cooperation among member states in preventing, preparing for and managing electricity crises. To reap the benefits of improved cooperation compared with the current diverging national approaches, the proposal foresees, inter alia, national risk-preparedness plans, a number of principles for crisis management and ex post crisis evaluation. This Policy Insight analyses the proposal and confronts it with a case study about a recent crisis in South East Europe (in January 2017). Among other conclusions, the findings suggest that the Regulation�s provisions for clear rules and national/regional procedures for crisis management and for evaluating crisis management ex post (i.e. whether the rules were followed) are appropriate, but they may need strengthening. Length: 13 pages Creation-Date: 2017-07 File-URL: https://www.ceps.eu/system/files/PI2017-25_RiskPreparedness.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12697 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Title: Programming Brexit: How will the UK�s IT sector fare? Abstract: The British economy has always been able to rely on a continuous inflow of high-skilled workers from the rest of the EU and the UK is currently home to over three million EU citizens. As a result of the UK�s decision to leave the European Union, however, the image of the UK in the eyes of foreign workers may have become tarnished. By using LinkedIn data, the authors of this study analyse the movements of IT professionals between the EU and the UK and thereby illustrate what is at stake for the UK, as exemplified by this particular �shortage sector�. LinkedIn data show that on an annual basis the UK gains over 6,000 IT experts more than it loses to the EU. Moreover, these mobile IT professionals tend to be much more qualified than domestic IT experts are. This reliance on the EU for IT recruitment � one in ten new hires comes from the EU � suggests that even if the UK is not aiming to restrict high-skilled immigration, curbing overall immigration could have unintended negative consequences for its capability to attract talented EU nationals in the future. The UK government should perhaps bear this in mind during negotiations with the EU27. Length: 12 pages Creation-Date: 2017-06 File-URL: https://www.ceps.eu/system/files/CEPS%20Policy%20Insights%20LinkedIn%20Brexit%20study%20MBusse%20and%20M%20Barslund_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12687 Template-Type: ReDIF-Paper 1.0 Author-Name: Lenaerts, Karolien Author-Name: Paquier, F�lix Author-Name: Simonetta, Suzanne Title: Unemployment Insurance in America: A model for Europe? Abstract: After the crisis, the longstanding debate on a European unemployment benefits scheme (EUBS) was revived as part of a much larger debate on the need for a supranational automatic stabilisation function for Europe. The American unemployment insurance (UI) system, given its two-tier structure, has often been regarded as a model for a potential EUBS. Previous research has examined the lessons to be learned from the US UI. This paper builds on this literature but goes one step further as it carefully assesses whether the lessons from the US system could actually be implemented in a European context. Indeed, while there are important parallels between the US and the EU in some areas, significant differences in others may complicate implementation or even render it impossible. In this paper, the aim, therefore, is to identify the aspects of the US system to draw inspiration from � in light of the EU�s institutional and political realities � and explain how they inform a potential EUBS. This exercise concentrates on the design and implementation of a potential EUBS. The paper highlights that a two-tier system helps to better attain the goals of unemployment insurance, as demonstrated by the American experience. It also shows the advantages of being pragmatic and taking an incentives-based approach. Other issues, such as solidarity and redistribution, seem more difficulty to tackle in Europe than in the American context and would require further examination. Finally, discretionary measures should be considered with caution. Length: 22 pages Creation-Date: 2017-06 File-URL: https://www.ceps.eu/system/files/PI2017-23_KL%20et%20al%20EUBS.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12684 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Implications of the Expanding Use of Cash for Monetary Policy Abstract: Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Currency is part of the monetary base. Its increase thus leads to an automatic increase in central banks� balance sheets. This becomes relevant when the size of a central bank�s balance sheet becomes a policy instrument. Taking account of the increase in cash holdings can lead to a different view of the monetary policy stance over longer periods of time. Holding the size of the overall balance sheet constant is equivalent to a gradual exit when currency holdings continue to increase. Length: 19 pages Creation-Date: 2017-06 File-URL: https://www.ceps.eu/system/files/PI2017-21_ExpandingUseOfCash.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12661 Template-Type: ReDIF-Paper 1.0 Author-Name: Elkerbout, Milan Author-Name: Egenhofer, Christian Title: The EU ETS price may continue to be low for the foreseeable future � Should we care? Abstract: Carbon prices in the EU ETS have been low for a number of years and might remain at relatively low levels for the foreseeable future. That does not mean that the EU ETS, or the price signal it produces, is meaningless. Incentives to abate greenhouse gas emissions exist at any price level (it is just stronger with higher prices). This is true even if the impact is different between the power and industrial sectors, partly but not only because of the difference in allocation rules. What the ETS price signal does not drive, however, is long-term investment decisions, which are more a function of price expectations and expected returns on investment. Length: 7 pages Creation-Date: 2017-06 File-URL: https://www.ceps.eu/system/files/PI_2017-22_MEandCE_ETSPriceSignal%20%282%29.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12666 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Tightening by Stealth: Why keeping the balance sheet of the Federal Reserve constant is equivalent to a gradual exit Abstract: Exiting from unconventional monetary policies is now a key issue for central banks, and especially for the US Federal Reserve. This paper argues that the Fed already began this exit some time ago, and that the relevant part of its balance sheet has already shrunk by about one-quarter of GDP. Pursuing the current policy of reinvesting would lead to a full exit within ten years. Length: 7 pages Creation-Date: 2017-06 File-URL: https://www.ceps.eu/system/files/No%202017-20TighteningByStealth.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12652 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Ludolph, Lars Title: Could the decrease in Belgian government debt-servicing costs offset increased age-related expenditure? Abstract: This paper argues that none of the secular trends that have driven down real interest rates over the past two decades is likely to reverse in the near future. Thus, real rates can be expected to remain low and government debt-servicing costs to decrease further over the coming years. Based on these findings, the authors calculate direct gains accruing to the Belgian government from lower net debt interest payments. The savings on interest payments are then contrasted with the projected future increases in age-related expenditures on pensions, education and long-term care. The findings indicate that, if savings on interest payments are channelled to cover the increases in age-related expenditures, they will fully offset financing needs in these areas until 2030. The calculations are robust to a moderate increase in interest rates. Length: 24 pages Creation-Date: 2017-06 File-URL: https://www.ceps.eu/system/files/WD2017-06MBandLL_DecreasedBelgianDebtServicing.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12598 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Thirion, Gilles Title: Fiscal Risk Sharing and Resilience to Shocks: Lessons for the euro area from the US Abstract: On May 31st, the European Commission issued a reflection paper on the deepening of the Economic and Monetary Union calling for a far-reaching debate on reforms to the economic governance architecture of the euro area. The Commission�s document also states that a fiscal stabilisation function for the euro area could be envisaged in the longer run (2020-25) in addition to the deepening of private risk-sharing mechanisms. The present paper offers a timely contribution to the important debate on the design of a possible fiscal stabilisation function for the euro area by assessing the stabilising effects and the nature of the US federal tax-transfer system to shocks. We question the mainstream argument for a euro area �fiscal capacity�, which revolves around the need to �dampen the effects of asymmetric shocks�, and argue that there are important lessons to be derived from US federal fiscal risk-sharing institutions, but that they are not what policymakers typically envisage. Length: 32 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/No%202017_07%20CA%20and%20GT%20Fiscal%20risk-sharing%20and%20resilience%20to%20shocks.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12595 Template-Type: ReDIF-Paper 1.0 Author-Name: Hu, Weinian Author-Name: Pelkmans, Jacques Title: China-EU Leadership in Globalisation: Ambition and capacity Abstract: This CEPS Policy Insight attempts to offer a first verification of whether China and the EU are ready to exercise leadership in global trade and investment, not only in words but also in deeds that would underpin credibility for the world trading and investor community. A distinction is drawn between the ambition to exercise such leadership and the effective capacity to do so. The EU�s capacity to lead is not at issue, but, as is shown, it does face a few difficulties. The paper analyses China�s effective leadership capacity based on aspects of its energetic FTA strategy, investment protection agreements, the progress of its domestic market-oriented reforms (required for economic openness) and its record in negotiating the WTO plurilaterals. Some reflections on a possible joint leadership of the EU and China are offered in the conclusion. Length: 25 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/PI2017-18_WHandJP_China-EULeadership.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12585 Template-Type: ReDIF-Paper 1.0 Author-Name: Metivier, Jeanne Author-Name: Di Salvo, Mattia Author-Name: Pelkmans, Jacques Title: Transatlantic Divergences in Globalisation and the China Factor Abstract: The EU and the United States are following divergent paths with regard to their respective trade policies. While the new administration of the United States has made some notably strong statements against further trade liberalisation, the EU continues to favour responsible globalisation. The EU has recently signed a series of free trade agreements (FTAs) as well as plurilateral agreements with its partners (especially, but not only, in East Asia). Consequently, the EU is strengthening its status as a global leader in the debate on economic openness. Conversely, the US has interrupted major negotiations with its trading partners and has renounced trade agreements, such as TPP and TTIP (at least for the time being). This paper provides some empirical economic and social guidance behind the recent policy divergence on globalisation between the US and the EU in general and vis-�-vis China in particular. Length: 29 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/PI2017-19_TransatlanticDivergencesGlobalisation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12584 Template-Type: ReDIF-Paper 1.0 Author-Name: Van der Loo, Guillaume Title: The Court�s Opinion on the EU-Singapore FTA: Throwing off the shackles of mixity? Abstract: In its landmark Opinion 2/15 the Court of Justice of the European Union concluded that the entire EU-Singapore FTA falls under the exclusive competences of the EU, with the notable exception of portfolio investment and the Investor-State Dispute Settlement (ISDS) mechanism. Although the result is that the trade agreement with Singapore is �mixed�, and therefore also needs to be ratified by all the 28 member states, this Opinion may actually contribute to the credibility and effectiveness of the EU�s trade policy. In line with the EU�s broadened trade competences, brought about by the Treaty of Lisbon, the Court confirmed that the EU has the exclusive competences to realise almost all its broad trade-related objectives in �EU-only� FTAs, covering trade in goods, services, intellectual property rights, public procurement and sustainable development. If investor-state dispute settlement and portfolio investment are excluded, such future EU FTAs will not be jeopardised by 28 additional � and sometimes unpredictable � ratification procedures in the member states. The Commission should therefore pursue �EU-only� FTAs and cover portfolio investment and investor-state dispute settlement, such as the new Investment Court System, in separate agreements, or not at all. Member states on the other hand should to refrain from deliberately making EU FTAs mixed, as this would contradict the spirit of the Lisbon Treaty and the Court�s case law. Length: 12 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/PI2017-17Gvdl_SingaporeJudgement.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12570 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Gros, Daniel Title: Greece and the Troika � Lessons from international best practice cases of successful price (and wage) adjustment Abstract: This paper reviews cases of successful price and wage adjustment, which are often regarded as constituting best practice, in Australia, Latvia and the German new states and contrasts them with the Greek experience under the Troika programmes. Latvia stands out as having had the quickest adjustment in wages. By contrast, before the crisis, Greek wages appeared to have been largely insensitive to labour market conditions but this changed with the programme. We find that the reaction of wages to unemployment in Greece under the programme was similar to that observed in Germany and Portugal (a case that has attracted less attention). A priori, it is likely that the change in wage behaviour in Greece was due to the labour market reforms imposed under the programme. But this cannot be proven beyond doubt. Length: 24 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/No%202017_05%20AB%20and%20DG%20GreeceAndTroika.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12557 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: D�Imperio, Paolo Author-Name: Thirion, Gilles Title: Risk-sharing and Consumption-smoothing Patterns in the US and the Euro Area: A comprehensive comparison Abstract: This paper compares the capacity to smooth the impact of asymmetric shocks in the US and in the euro area (EA) and examines the various mechanisms through which the shock absorption occurs. It first notes that comparable data for the US and the EA are not readily available, and that in the US, state accounting is such that what the literature commonly calls international risk-sharing in reality embeds inter-temporal consumption-smoothing through retained corporate earnings. With this in mind, we build euro area aggregates suitable for comparison. Our findings confirm that international capital markets in the US are a more powerful tool for risk-sharing than in the EA, but less so than previously reported. The better performance of the US is explained by very poor shock-absorption dynamics in the peripheral euro area countries, especially after 2010, as well as by a higher persistence of shocks in the euro area relative to the US. Length: 29 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/No%202017_04%20CAlcidi%20et%20al%20EMU%20vs%20US%20Risk%20Sharing.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12514 Template-Type: ReDIF-Paper 1.0 Author-Name: J. Nieto, Mar�a Title: Banks and Environmental Sustainability: Some reflections from the perspective of financial stability Abstract: There is growing evidence suggesting that climate change risks have important implications for financial stability, although the analysis of the complexity of the potential risks to the financial sector is still at an early stage. This Policy Brief quantifies the direct (syndicated) loan exposure to elevated environmental risk sectors of the largest banks in the EU, Switzerland, the US, Japan and China on average at between 0.3 to 3.7% of total banking assets and �1.35 trillion in total as of December 2014. Policy recommendations: The policy recommendations operationalise the 2016 recommendations on climate-related issues issued by the Enhanced Disclosure Task Force (EDTF) to G20 countries and advise revising the banks� prudential policy to consider environmental risks. � Better understanding the direct exposure to high environmental risk sectors demands a reliable and harmonised statistical framework that allows for detailed identification of sectors exposed to high environmental risks along the SIC (and NACE in the EEA) classifications. � Develop credit registers to become a tool that facilitates the assessment of environmental risk drivers in �carbon stress tests�. � Environmental aspects should be considered in the revisions of the assessment methodology of the Basel Core Principles for Effective Bank Supervision Length: 16 pages Creation-Date: 2017-05 File-URL: https://www.ceps.eu/system/files/PBNo%202017-01%20MNieto_BanksEnvironmentalSustainability.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12503 Template-Type: ReDIF-Paper 1.0 Author-Name: Rizos, Vasileios Author-Name: Tuokko, Katja Author-Name: Behrens, Arno Title: The Circular Economy: A review of definitions, processes and impacts Abstract: Transforming the linear economy, which has remained the dominant model since the onset of the Industrial Revolution, into a circular one is by no means an easy task. Such a radical change entails a major transformation of our current production and consumption patterns, which in turn will have a significant impact on the economy, the environment and society. Understanding these impacts is crucial for researchers as well as for policy-makers engaged in designing future policies in the field. This requires developing an in-depth knowledge of the concept of the circular economy, its processes and their expected effects on sectors and value chains. This paper reviews the growing literature on the circular economy with the aim of improving our understanding of the concept as well as its various dimensions and expected impacts. On the basis of this review, it attempts to map the processes involved and their application in different sectors. The paper suggests that research on the circular economy is currently fragmented across various disciplines and there are often different perspectives and interpretations of the concept and the related aspects that need to be assessed. This fragmentation is also evident in the available studies that adopt different approaches in calculating the impacts, which makes efforts at comparing the results from different sources very challenging. Finally, this paper suggests that there is limited information on the indirect effects on the economy (e.g. impacts on the value chain or changes in consumption spending patterns) as well as the social impacts of the circular economy transition. Length: 44 pages Creation-Date: 2017-04 File-URL: https://www.ceps.eu/system/files/RR2017-08_CircularEconomy_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12440 Template-Type: ReDIF-Paper 1.0 Author-Name: Rinaldi, David Author-Name: N��ez Ferrer, Jorge Title: The European Fund for Strategic Investments as a New Type of Budgetary Instrument Abstract: This paper provides an overview of the European Fund for Strategic Investments (EFSI) as a budgetary instrument. A preliminary analysis of the quantitative impact of its first year and a half of activity is complemented by an outline of the corollary policies that can determine the success of EFSI. Taking into account the instrument�s original mission, the preliminary evidence is encouraging and suggests that it is on track to attain expected targets. For EFSI 2.0, the study recommends revising the regulation to provide a window-specific definition of additionality and strengthening parliamentary oversight. In order for EFSI to contribute to the greater goal of cohesion and development, it further recommends the creation of a Development Window with a special guarantee for riskier regions and a push on EFSI corollary policies, including the establishment of country offices for the Advisory Hub and the development of a strategy for investment in human capital. Length: 37 pages Creation-Date: 2017-04 File-URL: https://www.ceps.eu/system/files/RRpt%20No%202017-07%20EFSI.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12433 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Gros, Daniel Author-Name: Rinaldi, David Author-Name: N��ez Ferrer, Jorge Title: The Instruments providing Macro-Financial Support to EU Member States Abstract: Following the financial crisis, the EU put in place a number of instruments aimed at providing macro-financial support to EU member states in difficulty, five of which remain in place. At the request of the European Parliament, CEPS carried out an in-depth assessment of the functioning and institutional arrangements of these support programmes with a view to providing a solid basis on which to design a sound architecture that can serve Europe for decades to come. This paper draws a number of important lessons from this assessment and identifies a few crucial issues that still need to be addressed. Length: 32 pages Creation-Date: 2017-03 File-URL: https://www.ceps.eu/system/files/RRpt%20No%202017-06%20MacroFinSupport%20to%20MSs_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12373 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Title: How can Sustainable Development Goals be �mainstreamed� in the EU�s Better Regulation Agenda? Abstract: The European Commission recently announced its intention to mainstream the Sustainable Development Goals in its policy process, as part of its approach to implement the 2030 Agenda. This explicitly involves the EU's better regulation agenda, but the current tools and methods used in both ex ante impact assessment and ex post policy evaluation would need to be adapted to link better regulation with SDGs more effectively. More generally, this would also mean that the better regulation agenda becomes an instrument for policy coherence in EU public policy, and not only an instrument for efficiency. In this paper, the author reflects on the changes that would be needed in governance and better regulation methods, and in the European Semester and Cohesion policy. He proposes a five-phase transition towards a policy process that is fully geared to sustainable development. Length: 17 pages Creation-Date: 2017-03 File-URL: https://www.ceps.eu/system/files/Better%20regulation%20and%20sustainable%20development_CEPS%20Policy%20Insights_%20A_Renda.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12334 Template-Type: ReDIF-Paper 1.0 Author-Name: Egenhofer, Christian Author-Name: Stroia, Christian Author-Name: Popov, Julian Title: Channelling Progress in Central and South East European Energy Market Integration Abstract: The Central and South Eastern Europe Gas Connectivity (CESEC) is a major political success for the European Commission and the member states in their bid to integrate Central and South East European (C&SEE) energy systems. CESEC has already made a significant contribution to strengthening the regional and wider European energy security. Broadening the scope of CESEC to include electricity, renewables and energy efficiency offers a unique opportunity to address energy systems in their full complexity, not just in technological and project �silos�. The region of Central and South East Europe has significant energy efficiency, renewables and new technology potential that could be scaled up at low cost. In this paper, the authors set out a number of proposals for the Terms of Reference for the new CESEC Working Groups to further channel progress in the integration of the Central and South East European energy market. Length: 13 pages Creation-Date: 2017-02 File-URL: https://www.ceps.eu/system/files/New%20CESEC%20Working%20Groups%20Egenhofer_%20Stroia_%20Popov_%20CEPS%20Policy%20Insights.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12332 Template-Type: ReDIF-Paper 1.0 Author-Name: Bouyon, Sylvain Title: The Future of Retail Financial Services: What policy mix for a balanced digital transformation? Abstract: In recent years, the digitalisation of retail financial services � retail payments, current/savings accounts, consumer/housing credit, car insurance, property insurance and health insurance � has accelerated significantly. While policy-makers are gradually creating the necessary conditions to strengthen this digital transformation, there remain numerous policy issues and unanswered questions to resolve. Against this background, CEPS-ECRI formed a Task Force to explore four specific core questions: What type of level playing field is needed to ensure a successful transition to the digital transformation? What are the opportunities and risks related to big (alternative) data and increasingly sophisticated algorithms? What kind of regulatory framework is the most appropriate for pre-contractual information duties in a digital era? How can the regulatory framework for digital authentication be improved? Length: 90 pages Creation-Date: 2017-02 File-URL: https://www.ceps.eu/system/files/TFRFutureFinancialServices.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12265 Template-Type: ReDIF-Paper 1.0 Author-Name: Leceta, Jos� Manuel Author-Name: Renda, Andrea Author-Name: K�nn�l�, Totti Author-Name: Simonelli, Felice Title: Unleashing Innovation and Entrepreneurship in Europe: People, Places and Policies Abstract: This report sets out the elements for the design of a streamlined and future-proof policy on innovation and entrepreneurship in Europe. It is the result of a collective effort led by CEPS, which formed a Task Force on Innovation and Entrepreneurship in the EU, composed of authoritative scholars, industry experts, entrepreneurs, practitioners and representatives of EU and international institutions. The result of these deliberations is a set of policy recommendations aimed at improving the overall environment and approach for entrepreneurship and innovation in Europe and a new paradigmatic understanding of the role that innovation and entrepreneurship can and should play within the overall context of EU policy. These recommendations are based on a new, multi-dimensional approach to both innovation and entrepreneurship as social phenomena and to the policies that are meant to promote them. Length: 160 pages Creation-Date: 2017-02 File-URL: https://www.ceps.eu/system/files/TFR%20Innovation%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12268 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Lenaerts, Karolien Author-Name: Maselli, Ilaria Title: Design of a European Unemployment Benefit Scheme Abstract: In this extensive report, we assess how a European unemployment benefit scheme (EUBS) could be designed. To this end, we examine 18 EUBS variants, 4 equivalent and 14 genuine schemes, and their key features. Some of these features can also be found in national unemployment benefit schemes, while others are more related to the EUBS context. We analyse the design of a common EUBS in previous literature and combine these insights with results for the legal and operational options as well as constraints and the economic value added obtained as part of our study on the �Feasibility and Added Value of a European Unemployment Benefit Scheme�. All this information is integrated into a summary fiche for each of the 18 EUBS variants studied. In addition, the report deals with a range of policy issues including convergence, minimum requirements and accession criteria. Length: 146 pages Creation-Date: 2017-02 File-URL: https://www.ceps.eu/system/files/Design%20of%20EUBS%20RRpt%20No%202017-04.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12263 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Di Bartolomeo, Anna Author-Name: Ludolph, Lars Title: Gender Inequality and Integration of Non-EU Migrants in the EU Abstract: The integration of refugees and migrants in general into the labour market � and into society at large �stands at the forefront of current policy debate. And rightly so: better integration enriches not only the migrant, but also the host country�s population and its public finances. A number of recent noteworthy publications have therefore studied the labour market integration process and how to improve it. While the diverse background of new arrivals is often acknowledged in these studies, on-the-ground labour market integration programmes too often follow a one-size-fits-all approach. In this Policy Insights study, we argue that there is a particularly strong case for labour market integration measures specifically geared towards female migrants. The primary reason is the traditionally low female labour market participation in the majority of source countries, which translates into a large excess gender gap in labour market integration among non-EU migrants in Europe. This gap is further mirrored by other important aspects of societal integration. We argue that this lack of labour market integration inhibits wider societal integration of female migrants. Hence, integration efforts need to more explicitly take the gender dimension into account and further analyse the determinants of the gender gap in integration. A mapping of successful initiatives targeting migrant women, as has been done in recent best-practice guidelines, is therefore essential. However, these studies mainly stress that the number of targeted measures is currently insufficient. Length: 12 pages Creation-Date: 2017-02 File-URL:https://www.ceps.eu/system/files/No%202017-06%20MB%20et%20al%20Gender%20Inequality%20and%20Integration%20of%20Non-EU%20Migrants%20in%20the%20EU.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12262 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: One Market, One Money � A Mistaken Argument (post factum)? Abstract: Why should Europe opt for monetary union? �One Market needs one Money'! This is, at first sight, the key argument of the influential report by the European Commission entitled �One Market, One Money�, published in 1990. But after closer examination of the report, Daniel Gros considers its rather more agnostic subtitle: �An evaluation of the potential benefits and costs of forming an economic and monetary union� and concludes that the key argument was in fact the other way round: one money would create one market. Unfortunately, the authors of 1990 did not recognise that �one money� would foster huge cross-border financial flows that would one day lead to a very costly financial crisis. Length: 14 pages Creation-Date: 2017-02 File-URL:https://www.ceps.eu/system/files/DG_OneMarketOneMoney_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12245 Template-Type: ReDIF-Paper 1.0 Author-Name: Hassel, Arndt Author-Name: Nicolescu, Razvan Author-Name: Egenhofer, Christian Author-Name: Nica, Andreea Author-Name: Elisei, Sorin Title: Fulfilment of National Objectives under the Renewable Energy Directive: State of play and projections Abstract: The EU Directive on the promotion of the use of energy from renewable sources contains the main body of the EU's current renewable energy (RE) policy. Adopted in April 2009, the Directive provides a common framework for the promotion of energy from renewable sources in all EU member states. The act specifies binding national targets for the share of renewable energy (as a percent of gross final energy consumption) for each member state, which together amount to an EU-wide target of 20%. This report reviews the progress made to date by each member state towards fulfilling its target and offers projections about possible outcomes in the year 2020. Length: 16 pages Creation-Date: 2017-02 File-URL:https://www.ceps.eu/system/files/PI2017-04_AH_CE_RES_Objectives_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12244 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Lenaerts, Karolien Title: Feasibility and Added Value of a European Unemployment Benefits Scheme Abstract: This CEPS e-Book presents the final report of a comprehensive project on the Feasibility and Added Value of a European Unemployment Benefits Scheme, initiated by the European Parliament and commissioned by the European Commission, Directorate-General for Employment, Social Affairs and Inclusion. The aim of the study is to assess the legal and operational feasibility of introducing a European unemployment benefits scheme (EUBS), as well as the economic added value that such as scheme could bring. Some 18 different variants of an EUBS are analysed in terms of their design, legal and operational challenges and economic effects. The study presents the most comprehensive work on the subject to date. For each of these 18 variants, the impact on the individual member states, EMU and the EU has been examined. The 18 variants vary across a range of features, such as the replacement rate and caps used, the duration of unemployment benefits and the eligibility conditions that apply. If an EUBS were to be selected as one of the potential stabilisation mechanisms to explore further, this study provides evidence and insights on the barriers ahead and different ways to deal with them. Length: 114 pages Creation-Date: 2017-02 File-URL:https://www.ceps.eu/system/files/EUBS%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12230 Template-Type: ReDIF-Paper 1.0 Author-Name: E. Wood, Donna Title: A European Unemployment Benefits Scheme: Lessons from Canada Abstract: In many federal political systems, responsibility for unemployment has a multi-tiered architecture, with competence for key elements such as unemployment insurance, social assistance, and the public employment service, dispersed across different orders of government. This CEPS Working Document tells the story of the long transformation of unemployment insurance into a federal responsibility in Canada, and seeks to identify lessons from Canada�s experience that might help Europeans consider the potential of an EU-wide unemployment benefits scheme. Most European scholars look to the United States for transferable ideas; this author argues that Canada is a more salient comparator, given that it has similar institutional features to the EU, and has successfully managed a pan-Canadian unemployment insurance benefits scheme for over 75 years. Lessons for the EU from Canada include the place of a centrally managed unemployment insurance programme in a monetary union, and insights with respect to stabilisation, labour mobility, redistribution, social solidarity, legitimacy, and institutional moral hazard. Length: 24 pages Creation-Date: 2017-01 File-URL:https://www.ceps.eu/system/files/WD2017-02%20EUBS%20Lessons%20from%20Canada.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12187 Template-Type: ReDIF-Paper 1.0 Author-Name: Sondermann, David Title: Towards More Resilient Economies: The role of well-functioning economic structures Abstract: Economic resilience is essential to withstand adverse shocks and reduce the economic costs associated with them, argues the author of this CEPS Working Document. He proposes different measures of resilience and gauges how countries differ in their shock absorption capacity, while controlling for the quality of their economic structures. The paper finds robust evidence that sound labour and product markets, framework conditions and political institutions increase resilience to adverse shocks and reduce the incidence of crisis more generally. In the presence of a common shock, a country with weaker economic structures can, on average, suffer up to twice the output loss in a given year compared to a country with sound institutional parameters. Similarly, the likelihood of a severe economic crisis is reduced if a country exhibits flexible and adaptable institutions. The proposed measures can be used to establish a governance process for more resilient economic structures, as suggested for the euro area in the so-called Five Presidents� Report. JEL classification: E32, L50, J21. Keywords: economic resilience, common shocks, economic structures, institutions. Length: 25 pages Creation-Date: 2017-01 File-URL:https://www.ceps.eu/system/files/WD%202017_03%20DSondermann%20ResilientEconomies.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12173 Template-Type: ReDIF-Paper 1.0 Author-Name: Thirion, Gilles Title: European Fiscal Union: Economic rationale and design challenges Abstract: Proposals for different types of elements of a fiscal union have flourished in recent years, both from academic and policy circles. Since a fiscal union could take a constellation of various different forms, this paper first provides an analytical framework pinpointing the five key elements of a fiscal union. It takes stock of the existing features of economic and monetary union (EMU) that embed some form of fiscal union, and then critically analyses the main arguments for and against further fiscal integration. Finally, It surveys the key proposals for a fiscal capacity and different types of Eurobonds. Gilles Thirion is a Researcher at CEPS. This paper was prepared as a deliverable for the Horizon 2020 FIRSTRUN project on ��Fiscal Rules and Strategies under Externalities and Uncertainties� commissioned by the European Commission. Length: 38 pages Creation-Date: 2017-01 File-URL:https://www.ceps.eu/system/files/WD2017-01GT%20FiscalUnion.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12160 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: de Groen, Willem Pieter Title: A radical cure for Italy�s banking problems: A combination of good banks and soft bail-in Abstract: Italian banks are in a precarious situation, burdened by non-performing loans (NPLs) that are almost of the same magnitude as their capital and provisions. The gradual approach of dealing with NPLs via more provisioning and some sales has yielded little results. The political crisis now gives an opening to the authorities to take radical steps to put the Italian banking system on a sound footing. Policy Recommendations The balance sheets of Italian banks should be cleaned-up. The quickest way to achieve this would be to transfer non-performing exposures to an asset-management vehicle. The losses resulting from the transfer could be covered by capital, obtained via soft (conversion of debt instruments into equity) or hard bail-in (loss absorption). The hard bail-in of creditors would amount approximately to only �5 billion. The Italian government should clearly explain to its citizens the difference between �hard� and �soft� bail-in, in order to facilitate the acceptance of the inevitable. Only a hard bail-in leads to a total loss. In a soft bail-in, investors participate in the upside from a cleaned-up banking system. Government intervention is needed only to extent that one wants to protect some investors from losses for political reasons. The Italian banking sector does not have many foreign creditors. It is not necessary to enlist the involvement of the pan-euro-area institutions, such as the Single Resolution Fund and the European Stability Mechanism, which could in any event only cover part of the losses. Length: 9 pages Creation-Date: 2016-12 File-URL:https://www.ceps.eu/system/files/PB350%20NPLs%20in%20Italy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12107 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Osowski, Thomas Title: Measuring fiscal spillovers in EMU and beyond: A Global VAR approach Abstract: This paper empirically identifies and measures fiscal spillovers in the EU countries using a global vector autoregression (GVAR) model. Our aim is to look at the sign and the absolute values of fiscal spillovers in a country-wise perspective and at the time profile (impulse response) of the impacts of fiscal shocks. We find moderate spillover effects of fiscal policy shocks originating in Germany and France. However, there is significant variation regarding the magnitude of the spillovers among destination countries and country clusters. Furthermore, we find some evidence that spillovers generated by German or French fiscal spillovers are stronger for EMU than non-EMU countries in Europe. Length: 49 pages Creation-Date: 2016-12 File-URL:https://www.ceps.eu/system/files/WD428%20Fiscal%20spillover.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12109 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Fabo, Brian Author-Name: Lenaerts, Karolien Title: Demand for Digital Skills in the US Labour Market: The IT Skills Pyramid Abstract: This study assesses the information technology skill requirements in the 30 most frequently advertised occupations in the United States. On the basis of approximately two million job advertisements, the authors examine the IT skill requirements of each occupation, making the distinction between basic, intermediate and advanced IT skills. Length: 50 pages Creation-Date: 2016-12 File-URL:https://www.ceps.eu/system/files/SR154%20IT%20Skills%20Pyramid_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12055 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Barslund, Mikkel Author-Name: Busse, Matthias Author-Name: Nicoli, FrancescoTitle: Will a European unemployment benefits scheme affect labour mobility? Abstract: Labour mobility in the EU is comparatively low, despite major efforts from the European Institutions to support cross-border mobility. This study evaluates the potential implications of a European Unemployment Benefits Scheme (EUBS) for labour mobility in the EU. We find that the introduction of an EUBS, irrespective of whether it takes the form of a genuine scheme or an equivalent scheme, is unlikely to have a substantial impact on the magnitude of EU mobility. An EUBS might be introduced alongside certain features designed to stimulate labour mobility, such as an extension of exportability of unemployment benefits or closer cooperation with national employment agencies. While both will positively impact mobility, its effect is likely to be marginal in light of the low uptake of exportability and the lagged responsiveness of mobility to shocks. Overall we assert that an EUBS may marginally facilitate labour mobility if the system is geared to advance this objective, but not more. Length: 16 pages Creation-Date: 2016-12 File-URL:https://www.ceps.eu/system/files/SR152%20EUBS%20and%20Labour%20Mobility.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12039 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Can Germany save Italy? Abstract: Contrary to the popular argument often heard in Italy that the country's economic woes are attributable to the euro and its �Teutonic� rules, Daniel Gros insists that the fate of the country in reality resides ultimately in its own hands. Length: 4 pages Creation-Date: 2016-12 File-URL:https://www.ceps.eu/system/files/Can%20Germany%20save%20Italy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12033 Template-Type: ReDIF-Paper 1.0 Author-Name: Valiante, Diego Title: Harmonising Insolvency Laws in the Euro Area: Rationale, stocktaking and challenges Abstract: There are four distinct areas where harmonising national insolvency frameworks could improve the functioning of the single market and the stability of the euro area. Early restructuring of businesses, bank resolution, cross-border insolvency and management of non-performing loans rely on common features of local insolvency frameworks, which can affect their legal certainty and operation. To promote a more entrepreneurial spirit, a pan-European framework for the early restructuring of businesses could offer a true second chance for entrepreneurs. To benefit from a capital markets union, insolvency frameworks would also need to remove sources of cost unpredictability in cross-border insolvency procedures, which are often hidden in national insolvency laws or are not sufficiently dealt with in the current EU framework. Moreover, measures to harmonise insolvency laws could have positive impacts on the banking union, and particularly those harmonising the hierarchies of claims could strengthen the functioning of the resolution mechanism. The diffusion of best practices in credit recovery procedures could help to improve the management of non-performing loans by fostering liquidity in secondary markets. In addition, this report contributes to defining areas for further action, such as the opening and governance of proceedings and reliefs. Length: 40 pages Creation-Date: 2016-12 File-URL:https://www.ceps.eu/system/files/SR_DValiante%20Harmonisation%20of%20Insolvency_1.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12024 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Dubova, Irina Author-Name: Osowski, Thomas Title: Policy Uncertainty and International Financial Markets: The case of Brexit Abstract: By analysing this impact of the uncertainty caused by Brexit on both the UK and international financial markets, this team of distinguished economists aims to gain some insight into market expectations about the magnitude of the economic impact beyond the UK and which other countries might be affected. This study assesses the impact of the uncertainty caused by Brexit on both the UK and international financial markets, for the first and second statistical moments (i.e. on the changes and standard deviations of the respective variables). Since financial markets are by their nature highly interlinked, the uncertainty engendered by Brexit is also likely to have an impact on financial markets in several other countries. The authors first use both the Diebold and Yilmaz (2012) and the Hafner and Herwartz (2008) method to estimate the time-varying interactions between UK policy uncertainty, which is largely is attributed to uncertainty about Brexit, and UK financial market volatilities (second statistical moment) to try and identify the direction of causality among them. Second, they use two other measures of the perceived probability of Brexit before the referendum, namely daily data released by Betfair and results of polls published by Bloomberg. Based on these datasets, and using both panel and single-country SUR (seemingly unrelated regressions) estimation methods, the authors analyse the Brexit effect on levels of stock returns, sovereign credit default swaps (CDS), 10-year interest rates in 19 predominantly European countries, and those of the British pound and the euro (first statistical moment). They show that Brexit-induced policy uncertainty will continue to cause instability in key financial markets and has the potential to damage the real economy in both the UK and other European countries, even in the medium run. The main losers outside the UK are the �GIIPS� economies: Greece, Ireland, Italy, Portugal and Spain. Length: 39 pages Creation-Date: 2016-11 File-URL:https://www.ceps.eu/system/files/WD%20429%20AB%20et%20al%20Brexit%20Applied%20Economics.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:12021 Template-Type: ReDIF-Paper 1.0 Author-Name: N��ez Ferrer, Jorge Title: The Multiannual Financial Framework post-2020: Balancing political ambition and realism Abstract: The EU budget is suffering not simply from a technical crisis, but rather from a deep crisis of trust on the part of EU citizens. Public support for the mainstream political class in general and the EU institutions in particular is rapidly waning. Restoring this trust is the single-most important task in countering rising populism and the forces intent on dismantling the European Union. This paper argues that the EU budget offers one of the most visible tools available to express the principles of the European Union in concrete action; its improvement is therefore essential for building trust. It aims to offer food for thought to promote reflection on the future of the budget, in view of the challenges facing the EU. Length: 9 pages Creation-Date: 2016-11 File-URL:https://www.ceps.eu/system/files/PI%202016-02%20JNF%20EU%20Budget.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11999 Template-Type: ReDIF-Paper 1.0 Author-Name: Cipriani, Gabriele Title: Reforming the EU�s Budget Revenue: The case for a visible VAT-based resource Abstract: This paper finds that the long-awaited reform of the EU�s revenue arrangements can be pursued within the current legal framework, thus keeping member states� fiscal sovereignty unaffected. In order to have a chance of approval by national parliaments, the author recommends that reform options should concentrate on known grounds and operational solutions. These include providing a reliable estimate of potential revenue and expected burden sharing as compared with the current arrangements. A key issue is whether the EU budget should be financed by a visible fiscal source. Making citizens directly liable for funding the EU budget would represent a major political decision. This study argues that the value added tax provides an operational solution to ensure the visibility of EU contributions without increasing the overall tax burden. Since EU revenue and expenditure are set as a comprehensive package, there is also a need to consider the extent to which the current spending programmes provide the best value and achieve objectives of common interest with demonstrable results. Such assessment should inspire the proposal for the multiannual financial framework after 2020, to be presented by the Commission in about a year�s time. Length: 26 pages Creation-Date: 2016-11 File-URL: https://www.ceps.eu/system/files/SR150%20GC%20EU%20Budget%20Financing.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11979 Template-Type: ReDIF-Paper 1.0 Author-Name: Grauwe, Paul De Title: How far should we push globalisation? Abstract: The discussions about CETA, the Comprehensive Economic and Trade Agreement between Canada and the European Union, have focused almost exclusively on two questions. They are important but certainly not the most fundamental ones. In this article I first discuss these two questions and then turn to the more fundamental question of how far we should push globalisation. The first question at the centre of the debate around CETA concerns the way national regulations on environment, safety and health are made consistent with each other. To make trade possible in a world where trading partners have different rules about the environment, health and safety, a procedure must be followed to make these rules mutually acceptable. When, for example, two countries wish to trade in poultry, they must agree on what constitutes a healthy chicken. The attitude of many opponents of CETA in Europe is that European regulation is superior to the Canadian (or American in the context of TTIP), and that as a result Canadian and American chicken are suspect, if not poisonous. The implicit hypothesis of this attitude is that European governments care more about the health and safety of their citizens than the Canadian and American governments do about their citizens ... Length: 3 pages Creation-Date: 2016-11 File-URL:https://www.ceps.eu/system/files/PDG%20How%20far%20should%20we%20push%20globalisation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11942 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Author-Name: Perissich, Riccardo Title: The Brexit Negotiations: An Italian Perspective Abstract: This paper attempts to map out Italy�s interests in the forthcoming Brexit negotiations, based on a number of economic and political hypotheses regarding what the UK�s opening position might be. In recent years, Italy has become a country of emigration again, with qualified young people seeking better paid and more rewarding jobs elsewhere in the EU. For this reason, Italy will mount a strong defence of existing internal market rules as an inseparable set of principles. This is not to say that Italy will not be helpful in the forthcoming Brexit negotiations, but there will be strict limits to its flexibility. Concessions to the UK�s demands for restrictions on labour mobility for EU citizens are likely to be opposed. An earlier version of this paper appears as a chapter in a VOX e-book entitled: What To Do With the UK? EU Perspectives on Brexit edited by Charles Wyplosz, and is published here with the kind permission of VOX. Length: 36 pages Creation-Date: 2016-10 File-URL:https://www.ceps.eu/system/files/S%20Micossi%20Italian%20view%20of%20Brexit%20CEPS%20Commentary.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11922 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Thirty Years of the Single European Market Abstract: Over the past thirty years, the Single European Market has been the core business of the European Union, and enormous progress has been achieved in both �widening� the economic activities covered by EU legislation and �deepening� the acquis to overcome emerging gaps in integration in areas already covered by legislation. And yet, empirical evidence indicates that market integration has stalled on many fronts and, more importantly, that the expected economic benefits of integration in terms of higher growth of incomes, jobs, and productivity have fallen short of expectations, notably in the long-established EU-15 member states. The situation has not improved since the introduction of the euro. This paper reviews the main developments in Single European Market (SEM) legislation and regulatory activities over the past three decades; it summarises the results of the SEM programme in market integration, highlighting areas where gaps appear to be more evident; and discusses the impact of economic integration within the SEM, including aspects that play an important role in feeding popular resistance to integration. Keywords: Single European Market, regulatory models, free movement, goods, persons, capital, services. This report was first published by the College of Europe as Bruges European Policy Briefing No.41/2016, and is republished here with the kind permission of the College.The views expressed are attributable only to the author and not to CEPS or any other institution with which he is associated. Length: 36 pages Creation-Date: 2016-10 File-URL:https://www.ceps.eu/system/files/SM%2030%20Years%20of%20the%20%20Single%20European%20Market%20CEPS%20SR%20148.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11919 Template-Type: ReDIF-Paper 1.0 Author-Name: Huertas, Thomas Title: How to deal with the Resolution of Financial Market Infrastructures Abstract: Financial market infrastructures (FMIs) are the backbone of the financial system, enabling market participants to transact with one another in an efficient manner. If an FMI were to cease operation, it could put a stop to payments and/or securities and derivatives transactions, which in turn could destabilise financial markets and possibly the economy at large. Given their systemic importance, policy-makers have recently turned their attention to FMIs and particularly to the question of how to respond when trouble arises in central counterparties (CCPs). The European Commission is expected to release a proposal on this subject very soon, but market participants are concerned that this proposal will further increase the requirements already set out in the rules on market infrastructures contained in EMIR. This new interim report by the CEPS Task Force on Implementing Financial Sector Resolution welcomes international efforts to devise guidelines to ensure that FMIs are resolvable, i.e. acknowledging that any FMI can fail, but if an FMI fails, critical operations will continue to be performed. The report argues that European rules in this area should focus on facilitating coordination between supervisors and encouraging restraint on the part of authorities from taking precipitous action. At the same time, however, it calls on supervisors to exercise strong vigilance to identify and remove obstacles to the resolution of an FMI if and when necessary. The latter should also ensure that the loss allocation (�waterfall�) process, especially in a CCP, can be completed, if necessary, over a �resolution weekend�, and that the default fund can be replenished. According to the Task Force Chairman, Thomas Huertas: "Resolution of one FMI could impact all G-SIBs (global systemically important banks), other FMIs and the markets at large. Consequently, coordination is critical, not only within the EU but also between the EU and third countries, especially the United States." The Task Force put forward three other recommendations for the resolution process of FMIs. First, FMIs should provide adequate time to a G-SIB in resolution to allow it to meet its obligations towards them. Second, and at the same time, FMIs should be given sufficient time for recovery. And finally, they should be prepared for potential resolution in a worst-case scenario. The report concludes: "Taken together, these recommendations would go a very long way towards ensuring that FMIs could continue to operate, even under extremely adverse circumstances. That in turn would make a significant contribution to financial stability." This timely and authoritative report is the result of deliberations among the members in a CEPS Task Force that examined the current rules on resolution of banks, insurers and financial market infrastructures. The group is composed of financial sector representatives, experts and officials. Length: 35 pages Creation-Date: 2016-10 File-URL:https://www.ceps.eu/system/files/FINAL%202nd%20interim%20report%20Bank%20Resolution%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11907 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The Globalisation Litany Abstract: One refrain heard over the last few decades has been that the dominant trend is �globalisation�. The world economy was integrating as trade increased year after year more than overall income. But over the last few years this trend has stopped. Trade growth has dramatically slowed and is no longer much higher than income growth, which itself has slowed down. This slowdown in trade is seen as dangerous for the proponents of globalisation. All the major international institutions have recently published studies of the slowdown in trade, almost invariably ending with calls for action to reverse the phenomenon to get globalisation back on track. Daniel Gros is Director of CEPS. An earlier version of this Commentary was published by Project Syndicate on 7 October 2016, and syndicated to newspapers and journals worldwide. It is republished here with the kind permission of Project Syndicate. Length: 4 pages Creation-Date: 2016-10 File-URL:https://www.ceps.eu/system/files/DG%20Cost%20of%20globalisation%20hype.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11894 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Ultra-low or Negative Yields on Euro-Area Long-term Bonds: Causes and Implications for Monetary Policy Abstract: The importance of monetary policy for the current ultra-low interest rates is often over-estimated. As emphasised by ECB President Draghi himself, monetary policy cannot determine long-term rates directly, and its influence on long-term real rates is even more limited and indirect. Moreover, long-term bond yields have fallen to unprecedented low levels throughout developed countries. The influence of any single central bank on bond yields in its currency area must be quite limited if global capital markets are integrated. The importance of the ECB�s policy in driving down rates in the euro area is widely assumed to be substantial. But even the ECB does not attribute more than a one percentage point decline in rates to QE. The author of this study believes that the impact of QE has been much smaller, due to the state of global markets. It is widely accepted that a sudden reversal of rates to �normal� would pose a threat to financial stability, but few believe that this is likely to materialise any time soon. Length: 19 pages Creation-Date: 2016-09 File-URL:https://www.ceps.eu/system/files/D%20Gros%20on%20Ultra-low%20or%20Negative%20Yields%20on%20Euro-Area%20Long-term%20Bonds%20-%20CEPS%20WD.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11877 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Thirion, Gilles Title: Assessing the Euro Area�s Shock-Absorption Capacity - Risk sharing, consumption smoothing and fiscal policyAbstract: Based on a combination of quantitative analysis and a qualitative forward-looking approach, this paper assesses both the state of play and the future capacity of the EMU to respond and adapt to asymmetric shocks. The objective is to provide a basis upon which to gauge the potential value added of a European Unemployment Benefit Scheme (EUBS), against the background of the recent plans for the Banking Union, the Capital Markets Union and the reform of the fiscal governance framework. We find that the capacity of the system to deal with asymmetric shocks (and in principle reduce their occurrence) is likely to increase due to these changes; but it will remain limited in the medium term and certainly lower than in the US. We also argue that given the broad pro-cyclicality of fiscal policy, the idea that national policies alone can deal alone with asymmetric shocks is not realistic. Lastly, we maintain that an ex-ante fiscal insurance mechanism can provide some degree of income smoothing and is likely to catalyse market insurance. Fiscal and market insurance can reduce the role of credit and borrowing, which until now has been the main channel for shock absorption in the euro area but also the least effective in times of crisis. We conclude that, from a macroeconomic point of view, an EUBS is a useful tool to improve shock absorption capacity and is not mutually exclusive with market risk sharing. This report was prepared in the context of a research project on �The Feasibility and Added Value of a European Unemployment Benefits Scheme�, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is published by CEPS with the kind permission of the European Commission. Length: 41 pages Creation-Date: 2016-09 File-URL:https://www.ceps.eu/system/files/SR146%20EUBS%20Assessing%20the%20euro%20area%E2%80%99s%20shock-absorption%20capacity.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11875 Template-Type: ReDIF-Paper 1.0 Author-Name: Karel Lannoo Title: EU Financial Market Access after Brexit Abstract: Karel Lannoo has contributed a policy analysis to the Forum section of the latest issue of Intereconomics, which is devoted to the broad question of �Post-Brexit European Union�. It can be downloaded, along with other contributions on this question, at https://www.ceps.eu/system/files/IEForum52016_3.pdf Lannoo opens his contribution by observing that it is understandable why the UK attaches immense importance to retaining access to the EU�s single market, given that financial services account for about 8% of the country�s GDP. He warns, however, that putting a mutually acceptable regime in place will take years of negotiations, and the final agreement will clearly allow much less access than UK-licensed firms enjoy today. He further finds that the �equivalence� assessment � the basic tool used under current EU financial services legislation to recognise that a third country�s legal, regulatory and/or supervisory regime is equivalent to the corresponding EU framework � offers a fairly bleak basis on which the City might continue to thrive as a global financial centre in Europe. Length: 7 pages Creation-Date: 2016-09 File-URL:https://www.ceps.eu/system/files/Brexit%20and%20the%20financial%20sector_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11876 Template-Type: ReDIF-Paper 1.0 Author-Name: Coucheir, Michael Author-Name: Strban, Grega Author-Name: Hauben, Harald Title: The Legal and Operational Feasibility of a European Unemployment Benefits Scheme at the National Level Abstract: The objective of this paper is to investigate the legal and operational feasibility of a European unemployment benefits scheme (EUBS) as a specific form of supranational automatic stabiliser. This investigation forms part of a broader multidisciplinary analysis of the EUBS, encompassing inter alia a study of its compatibility with the EU Treaties and, using macro- and micro-simulations, the value added of the EUBS in terms of stabilisation and social outcomes. Through an examination of how the EUBS would articulate with national legal and administrative frameworks in the EU member states, this paper seeks to identify the main legal and operational barriers to the introduction of such a scheme. The paper draws on input from social security experts in all member states, which was collected by means of a questionnaire. Focusing on the �genuine� EUBS scheme, the paper identifies several challenges associated with its introduction. These are largely the result of three characteristics of national unemployment benefit regulations, i.e. their complexity, their diversity and their interrelation with broader areas of national socio-economic regulation. The research shows that introducing a genuine EUBS would require substantial legal reforms at the national level. Moreover, its operation would inevitably entail a degree of additional administrative effort and complexity. That being said, it is notable that some countries would encounter more challenges � whether of a legal, operational or political nature � than others. Furthermore, it is apparent that the definition of EUBS parameters has a significant impact on the feasibility of the scheme. This report was prepared in the context of a research project on �The Feasibility and Added Value of a European Unemployment Benefits Scheme�, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is re-published by CEPS with the kind permission of the European Commission. Length: 99 pages Creation-Date: 2016-09 File-URL:https://www.ceps.eu/system/files/SR145%20on%20EUBS%20Legal%20%26%20Operational%20Feasibility%20by%20Coucheir%20et%20al.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11850 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The Stabilisation Properties of a European Unemployment Benefit Scheme Abstract: In this contribution, Daniel Gros focuses on the (macro-economic) stabilisation properties of a potential European unemployment benefits scheme (EUBS). He notes that any such scheme would involve many other aspects, both political and economic, but it could be argued that an EUBS, especially one that pays benefits directly to individuals, would constitute a powerful illustration of the benefits of �Europe�. It might also be argued that the creation of an EUBS could foster the upward convergence of unemployment systems (although this is not the subject of the paper). Length: 7 pages Creation-Date: 2016-09 File-URL:https://www.ceps.eu/system/files/CEPS%20Commentary%20D%20Gros%20EUBS_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11826 Template-Type: ReDIF-Paper 1.0 Author-Name: Ferrer, Jorge N��ez Author-Name: Rinaldi, David Title: The Impact of Brexit on the EU Budget: A non-catastrophic event Abstract: Given that the UK is one of the largest economies in the Europe Union � with per capita income above the EU average and therefore a net contributor � there have been concerns that the country�s decision to leave the EU could strongly impact the EU budget. On closer scrutiny, however, this paper finds that the impact will be rather small due to the effects of the UK rebate and to the potential contribution the UK would be obliged to make as a condition to obtain access to the internal market. If the UK remains outside the internal market, tariff revenues would make up a considerable share of the �net loss�. On balance, the authors conclude that the financial savings for the UK would be negligible and the impact on member states would be manageable. They also note that the impact on the classification of regions in EU Cohesion Policy is projected to be minimal and the European Fund for Strategic Investments is not affected by changes in membership. Length: 8 pages Creation-Date: 2016-09 File-URL:https://www.ceps.eu/system/files/Impact%20of%20Brexit%20on%20EU%20budget.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11814 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Akg�c, Mehtap Author-Name: Fabo, Brian Author-Name: Lenaerts, Karolien Title: Occupations Observatory - Methodological Note Abstract: As a result of technological progress and economic change, many new occupations have emerged in the labour market, while others have become redundant and disappeared. Along with these new and emerging occupations, new skills have been introduced that can be developed through formal education, on-the-job training or learning-by-doing (or in some other way). This paper presents the Occupations Observatory, which we have created with the aim of providing up-to-date information on these changes in the labour market � reflected in the rise of new occupations and their corresponding skill changes � to policy-makers, researchers, educational institutes, job seekers and many other stakeholders (and how occupational dynamics feed into the occupational classification schemes). We focus not only on new occupations that did not exist before but also on new occupations in terms of recognition, awareness and importance. This paper was written within the framework of the InGRID project. Funded by the European Union�s 7th Framework Programme for Research, the InGRID project (Inclusive Growth Research Infrastructure Diffusion) involves 17 European partners, including CEPS. It aims to integrate and innovate existing, but distributed European social sciences research infrastructures on �Poverty and Living Conditions� and �Working Conditions and Vulnerability� by providing transnational data access, organising mutual knowledge exchange activities and improving methods and tools for comparative research. Length: 99 pages Creation-Date: 2016-08 File-URL:https://www.ceps.eu/system/files/SR%20No%20144%20Methodological_note_InGRiD_formatted.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11784 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Title: The EBA EU-wide Stress Test 2016: Deciphering the black box Abstract: Key Points The results of the European Banking Authority�s (EBA) stress test, administered to banks throughout the EU and published at the end of July 2016, revealed some large differences across banks. Our analysis of the results for the 51 banking groups suggests that not economic growth but rather the exposure to non-performing loans (NPLs) and to governments and corporates seems to be the main drivers behind the impact of the adverse scenario. This implies that the stress tests are primarily responding to the risks that have already materialised. They are therefore useful for understanding the implications of the currently identified risks, but they do not necessarily give insights into the fundamental soundness of the European banking sector. Policy Recommendation If well-executed, the stress test can be a useful tool for acquiring a better understanding of the implications of the current issues facing European banks. It does not, however, give insights into the fundamental soundness of the European banking sector, which is widely considered to be one of the main objectives of the stress test. To obtain such insights, a more comprehensive exercise with a longer horizon (say, five or ten years instead of three) and multiple scenarios would be recommended. Length: 10 pages Creation-Date: 2016-08 File-URL:https://www.ceps.eu/system/files/PB346%20WPdG%20Bank%20Stress%20Test.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11768 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Title: A closer look at Banca Monte dei Paschi: Living on the edge Abstract: Key Points The Italian bank Monte dei Paschi di Siena (MPS) is expected to fail the 2016 EU-wide stress test conducted by the European Banking Authority (EBA), whose results are due to be presented Friday, 29 July 2016. When taking a closer look at the bank, it becomes apparent that the bank has so far failed or nearly failed all the EU-wide supervisory exercises that have been undertaken in the past six years. Almost every time the bank has managed to raise just enough capital, including public funds already contributed twice by the Italian government, to close the capital shortfalls or meet the threshold. This allowed the bank to live on the edge, which is costly to society. Supervisory, resolution and competition authorities should therefore discourage banks from following in MPS� path of doing the minimum required, by imposing extensive recapitalisation requirements with a proper resolution. Policy Recommendations � Supervisors should subject banks that perform poorly in several consecutive supervisory exercises to additional scrutiny. � The stress test is unlikely to be very helpful in the case of MPS since it looks at the impact of an adverse scenario on earnings, and not the true value of existing non-performing loans, which constitute the real issue. Accordingly, the supervisor should use its discretionary powers to undertake a detailed assessment to determine the current market value of the bank�s loan book. � Bail-in of retail investors in subordinated debt also seems feasible since most of the instruments are held by the wealthiest families. Moreover, in the event that the instruments were mis-sold, the government could compensate them. The conduct-of-business supervisors should closely follow the sales practices of bail-inable instruments to avoid further mis-selling and ensure that banks now inform their clients, take the risk-profile into account and diversify their portfolios. � The supervisory, resolution and competition authorities should impose the standard procedure as foreseen in the resolution scheme with bail-in to cover the losses and arrange the recapitalisation. If the resolution authority faces some obstacles in the execution of the bail-in, it could use its discretionary powers to prioritise certain creditors. � The authorities should use their experience to correct the weaknesses in the resolution framework (e.g. cross-holding of bail-in instruments, exclusion of politically sensitive exposures), improve ongoing work (e.g. recovery and resolution plans, setting MREL-levels) and prepare for future resolution cases (e.g. sufficiently high recapitalisation). Length:10 pages Creation-Date: 2016-07 File-URL:https://www.ceps.eu/system/files/MPSLivingontheEdge.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11762 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Gros, Daniel Title: Negative Rates and Seigniorage: Turning the central bank business model upside down? The special case of the ECB Abstract: Adjustment to an external imbalance is more difficult within a monetary union if wages are sticky. Periods of high unemployment are usually necessary to achieve the required real depreciation (internal devaluation). Gradual adjustment is usually recommended to distribute the output and employment cost over time. This paper takes into account that gradual adjustment also has a cost in terms of higher current account deficits and thus a higher debt, and ultimately higher debt-service costs. We calculate the optimal path/speed of price and wage adjustment in terms of deeper parameters like the slope of the Phillips curve, the degree of openness, etc. Gradual adjustment is not always optimal. Length:22 pages Creation-Date: 2016-07 File-URL:https://www.ceps.eu/system/files/WD%20424%20Optimal%20Adjustment%20Paths%20ABandDG.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11753 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Negative Rates and Seigniorage: Turning the central bank business model upside down? The special case of the ECB Abstract: Negative rates have invalidated the normal business model of central banks, which consists of issuing zero-interest bearing cash as liabilities and earning a return on their assets (the resulting profits are called �seigniorage�). But many central banks are now earning a negative rate on their assets. Seigniorage, in fact, might now become negative in the euro area and in Japan. Bond purchasing programmes (called usually QE for quantitative easing) offer central banks at least temporary profit opportunities since they can issue liabilities at lower rates than the long-term bonds they acquire. The resulting profits should be regarded in the same way as those of investment banks. For the time being, central banks are making large profits on their investment banking activities, but little in terms of traditional seigniorage. The QE programme of the European Central Bank does not increase its seigniorage revenues, because 80% of the euro area�s sovereign bond purchase programme is done by the national central banks on their own accounts. The policy implication of this assessment is that the seigniorage income of the ECB will be much smaller than many assume and one should thus not count on it as a source for any euro-area projects. Length: 7 pages Creation-Date: 2016-07 File-URL:https://www.ceps.eu/system/files/PB344%20DG%20Seigniorage.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11754 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Busse, Matthias Title: Labour Mobility in the EU: Addressing challenges and ensuring �fair mobility� Abstract: Labour mobility creates economic benefits for the EU at large and the mobile workforce. The same can be said for the special case of posted workers � a form of labour mobility that is crucial to the functioning of the internal market for services. Moreover, the number of posted workers is set to grow if the single market is further deepened. However, regulating the cross-border posting of workers � and ensuring a notion of �fair mobility� � also epitomises the inherent difficulties in squaring the differences of 28 different sets of labour market regimes and regulations with the freedom to provide services in situ. In addition, the regulation has to work effectively in countries with large differences in income levels and social policies. This paper reviews the state of play with regard to posted workers and spell out the trade-offs involved to be kept in mind when considering the targeted revision of the posted workers Directive. Length: 20 pages Creation-Date: 2016-06 File-URL:https://www.ceps.eu/system/files/SR139%20MB%20and%20MB%20LabourMobility.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11705 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Busse, Matthias Title: How mobile is tech talent? A case study of IT professionals based on data from LinkedIn Abstract: Skills, labour mobility and Information technology (IT) all rank high on the European policy agenda and feature among the key priorities of the European Commission. Better skills promote employment and growth. Enhanced labour mobility expands employment and growth opportunities by fostering more efficient allocation of resources within the EU and by attracting and retaining talented individuals. And IT expertise enhances employment and growth prospects, since IT is a high-growth sector in its own right, the largest recipient of FDI inflows and an important driver of overall productivity increases. This report aims to produce new insights into how IT professionals move from one region to another within Europe and beyond, using the sizeable collection of data amassed by the business networking site LinkedIn, aggregated by region and provided to us in anonymised and relative terms The study looks in detail at both the quantity and quality of the global interchange of IT professionals and investigates the behaviour of recent graduates and asks to what extent are they more likely to move � and where to. The key findings can be summarised as follows: Intra-EU flows of IT professionals follow a general pattern of mobility: from east and south to west and north. Net flows are substantial and more so for recent graduates. The EU is losing tech skills to the US � especially those possessed by new graduates. The EU is also losing on quality � the best educated are more likely to leave. This is also the case for intra-EU flows. Big data sources offer great potential to inform the policy-making process � but obstacles remain on the path to achieving this potential. Based on these findings, the authors call for the following policy measures: Ease access to visas for students who graduate from an EU university (automatic visa for, say, 6-9 months upon graduation across the EU). This would provide time for non-EU citizens to find a job after graduation. Reform of the Blue Card Directive to allow non-EU citizens to view the EU as one common labour market. Improve the standing and reputation of European universities in general to attract talent early on. Pay attention to persistent net flows of talented people within the EU. Further experiment with the use of big data sources for monitoring mobility trends, focusing on skills and return mobility. Length: 40 pages Creation-Date: 2016-05 File-URL:https://www.ceps.eu/system/files/CEPS%20-%20LINKEDIN%20study%20FINAL.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11692 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Author-Name: Maselli, Ilaria Title: The Impact of the Collaborative Economy on the Labour Market Abstract: The digitalisation of work is creating new ways of intermediating work, with for example platforms intermediating work between individuals online. These so-called online collaborative platforms have the potential to fundamentally change the labour market, but for the moment, with an estimated 100,000 active workers or 0.05% of total employees in the EU, they do seem to have a large impact on the offline/traditional labour market or the create/destroy impetus. This paper analyses the direct and indirect impact of the collaborative economy on the labour market. The findings, based on a collection of empirical studies, suggest that most workers do not earn their main income through online platforms and they obtain earnings from different types of platforms. Earnings from physical/local services are, in general, substantially higher than virtual services that can potentially be delivered globally. The paper also assesses the conditions, number of hours worked and employment status, compared to the offline labour market, and finds shows large differences across types of workers, platforms, and countries. The emergence of online collaborative platforms poses some challenges and opportunities for policy-makers. On the one hand, they may be challenged to ensure minimum remuneration, fair evaluation, tax declaration and social protection, and reduction of the administrative burden. On the other hand, the new technologies may provide opportunities to (partially) liberate some professional services and activate specific groups at a distance away from the labour market. This paper was commissioned by the European Commission as input into its European Agenda for the Collaborative Economy. This Agenda will take account of the direct and indirect impact of the collaborative economy on the labour market. Length: 35 pages Creation-Date: 2016-06 File-URL:https://www.ceps.eu/system/files/SR138%20CollaborativeEconomy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11625 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Title: Can Spain break the curse of the periphery? The upcoming Spanish elections and what it means for Europe Abstract: In this CEPS Essay, Miroslav Beblav� takes stock of the changing situation in Spanish politics one month before the early elections, which are expected to take place on June 26th in the hope that a new government can finally be formed. He finds that in both in politics and in economics, Spain resides at an immensely important inflection point situated between the European periphery and its core. Length: 8 pages Creation-Date: 2016-05 File-URL:https://www.ceps.eu/system/files/MB%20Can%20Spain%20break%20the%20curse%20of%20the%20periphery.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11589 Template-Type: ReDIF-Paper 1.0 Author-Name: den Hertog, Leonhard Title: EU Budgetary Responses to the �Refugee Crisis�: Reconfiguring the Funding Landscape Abstract: This paper analyses the EU budgetary responses to the �refugee crisis� in Europe. The European Commission has proposed several changes to the EU budget as well as the establishment of new funding instruments. The paper explores what the announced funding consists of, what role it plays in policy-making and what issues it generates. Throughout these budgetary responses the search for flexibility has been dominant, motivated by the need to respond more swiftly to humanitarian and operational needs. In addition, the paper argues that beyond implementation or management, the role of funding is also symbolic and communicative. In light of limited competences that are difficult to exercise, funding represents a powerful tool enabling the Commission to shape policy-making in times of crisis. At the same time, the dominant search for flexibility also challenges established funding rules and procedures. It has furthermore led to reduced space for democratic scrutiny by the European Parliament. More profoundly, EU funding for cooperation with third countries to prevent the inflow of refugees and asylum seekers has monetised questions over the responsibility for these individuals. As the EU�Turkey agreement shows, this has created a self-imposed dependence on third countries, with the risk of potentially insatiable demands for EU funding. This paper questions the proportionality and rule of law compliance of allocating funding for the implementation of this agreement. Moreover, it proposes that the Commission take steps to practically safeguard the humanitarian aid principles in the management structures of the new funding instruments, and it stresses the need for more scrutiny of the reconfigured funding landscape by the European Parliament and the European Court of Auditors. Length: 22 pages Creation-Date: 2016-05 File-URL:https://www.ceps.eu/system/files/LSE%20No%2093%20LdH%20on%20EU%20Budgetary%20Responses%20to%20the%20Refugee%20Crisis.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11582 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Is globalisation really fuelling populism? Abstract: On both sides of the Atlantic, populism on the left and the right is on the rise. Its most visible standard-bearer in the United States is Donald Trump, the Republican Party�s presumptive presidential nominee. In Europe, there are many strands � from Spain�s leftist Podemos party to France�s right-wing National Front � but all share the same opposition to centrist parties and to the establishment in general. What accounts for voters� growing revolt against the status quo? Length: 3 pages Creation-Date: 2016-05 File-URL:https://www.ceps.eu/system/files/DG_Globalisation%20and%20Populism_PDF.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11557 Template-Type: ReDIF-Paper 1.0 Author-Name: Genoese, Fabio Author-Name: Drabik, Eleanor Author-Name: Egenhofer, Christian Title: The EU power sector needs long-term price signals Abstract: By 2030, half of the EU�s electricity demand will be covered by renewables and will need to be accompanied by flexible conventional back-up resources. Due to the high upfront costs inherent to renewables and the progressively lower running times associated with back-up capacity, the cost of capital will have a proportionately greater impact on total costs than today. This report examines how electricity markets can be designed to provide long-term price signals, thereby reducing the cost of capital for these technologies and allowing for a more efficient transition. It finds that current market arrangements are unable to provide long-term price signals. To address this issue, we argue that a system for long-term contracts with a regulated counterparty could be implemented. A centralised system where capacity or energy or a combination of both is contracted, could be introduced for conventional and renewable capacity, based on a regional adequacy assessment and with a competitive bidding system in place to ensure cost-effectiveness. Member states face a number of legislative barriers while implementing these types of systems, however, which could be reduced by merging legislation and setting EU framework rules for the design of these contractual agreements. Length: 16 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/SR135%20LongTermPriceSignals_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11539 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: Flexibility versus Stability: A difficult trade-off in the eurozone Abstract: Optimal currency area (OCA) theory has been influential in pushing eurozone countries towards structural reforms to make product and labour markets more flexible. The underlying assumption of the OCA prescription for structural reform is that asymmetric shocks are permanent. However, when shocks are temporary it does not follow that more flexibility is the answer. When shocks are the result of business-cycle movements, the way to deal with them is by stabilisation efforts. This paper provides empirical evidence that suggests that the biggest shocks in the eurozone were the result of business-cycle movements. These were relatively well synchronised, except for their amplitude. We argue that efforts to stabilise business cycles should be strengthened relative to the efforts that have been made to impose structural reforms, with consideration given to the implications for the governance of the eurozone. Length: 34 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/WD422%20De%20Grauwe%20and%20Ji%20Flexibility%20versus%20Stability_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11530 Template-Type: ReDIF-Paper 1.0 Author-Name: Vandenbroucke, Frank Author-Name: Luigjes, Chris Title: Institutional Moral Hazard in the Multi-tiered Regulation of Unemployment and Social Assistance Benefits Abstract: This paper studies eight countries in which the regulation of unemployment benefits and related benefits and the concomitant activation of unemployed individuals has a multi-tiered architecture. It assesses their experiences and tries to understand possible problems of �institutional moral hazard� that may emerge in the context of a hypothetical European Unemployment Benefit Scheme. This paper has been prepared at the request of the European Commission as Task 1A of the research project on the Feasibility and Added Value of a European Unemployment Benefit Scheme. The principal authors are Frank Vandenbroucke (University of Amsterdam, the Netherlands) and Chris Luigjes (University of Amsterdam, the Netherlands). Donna Wood (University of Victoria, Canada) is co-author for the Canadian case study and country fiche. Kim Lievens (KULeuven) is co-author of the Belgian case study and country fiche. Length: 89 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/SR%20No%20137%20Moral%20hazard%20in%20multi-tiered%20reg%20of%20UB.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11526 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Author-Name: Bruzzone, Ginevra Author-Name: Cassella, Miriam Title: Fine-tuning the use of bail-in to promote a stronger EU financial system Abstract: This paper discusses the application of the new European rules for burden-sharing and bail-in in the banking sector, in view of their ability to accommodate broader policy goals of aggregate financial stability. It finds that the Treaty principles and the new discipline of state aid and the restructuring of banks provide a solid framework for combating moral hazard and removing incentives that encourage excessive risk-taking by bankers. However, the application of the new rules may have become excessively attentive to the case-by-case evaluation of individual institutions, while perhaps losing sight of the aggregate policy needs of the banking system. Indeed, in this first phase of the banking union, while large segments of the EU banking sector still require a substantial restructuring and recapitalisation, the market may not be able to provide all the needed resources in the current environment of depressed profitability and low growth. Thus, a systemic market failure may be making the problem impossible to fix without resorting to temporary public support. But the risk of large write-offs of capital instruments due to burden-sharing and bail-in may represent an insurmountable obstacle to such public support as it may set in motion an investors� flight. The paper concludes by showing that existing rules do contain the flexibility required to accommodate aggregate policy requirements in the general interest, and outlines a public support scheme for the precautionary recapitalisation of solvent banks that would be compliant with EU law. Length: 20 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/CEPS%20SR%20No%20136%20Bail-in%20StateAid%20and%20Public%20Interest.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11505 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: von Werder, Marten Title: Measuring Dependency Ratios using National Transfer Accounts Abstract: Future older generations will have increasingly better health and are likely to work longer. It is now widely recognised that the socio-economic changes that ageing societies will bring about are poorly captured by the traditional demographic dependency ratios (DDRs), such as the old-age dependency ratio that relates the number of people aged 65+ to the working-age population. In this paper the authors combine population projections and National Transfer Accounts (NTA) data for seven European countries, project the quantitative impact of ageing on public finances until 2040 and compare it to projected DDRs. They then simulate the public finance impact of changes in three key indicators related to the policy responses to population ageing: net immigration, healthy ageing and longer working lives, by linking age-specific public health transfers and labour market participation rates to changes in mortality. Four main findings emerge: first, the simple old-age dependency ratio overestimates the future public finance challenges faced by the countries studied � significantly so for some countries, namely Austria, Finland and Hungary. Second, healthy ageing has a modest effect (on public finances) except in the case of Sweden, where it is substantial. Third, the long-run effect of immigration is well captured by the simple DDR measure if immigrants are similar to the native population. Finally, the authors find that increasing the length of working lives is key to addressing the public finance challenge of ageing; extending working lives by three to four years over the next 25 years � equivalent to the increase in life expectancy � severely limits the impact of ageing on public transfers. Length: 24 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/WD420%20Measuring%20dependency%20ratios%20using%20National%20Transfer%20Accounts%20-%20Barslund%20and%20Werder%20%282016%29.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11491 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Busse, Matthias Author-Name: Gros, Daniel Title: Is there a need for additional monetary stimulus? Insights from the original Taylor Rule Abstract: Central banks in the developed world are being misled into fighting the perceived dangers of a �deflationary spiral� because they are looking at only one indicator: consumer prices. This Policy Brief finds that while consumer prices are flat, broader price indices do not show any sign of impending deflation: the GDP deflator is increasing in the US, Japan and the euro area by about 1.2-1.5%. Nor is the real economy sending any deflationary signals either: unemployment is at record lows in the US and Japan, and is declining in the euro area while GDP growth is at, or above potential. Thus, the overall macroeconomic situation does not give any indication of an imminent deflationary spiral. In today�s high-debt environment, the authors argue that central banks should be looking at the GDP deflator and the growth of nominal GDP, instead of CPI inflation. Nominal GDP growth, as forecasted by the major official institutions, remains robust and is in excess of nominal interest rates. They conclude that if the ECB were to set the interest rate according to the standard rules of thumb for monetary policy, which take into account both the real economy and price developments of broader price indicators, it would start normalising its policy now, instead of pondering over additional measures to fight deflation, which does not exist. In short, economic conditions are slowly normalising; so should monetary policy. Length: 10 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/PB342TaylorRule.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11492 Template-Type: ReDIF-Paper 1.0 Author-Name: Masuch, Klaus Author-Name: Moshammer, Edmund Author-Name: Pierluigi, Beatrice Title: Institutions and Growth in Europe Abstract: This paper provides empirical evidence in support of the view that the quality of institutions is an important determinant of long-term growth of European countries. When also taking into account the initial level of GDP per capita and government debt, cross-country institutional differences can explain to a great extent the relative long-term GDP performance of European countries. It also shows that an initial government debt level above a threshold (e.g. 60-70%) coupled with institutional quality below the EU average tends to be associated with particularly poor long-term real growth performance. Interestingly, the detrimental effect of high debt levels on long-term growth seems cushioned by the presence of very sound institutions. This might be because good institutions help to alleviate the debt problem in various ways, e.g. by ensuring sufficient fiscal consolidation in the longer-run, allowing for better use of government expenditures and promoting sustainable growth, social fairness and more efficient tax administration. The quality of national institutions seems to enhance the long-term GDP performance across a large sample of countries, also including OECD countries outside Europe. The paper offers some evidence that, in the presence of good institutions, conditions for catching-up seem generally good also for euro-area and fixed exchange rate countries. Looking at sub-groupings, it seems that sound institutions may be particularly important for long-term growth in the countries where the exchange rate tool is no longer available (and where also sovereign debt is high), and less so in the countries with flexible exchange rate regimes. However, this result is preliminary and requires further research. The empirical findings on the importance of institutions are robust to various measures of output growth, different measures of institutional indicators, different sample sizes, different country groupings and to the inclusion of additional control variables. Overall, the results tend to support the call for structural reforms in general and reforms enhancing the efficiency of public administration and regulation, the rule of law and the fight against rent-seeking and corruption in particular. Length: 45 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/WD421%20Masuch%20et%20al%20Institutions%20and%20Growth.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11482 Template-Type: ReDIF-Paper 1.0 Author-Name: Dimitrova, Anna Author-Name: Egenhofer, Christian Author-Name: Behrens, Arno Title: A Roadmap to Enhanced Regional Energy Policy: Cooperation in South East Europe Abstract: Regional Energy Policy Cooperation has now gained political traction in the EU as a tool to advance the EU�s energy objectives. Cooperation and coordination is meant to facilitate the convergence of markets and policies, so while the creation of one EU Internal Energy Market remains the goal, regional cooperation is the tool with which to achieve that goal. Cooperation could become the stepping-stone towards the completion of the Internal Energy Market within the European 2030 climate and energy framework and beyond. The Energy Union concept recognises the importance of regional integration. For South East Europe, regional energy policy cooperation is seen as a means to address region-specific challenges such as security of supply, energy imports dependence, affordability, but also to build trust. South East Europe�s hitherto untapped or underutilised potential for renewable energy, hydro � also for storage � and the huge potential for energy efficiency improvements offer a great opportunity to solve the region�s challenges. Length: 7 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/SR134%20Roadmap%20SEE.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11451 Template-Type: ReDIF-Paper 1.0 Author-Name: Busse, Matthias Author-Name: Gros, Daniel Title: Are Germans wasting their savings abroad? Abstract: Germany is running a current account surplus of about 8% of GDP, which means that about one-third of all German savings (equal to 24% of GDP) has to be invested abroad every year. It has become by now almost a clich� that these huge excess savings are being wasted abroad. But this is a popular misconception based on the divergence between the available data on the (cumulated) current account balance (cCAB) of Germany and its net international investment position (NIIP). A closer look at the data actually suggests that the NIIP is probably not measured correctly and that the observed returns on German investment abroad have remained above most domestic returns. Length: 3 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/PrtV_GermansSavingsAbroad.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11449 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Author-Name: Maselli, Ilaria Author-Name: Fabo, Brian Title: The Digital Market for Local Services: A one-night stand for workers? An example from the on-demand economy Abstract: This case study provides a snapshot of the dynamics in the digital market for locally provided personal services. Based on a case study for a Belgium platform with 14,113 identified workers and 9,459 posted tasks, the findings suggest that the current intermediation is inefficient. Only a limited share of the tasks posted on the platform are being completed, whereas the characteristics of the not-completed tasks are fairly limited. Moreover, just a small share of the workers participating in the platform is actually performing the completed tasks. Their average earnings per hour are in most cases above the minimum wage and even above the median wage in the offline market. At the present time, however, the limited earnings for individual workers prevent this mode of working from becoming an alternative to a conventional job. In addition to the standard determinants of workers� earnings (e.g. gender, age, occupation, etc.), the characteristics and evaluation mechanism of the platform have a large influence on the distribution of tasks and earnings. Length: 31 pages Creation-Date: 2016-04 File-URL:https://www.ceps.eu/system/files/SR%20No%20133%20Sharing%20Economy%20for%20JRC.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11438 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Valiante, Diego Author-Name: De Groen, Willem Pieter Title: The ECB�s latest gimmick: Cash for loans Abstract: Among several important monetary policy initiatives decided by the European Central Bank on 10 March 2016 was the launch of a new set of targeted longer-term refinancing operations (TLTRO II), expanding on the previous TLTRO. In assessing this scheme, which might cost up to �24 billion, this Policy Brief finds that while it could become important, it is questionable whether it will achieve its goal of encouraging the extension of credit for new investment, as banks can easily window dress their loan book. Length: 6 pages Creation-Date: 2016-03 File-URL:https://www.ceps.eu/system/files/ECBLoanSubsidies.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11425 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Fabo, Brian Author-Name: Lenaerts, Karolien Title: Skills Requirements for the 30 Most-Frequently Advertised Occupations in the United States: An analysis based on online vacancy data Abstract: Using a sample of approximately 2 million job advertisements published online, this paper assesses which educational, skills and other requirements US employers demand the most. The analysis is focused on the 30 most-frequently advertised occupations in the United States, of different levels of complexity, and finds that employers are quite demanding in their job advertisements, even when these concern low- or medium-skilled occupations. Although vacancies for more complex occupations are generally more demanding than those for less complex ones, there is a lot of variation across the 30 occupations. Formal education is the most important criterion for employers in the United States; it is required in 67% of the vacancies examined. Specialised training and licenses, in contrast, appear to be less important. Of the cognitive and non-cognitive skills, service skills in particular are high in demand (called for in 49% of the vacancies). Other non-cognitive skills, both of a social and personal nature, are frequently included as well. Experience is the third key criterion that employers use to screen job applicants, appearing in 38% of the vacancies. Length: 41 pages Creation-Date: 2016-03 File-URL:https://www.ceps.eu/system/files/SR%20No%20132%20Skill%20Requirements.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11406 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: H�jkov�, Al�beta Title: Social Investment and State Capacity Abstract: This paper looks at the difference between the levels and nature of social policy expenditure in northern and northwest European countries and the countries of southern, central, and eastern Europe, and examines the relationship between social investment and state capacity in these country groupings. The authors show that southern and eastern countries have a much greater preference for �compensating� rather than �capacitating� social policy spending. Furthermore, the state capacity in these countries is lower, which generates less state revenue. Based on these observations they conclude that low state capacity and low state revenue go hand in hand with the preference for capacitating social policies, as these policies involve less delegation and discretion than social investment policies. This paper shows that high state capacity is probably a necessary precondition for effective social investment policies, although some limited alternative paths do exist. Length: 13 pages Creation-Date: 2016-02 File-URL:https://www.ceps.eu/system/files/WD419%20Social%20Investment%20Beblavy%20and%20Hajkova.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11350 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Marten von Werder Author-Name: von Werder, Marten Title: Measuring ageing and the need for longer working lives in the EU Abstract: This study considers different ways of measuring the ageing of societies and their implications for public policy. The first part characterises the ongoing ageing of the population in the EU28 by relating it to past and future longer-term demographic trends for broad groups of countries. It goes beyond traditional chronological measures to include recently suggested prospective measures of ageing. The second part of the study is concerned with economic dependency ratios, which are a more relevant measure for summarising the economic challenges related to ageing. Three main findings emerge: first, prospective indicators of ageing reveal the challenge of population ageing to be less onerous than traditional chronological measures would suggest. Their relevance, however, will depend on the degree to which policy changes can respond to the changing age structure of the population. Second, substantial increases in the length of working lives are necessary to maintain current economic dependency ratios. Taking a year-2000 perspective on the economic challenges of ageing shows that substantial progress has been made. Third, looking towards 2050, education will have limited direct impact on the scale of the ageing challenge. Length: 27 pages Creation-Date: 2016-02 File-URL:https://www.ceps.eu/system/files/WD417%20MB%20%26%20MVW%20Measuring%20ageing%20and%20need%20for%20longer%20working%20lives%20%281%29.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11349 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The Negative Rates Club Abstract: For the better part of a decade, central banks have been making only limited headway in curbing powerful global deflationary forces. Since 2008, the US Federal Reserve has maintained zero interest rates, while pursuing multiple waves of unprecedented balance-sheet expansion through large-scale bond purchases. The Bank of England, the Bank of Japan and the European Central Bank have followed suit, each with its own version of so-called quantitative easing (QE). Yet inflation has not picked up appreciably anywhere. Length: 3 pages Creation-Date: 2016-02 File-URL:https://www.ceps.eu/system/files/NegativeRatesClub%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11337 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Fabo, Brian Author-Name: Lenaerts, Karolien Title: The Importance of Foreign Language Skills in the Labour Markets of Central and Eastern Europe: An assessment based on data from online job portals Abstract: In a globalised world, knowledge of foreign languages is an important skill. Especially in Europe, with its 24 official languages and its countless regional and minority languages, foreign language skills are a key asset in the labour market. Earlier research shows that over half of the EU27 population is able to speak at least one foreign language, but there is substantial national variation. This study is devoted to a group of countries known as the Visegrad Four, which comprises the Czech Republic, Hungary, Poland and Slovakia. Although the supply of foreign language skills in these countries appears to be well-documented, less is known about the demand side. In this study, we therefore examine the demand for foreign language skills on the Visegrad labour markets, using information extracted from online job portals. We find that English is the most requested foreign language in the region, and the demand for English language skills appears to go up as occupations become increasingly complex. Despite the cultural, historical and economic ties with their German-speaking neighbours, German is the second-most-in-demand foreign language in the region. Interestingly, in this case there is no clear link with the complexity of an occupation. Other languages, such as French, Spanish and Russian, are hardly requested. These findings have important policy implications with regards to the education and training offered in schools, universities and job centres. Length: 45 pages Creation-Date: 2016-01 File-URL:https://www.ceps.eu/system/files/SR%20No%20129%20Foreign%20Language%20Requirements_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11264 Template-Type: ReDIF-Paper 1.0 Author-Name: Huertas, Thomas Title: European Bank Resolution: Making it work! Abstract: From the start of 2016, new rules for bank resolution are in place � as spelled out in the Bank Recovery and Resolution Directive (BRRD) � across the EU, and a new authority (the Single Resolution Board, or SRB) is fully operational for resolving all banks in the eurozone. The implementation issues of the new regime are enormous. Banks need to develop recovery plans, and authorities need to create resolution plans as well as set the minimum required amount of own funds and eligible liabilities (MREL) for each bank. But given the diversity in bank structures and instruments at EU and global level, this will be a formidable challenge, above all with respect to internationally active banks. In order to explore ways in which the authorities and banks can meet this challenge, CEPS formed a Task Force composed of senior experts on banking sector reform and chaired by Thomas Huertas, Partner and Chair, EY Global Regulatory Network. This report contains its policy recommendations. Length: 52 pages Creation-Date: 2016-01 File-URL:https://www.ceps.eu/system/files/TFR%20Bank%20Resolution.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11262 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Gros, Daniel Author-Name: Osowski, Thomas Title: Did quantitative easing affect interest rates outside the US? New evidence based on interest rate differentials Abstract: This paper explores the effects of non-standard monetary policies on international yield relationships. Based on a descriptive analysis of international long-term yields, we find evidence that long-term rates followed a global downward trend prior to as well as during the financial crisis. Comparing interest rate developments in the US and the eurozone, it is difficult to detect a distinct impact of the first round of the Fed�s quantitative easing programme (QE1) on US interest rates for which the global environment � the global downward trend in interest rates � does not account. Motivated by these findings, we analyse the impact of the Fed�s QE1 programme on the stability of the US-euro long-term interest rate relationship by using a CVAR (cointegrated vector autoregressive) model and, in particular, recursive estimation methods. Using data gathered between 2002 and 2014, we find limited evidence that QE1 caused the break-up or destabilised the transatlantic interest rate relationship. Taking global interest rate developments into account, we thus find no significant evidence that QE had any independent, distinct impact on US interest rates. Length: 33 pages Creation-Date: 2016-01 File-URL:https://www.ceps.eu/system/files/WD416%20Did%20QE%20affect%20interest%20rates_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11266 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Adjustment within the Euro Area: Is it all about competitiveness? Abstract: The key problem afflicting the eurozone today seems clear: the periphery experienced a large loss of competitiveness during the boom years. In order for these economies to recover, they must restore their competitiveness, ideally by increasing productivity. This contribution shows, however, that the story line is not that straightforward. The drivers of competitiveness might have been more macro than micro in nature. The relationship between productivity and competitiveness is sometimes the opposite of what one would expect; and the link between competitiveness and exports is also much weaker than generally believed. Daniel Gros is Director of CEPS. An earlier version of this paper was prepared for the 14th Munich Economic Summit on �Competitiveness and Innovation: The Quest for Best", co-organised by CESifo and the BMW Foundation Herbert Quandt, 21-22 May 2015, and published in CESifo Forum, Vol. 16 (3):18-25 (www.cesifo-group.de/ifoHome/publications/docbase/details.html?docId=19173034). He gratefully acknowledges useful comments and suggestions received from Stefano Micossi, who recently completed a related contribution to the �Rebooting Europe � Step 2� project organised by the Centre for Economic Policy Research (CEPR). CEPS has published this latter paper on its website as a companion piece to the present study (see �Balance-of-Payments Adjustment in the Eurozone�, CEPS Policy Brief No. 38, January 2016). Length: 17 pages Creation-Date: 2016-01 File-URL:https://www.ceps.eu/system/files/SR%20No%20127%20DG%20Rev%20Restoring%20Competitiveness%20in%20EZ.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11260 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Balance-of-Payments Adjustment in the Eurozone Abstract: This policy contribution describes the unresolved adjustment problems confronting the eurozone, and places them in historical perspective by comparing developments in key real economic variables under EMU with those observed under the Bretton Woods system. The main finding is that the eurozone is afflicted by a strong deflationary bias and that, therefore, under current trends, deep economic and social strains will continue to project a dark cloud over its future survival. Length: 13 pages Creation-Date: 2016-01 File-URL:https://www.ceps.eu/system/files/PB%20338%20SM%20BoP%20Adjustment%20in%20EZ.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11250 Template-Type: ReDIF-Paper 1.0 Author-Name: Maselli, Ilaria Author-Name: Lenaerts, Karolien Author-Name: Beblav�, Miroslav Title: Five things we need to know about the on-demand economy Abstract: The last few years have witnessed the exponential growth of platforms like Uber and Airbnb and the creation of countless other less well-known examples. The expansion of the on-demand economy puts huge pressure on regulators to adapt it to the existing frameworks for labour and taxation. The rapid growth of the sector also divides experts: it is seen by many as threat for working conditions, and by others as an incredible opportunity. The purpose of this essay is to take a balanced perspective on what we know about the on-demand economy and what needs further investigation. More research is needed on the individual cases before one can draw conclusions on how this new sector works. The political economy of the sector is made even more interesting by the fact that the technology is developing faster than the regulation. Yet, our plea to policy-makers is to refrain from legislating too early and to take the time to understand how the supply and the demand of these services behave and their equilibrium. This CEPS Essay presents groundbreaking work on the on-demand economy, drawing on the most salient findings debated during the CEPS Winter School �From Uber to Amazon Mechanical Turk: Non-traditional labour markets driven by technological and organisational change�, 23-25 November 2015, financed by the InGRID FP7 project. Length: 10 pages Creation-Date: 2016-01 File-URL:https://www.ceps.eu/system/files/CEPS%20Essay%20No%2021%20On%20Demand%20Economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11209 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: De Groen, Willem Pieter Title: Will the Single Resolution Fund be a �baby tiger� during the transition? Abstract: The short answer to this question is no! According to the authors� calculations, even during its early years, the Single Resolution Fund (SRF) should be sufficient to deal with almost any crisis scenario imaginable. They caution, however, that its funding will be built up only gradually over the coming decade and there is thus a legitimate concern that the SRF will not be sufficient to deal with a major crisis. Length: 2 pages Creation-Date: 2015-12 File-URL:https://www.ceps.eu/system/files/SRF%20as%20paper%20tiger_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11192 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Completing the Banking Union: Deposit Insurance Abstract: It is generally agreed that a Banking Union should have common or �single� institutions responsible for carrying out three basic functions: supervision, resolution and deposit insurance. So far, however, agreement has been reached in the EU on only the first two of these functions. The Commission has now presented its proposal on how to complete the Banking Union with a European Deposit Insurance Scheme (EDIS). It is an innovative and courageous proposal. It is courageous because it will clearly be very controversial in a number of member states (especially Germany) and it is innovative because it proposes a three-stage process, starting with re-insurance, then switching to co-insurance and finally to full direct insurance of deposits via a �single� Deposit Insurance Fund (DIF). This final stage should be reached in 2024, which is also the date at which the Single Resolution Fund (SRF) will become the only source of financing for bank resolution. The Commission�s proposal calls for integrating the decision-making for EDIS into the decision-making entity for the SRF, namely the existing Single Resolution Board (SRB). This makes sense if one views resolution and deposit insurance as two highly interlinked dimensions of dealing with banks in trouble. In this view the two dimensions should be bundled into one institution � and one suspects that over time the two funds (the SRF and the DIF) could be merged into one. This Policy Brief argues that re-insurance should not be considered as a transitory phase, but could also provide a solution for the long run. �Experience rating� could be used to ensure a proper pricing of risk and to protect the interests of the depositors in countries with safer banking systems. Moreover, EDIS should have a decision-making structure separate from and independent of the SRM, since it has mainly a macroeconomic function. Length: 8 pages Creation-Date: 2015-12 File-URL:https://www.ceps.eu/system/files/PB335%20DG%20Completing%20BU_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11143 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Baldwin, Richard Title: What caused the eurozone crisis? Abstract: After five years of crisis there are now signs that the eurozone economy is recovering, but it is far from being back to normal. The authors of this CEPS Commentary sound a note of caution: although progress has been made with the banking union and new institutions like the European Stability Mechanism (ESM), more needs to be done. The eurozone crisis may be in remission now but when interest rates start to rise, or if confidence evaporates again due to global shock, the systemic cracks could reappear at an alarming rate. Length: 5 pages Creation-Date: 2015-11 File-URL:https://www.ceps.eu/system/files/What%20caused%20the%20EZ%20Crisis%20RB%20DG%20CEPS%20Commentary.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11129 Template-Type: ReDIF-Paper 1.0 Author-Name: Milne, Alistair Title: Achieving European Policy Objectives through Financial Technology Abstract: Alistair Milne argues in this ECRI Commentary that �FinTech� (newly emerging Financial Technologies) can play a crucial role in achieving European policy objectives in the area of financial markets. These notably include increasing access by smaller firms to trade credit and other forms of external finance and completing the banking and capital markets unions. He points out, however, that accomplishing these objectives will require a coordinated European policy response, focused especially on promoting common business processes and the adoption of shared technology and data standards. Length: 6 pages Creation-Date: 2015-11 File-URL:https://www.ceps.eu/system/files/ECRI%20Commentary%20No%2017%20Alistair%20Milne%20Financial%20Technology_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11104 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Mustilli, Federica Title: The Economic Impact of Sanctions against Russia: Much ado about very little Abstract: The decision process leading to the imposition of sanctions against Russia in response to its annexation of Crimea and its subsequent military intervention in Eastern Ukraine has been very difficult for the EU, with some member states claiming that they have been particularly hard hit because exports to Russia are important to their economies. This commentary shows, however, that the economic cost in terms of lost exports, and thus potentially jobs, has in reality been negligible. Length: 4 pages Creation-Date: 2015-11 File-URL:https://www.ceps.eu/system/files/DGandFM_RussianSanctions.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11036 Template-Type: ReDIF-Paper 1.0 Author-Name: Maselli,Ilaria Author-Name: Fabo, Brian Title: Digital workers by design? An example from the on-demand economy Abstract: Recent organisational and technological changes have generated a digital class of workers and contractors � in effect a new labour-market fringe. In this paper the authors take the case of an Italian crowdsourcing platform for interior design, called CoContest, to examine whether this medium is profitable and why professionals would choose to supply their work via such a platform. The authors� analysis shows that despite the low returns on crowdsourced design work, a straightforward pattern of northern employer/southern contractor is not represented here because designers supply their work even if they live in Italy, which is a high-income country. For these designers CoContest can make sense if they are new to the labour market and face high entry barriers, although crowdsourcing does not offer them profitable full-time employment. The case of Serbia, however, which is the second-largest supplier of designers on the platform, is interesting in this regard. As a result of differences in purchasing power, experienced Serbian designers can make a living from crowdsourced contracts, assuming that the market continues to grow. Length: 15 pages Creation-Date: 2015-10 File-URL:https://www.ceps.eu/system/files/WD414%20IM%20and%20BF%20Interior%20Designer.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11030 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The End of German Hegemony Abstract: Without anyone quite noticing, Europe�s internal balance of power has been shifting. As Daniel Gros observes in this commentary, Germany�s dominant position, which has seemed absolute since the 2008 financial crisis, is gradually weakening � with far-reaching implications for the European Union. Length: 2 pages Creation-Date: 2015-10 File-URL:https://www.ceps.eu/system/files/DG%20The%20End%20of%20German%20Hegemony.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11026 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Where is the credit crunch in Greece? Abstract: Greek policy-makers like to make the point that their economy cannot recover because of a lack of credit and that this affects exports, in particular. Austerity is an easy explanation for the weakness of domestic demand, argues Daniel Gros in this CEPS Commentary, but it is more difficult to see why Greek exports have stagnated in recent years. The author considers the argument that the Greek economy could not recover via export-led growth because of a credit crunch. The overall availability of credit was higher than GDP, and interest rates remained relatively low. There is some indication of a misallocation of bank credit, but the responsibility for any mistakes in this direction must lie squarely with the government and the Troika, given that the Greek banking system has been under government control since 2012. Length: 5 pages Creation-Date: 2015-10 File-URL:https://www.ceps.eu/system/files/CEPS%20Commentary%20Credit%20Crunch%20Greece%20D%20Gros_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:11002 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Alcidi, Cinzia Title: China�s slowdown: When the dragon catches the flu, Europe sneezes Abstract: Notwithstanding the erratic stock market responses around the world, this CEPS Commentary argues that while a slowdown of the world�s second-largest economy may not be good news for Europe, its effects will not be as bad as headlines would have us believe. In the short term, it finds that the biggest risks from the Chinese slowdown may be political, stemming from a weakening of the Renminbi, either from actions taken by China�s central bank and/or from large capital outflows. Length: 5 pages Creation-Date: 2015-09 File-URL:https://www.ceps.eu/system/files/MB%2BCA%20ChinaSlowdown.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10960 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Marconi, Gabriele Author-Name: Maselli,Ilaria Title: A European Unemployment Benefits Scheme: The rationale and the challenges ahead Abstract: This paper aims to frame the debate on a European Unemployment Benefits Scheme (EUBS), as a shock absorber for EU economies, around its origins on the one hand, and its most controversial aspects, on the other. The paper focuses on several key aspects of the EUBS, the first being the options for financing the scheme. This can be divided into those requiring the imposition of an ad-hoc tax in member countries and those relying on general contributions from these countries, which can in turn be financed in various ways. Second, it focuses on the extent to which harmonisation of current national unemployment benefit schemes would be needed. Harmonisation implies changing national legislation and practices, which creates political and administrative difficulties. Third, the study examines the problem of schemes generating regular monetary transfers from certain countries to others, and the associated problem of moral hazard. There are two broad ways to solve this problem: ex-ante or ex-post balancing. Fourth, it discusses which countries should join the EUBS. There are arguments for limiting membership to euro-area members, or for extending it to the entire European Union, but participation should in any case be mandatory. Finally, it reviews the costs of the various forms of EUBSs proposed in the literature, concluding that they tend to stay below 1% of the member countries� aggregate GDP. This paper constitutes the first paper prepared in the context of a research project on �The Feasibility and Added Value of a European Unemployment Benefits Scheme�, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is re-published by CEPS with the kind permission of the European Commission and can also be downloaded from the Commission�s website. Length: 30 pages Creation-Date: 2015-09 File-URL:https://www.ceps.eu/system/files/CEPS%20SR%20No%20119%20EUBS_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10952 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Gros, Daniel Title: The Greek elections and the third bailout programme: Why it could work this time round Abstract: Following the decisive victory won by the Syriza party in Greece�s general election on September 20th, this commentary explores the key question of whether the third bailout programme can work, where the previous two programmes failed. Whereas most observers argue that the third one cannot work because it merely represents a continuation of an approach that has manifestly failed, the authors argue that a closer inspection of the conditions today give grounds for cautious optimism. Length: 3 pages Creation-Date: 2015-09 File-URL:https://www.ceps.eu/system/files/Commentary%20CA%2BDG%20Greek%20elections.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10945 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: What signal from the Fed? Should the ECB ease further? Abstract: The Federal Reserve left rates unchanged at its closely-watched meeting on September 17th, although many had argued that the real economy data, especially on the labour market, would have justified an exit (from the zero interest policy). In this CEPS Commentary, Daniel Gros observes that no similar decision on exit is in sight in the euro area, despite the fact that some have argued that the ECB should consider further easing measures (pushing the deposit rate deeper into negative territory or increasing the size of its asset purchase programme). He asks, in fact, whether further easing measures should be even discussed at this point. Length: 3 pages Creation-Date: 2015-09 File-URL:https://www.ceps.eu/system/files/DG%20Should%20the%20ECB%20ease%20further.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10940 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Monetary policy and the over-investment cycle: China as an extreme case Abstract: Against the background of the severe turbulence that is hitting global stock markets, Daniel Gros examines the looming slowdown in the Chinese economy in this CEPS Commentary, which he attributes to an underlying �real� domestic investment/savings imbalance. Given the magnitude of this imbalance, Gros thinks it is unlikely to be solved by monetary policy and that the best that can be hoped for is that the central banks will manage to �paper over� some of the unavoidable symptoms in credit markets. Length: 4 pages Creation-Date: 2015-09 File-URL:https://www.ceps.eu/system/files/DG%20Overinvestment%20cycle%20China.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10861 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Title: Greece�s poor growth prospects Abstract: Four years ago � almost to the day � when the question of Greece�s debt sustainability was being intensely debated, these same authors argued that Greece would face strong headwinds in its effort to �grow solvent�. With the third rescue package dealing with the immediate liquidity issues in the works, and concerns being voiced by the IMF as well as other actors, they find in this CEPS Commentary that the issue is once again pertinent. Length: 3 pages Creation-Date: 2015-08 File-URL:https://www.ceps.eu/system/files/Greece%20poor%20growth%20prospects_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10856 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Why Greece declined a euro holiday Abstract: In a CEPS Commentary, Daniel Gros speculates on why the Greek government suddenly turned an about-face on July 13th and conceded to terms that not only controverted its own promises, but also closely resembled those that voters had overwhelmingly rejected in a popular referendum barely a week earlier? Length: 3 pages Creation-Date: 2015-08 File-URL:https://www.ceps.eu/system/files/DG%20Paid%20holiday%20from%20the%20euro.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10839 Template-Type: ReDIF-Paper 1.0 Author-Name: Lehouelleur, Sophie Author-Name: Beblav�, Miroslav Author-Name: Maselli,Ilaria Title: How returns from tertiary education differ by field of study: Implications for policy-makers and students Abstract: With the huge growth in enrolment in higher education, the key question facing young people today is not so much �what to study� as �whether to study�. Taking a methodologically innovative approach, this paper measures the net present value of university education and compares returns from studying a range of different subjects. We use data from five European countries (France, Italy, Hungary, Poland and Slovenia) and include (opportunity) costs in the computation. Results suggest that enrolling in science, technology, engineering and mathematics (STEM) courses is often not the best investment for students, especially female students. In choosing what to study, therefore, students are taking decisions that are consistent with their own private returns. This suggests that policy-makers should consider changing the incentives offered if they wish to change students� behaviour. Length: 20 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/WD%20No%20411%20Useless%20Degrees.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10835 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Author-Name: Gros, Daniel Title: Addressing the immediate needs of the Greek banks Abstract: Based on a detailed calculation of the recapitalisation requirements of the Greek banks, Willem Pieter De Groen and Daniel Gros find in this CEPS Commentary that the sector unquestionably needs an infusion of capital, but that the level largely depends on the stringency of the capital requirements applied. An expedient quick fix to comply with the minimum capital requirements could be achieved by a bail-in of existing creditors under the EU Bank Recovery and Resolution Directive (BRRD) of around �5 billion, leaving only �6 billion needed for re-capitalisation. If the �Cypriot standard� is applied, however, the required re-capitalisation would be �15 billion. A �generous� approach, which takes into account the phasing in of the new, more-stringent capital requirements until 2018, would imply a re-capitalisation of �29 billion (or more bailing-in of creditors). The re-capitalisation should be undertaken preferably by the EBRD or the new Greek investment fund, rather than via loans from the ESM to the Greek government. Length: 4 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/WPdGandDG_RecapitalisingGreekBanks.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10832 Template-Type: ReDIF-Paper 1.0 Author-Name: Fabo, Brian Author-Name: Beblav�, Miroslav Title: Students in Work and their Impact on the Labour Market Abstract: The purpose of this study is to evaluate the size and composition of the student labour force in order to consider its potential impact on labour markets in the European Union. The paper is based on an analysis of EU Labour Force Survey data from 2011, supplemented by the findings of the EUROSTUDENT project. The structure of student labour is discussed within the framework of the so-called �crowding-out� literature, which identifies competition for jobs between students and low educated non-students, particularly in the retail and wholesale sectors. In contrast to these assumptions, the authors found that, depending on the age of the student, the profile of student workers closely matches that of non-students with medium- to-high educational attainment. In general, the retail and wholesale sectors are of importance in the employment of students under the age of 25, but students typically take positions in the middle of the occupational hierarchy, rather than in the lower-grade positions. Meanwhile, older students, often professionals furthering their education while studying, are typically located in similar jobs and sectors to university graduates. A common trait of student work is its very high degree of flexibility compared to that of non-students. Nevertheless, the structure of student labour does not lead us to believe that student workers are particularly prone to be present in the precarious segment of the labour market. Length: 31 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/WD410%20Miro%20%2B%20Brian%20on%20Education_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10813 Template-Type: ReDIF-Paper 1.0 Author-Name: Fabo, Brian Author-Name: Beblav�, Miroslav Title: Are student workers a threat or a solution? Abstract: The massification of tertiary education means that a significant percentage of young people participate in tertiary education while also working. They can be seen as a threat � as cheap and highly qualified competition for low-skilled workers in casual jobs who are setting aside their studies for the time being in favour of immediate income. Or they might present an opportunity � a natural way for a large percentage of young people to gain experience and contact with the labour market without the need for massive government programmes. The authors argue in this CEPS commentary that student work is more of an opportunity than a threat. Length: 6 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/BF%20and%20MB%20Student%20Workers%20Threat%20or%20Solution_1.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10812 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Author-Name: Pollack, Alan Author-Name: St�hr, Ole Title: Keep capital markets union simple Abstract: The announcement of the creation of a capital markets union has led to a flurry of possible harmonisation proposals that could lead to new Action Plans that could preoccupy legislators for years to come. As underlined by Karel Lannoo and his colleagues in this new ECMI Commentary, however, a first step in any new legislative plan should be to set a clear objective, based on a thorough analysis of the reasons for the persistent differences in markets and a prioritisation of initiatives aimed at reaching more integration. Amongst these, they single out an initiative for an EU-wide, long-term savings product as warranting priority attention. Length: 2 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/No%2038%20KL%20Keep%20CMU%20simple.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10803 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Author-Name: Gros, Daniel Title: Restructuring the Greek banking sector with an empty purse Abstract: Greek banks are close to collapse, even if a new bail-out programme is agreed soon. The deterioration of the economy means that their fragile capital position is deteriorating further. In this CEPS Commentary, Daniel Gros observes that any new programme needs to include recapitalisation, comprising possibly a bail-in and restructuring to get the banking system working again. With only a small part of the assets unencumbered and a government with empty pockets, the depositors might have to take a large part of the burden. As private investors are unlikely to participate in a recapitalisation, foreign official funds will be needed. A direct equity investment by the EIB or the EBRD could be used to transfer control rights, and special ESM bonds could be used to provide additional capital without entailing additional risk to the creditors. Length: 2 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/DG%20Restructuring%20Greek%20Banks_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10789 Template-Type: ReDIF-Paper 1.0 Author-Name: Maselli,Ilaria Title: Poor Greeks or lazy Greeks? Abstract: Drawing on a wide array of statistical indicators reflecting economic activity, states of poverty, structural reform and governance in Greece, this Commentary by Ilaria Maselli provides substance to a debate that has become both highly inflammatory and superficial in the latest episodes. Length: 8 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/IM%20Poor%20or%20lazy%20Greeks.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10790 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Gros, Daniel Title: The Greek economy is unlikely to benefit from further devaluation Abstract: In the run up to the Greek referendum this Sunday, CEPS economists Cinzia Alcidi and Daniel Gros find that there is no good option for the country: either be engulfed in the chaos following the rejection of the programme, exit from the Eurozone and collapse of the economy or accept another programme. Even the benefits that one might expect from the expansion of the tourism sector in Greece may may not be enough for its salvation, according to the key indicators the authors present. Length: 4 pages Creation-Date: 2015-07 File-URL:https://www.ceps.eu/system/files/CA%20DG%20Benefit%20from%20Devaluation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10773 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Puerto Rico and Greece: A tale of two defaults in a monetary union Abstract: By the end of June, both Greece and Puerto Rico seem to have arrived at the end of the road. The governor of the Commonwealth has announced that the public debt needs to be restructured (although there are no legal provisions to do so). In Greece, the government is organising a referendum, calling on the people of Greece to reject the latest proposal of its official creditors (the Troika, composed of the IMF, the ECB and the European Commission) for a further adjustment programme. This coincidence illustrates that the difference between the two cases is not the underlying economic problems, but the political context: in Greece, both the liquidity provision to banks and the debt problems are politically charged because both are in the hands of official institutions. In Puerto Rico, by contrast, both of these issues are determined by the market. In Greece, the government and the Greek people feel that they have to battle �foreigners�, i.e. other political institutions. In Puerto Rico, the government (and the banks) has a problem with anonymous market forces and investors. This is why nobody argues that the �dollar� has failed when Puerto Rico fails, but many argue that the �euro� fails if Greece fails. Length: 16 pages Creation-Date: 2015-06 File-URL:https://www.ceps.eu/system/files/HLB5_DG_PuertoRico_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10709 Template-Type: ReDIF-Paper 1.0 Author-Name: Mayer,Thomas Title: The Euro as a Foreign Currency for Greece Abstract: In contrast to his contribution just a month ago, which examined how a Greek parallel currency to the euro could allow the Greek government to gain some room for manoeuver in fiscal policy while at the same time continuing the adjustment programme demanded by the country�s creditors, Thomas Mayer explores in the present note the question of how the Greek population could still keep the euro after a default of its government. Contrary to general belief, he finds that Grexit and the reintroduction of the euro as a foreign currency would probably be positive for the Greek economy, although its creditors would be hard hit. It is therefore primarily in their interest that default and Grexit are avoided. Length: 4 pages Creation-Date: 2015-06 File-URL:https://www.ceps.eu/system/files/190615%20Mayer%20Euro%20as%20parallel%20currency%20for%20Greece_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10702 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Title: Greece is solvent but illiquid: What should the ECB do? Abstract: In a CEPS Commentary, Paul De Grauwe argues that the Greek government is solvent but is trapped in a liquidity dilemma in which cannot find liquidity because markets believe it cannot find liquidity. He then explores the role of the European Central Bank in this self-fulfilling problem and ask specifically whether its outright monetary transactions (OMT) programme, introduced in September 2012, should be used to ease the constraints on Greece. Length: 3 pages Creation-Date: 2015-06 File-URL:https://www.ceps.eu/system/files/PDG_Greece.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10694 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The QE Placebo Abstract: After pointing out several surprising coincidences and contradictions that arise in nearly every aspect of the QE debate, Daniel Gros arrives at the conclusion in this CEPS Commentary that evaluating the policy�s effectiveness is more of an art than a science, which leaves plenty of room for distortion and bias. Length: 4 pages Creation-Date: 2015-06 File-URL:http://www.ceps.eu/system/files/DG_QE_Placebo.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10677 Template-Type: ReDIF-Paper 1.0 Author-Name: Rizos, Vasileios Author-Name: Behrens, Arno Author-Name: Taranic, Igor Title: Measuring progress in eco-innovation Abstract: Eco-innovation has been identified as one of the key drivers of change that need to be harnessed for a sustainable future. Given the complexity of eco-innovation as a concept, there are various challenges to measuring its progress. This CEPS Working Document briefly explores the evolution of the concept of eco-innovation and emphasises its role in the EU 2020 strategy. It then gives an overview of the different measurement approaches and challenges associated with identifying and using indicators for measuring progress in eco-innovation. Within this context, the paper describes the added value and key features of the www.measuring-progress.eu web tool, which aims to improve the way in which policy-makers and others involved in the policy process can access, understand and use green economy and eco-innovation indicators. The web tool was developed as part of a systematic overview by the NETGREEN project research team of the large and fragmented body of work in the field of green economy indicators. The paper concludes with a number of messages for policy-makers in this field. Length: 17 pages Creation-Date: 2015-06 File-URL:http://www.ceps.eu/system/files/WD409%20NETGREEN%20policy%20brief_Eco-Innovation_final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10676 Template-Type: ReDIF-Paper 1.0 Author-Name: Chase, Peter Author-Name: Pelkmans, Jacques Title: This time it�s different: Turbo-charging regulatory cooperation in TTIP Abstract: Regulatory cooperation is both one of the most ambitious and contentious parts of the EU-US Transatlantic Trade and Investment Partnership (TTIP) negotiations. In this paper, having identified the many levels of international regulatory cooperation, we show that TTIP regulatory cooperation will be significant, but not ambitious, while political and legal limits on cooperation in both the EU and the US minimise the concerns. For transatlantic regulatory cooperation to work, it must accept these political and legal constraints, build trust and confidence among counterpart regulators so they see that their transatlantic partner can help them do their work better, and provide tools to help regulators on both sides make informed decisions while retaining their regulatory autonomy and accountability to their politicians and citizens. A TTIP that provides these tools � and some more detailed instruments to that effect � will be more ambitious than previous trade agreements, and should, over the longer term, provide both the economic and regulatory benefits that the two sides envisage. The paper incorporates comparisons with the relevant chapters of recent FTAs the US and the EU have concluded, so as to clarify the approaches and degrees of ambition in this area. This comparison suggests that the TTIP regulatory cooperation will probably be more ambitious in terms of commitments and have a wider scope than any of these FTAs. This paper is the seventh in a series produced in the context of the �TTIP in the Balance� project, jointly organised by CEPS and the Center for Transatlantic Relations (CTR) in Washington, D.C. It is published simultaneously on the CEPS (www.ceps.eu) and CTR websites (http://transatlantic.sais-jhu.edu). Length: 35 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/SR110%20Regulatory%20Cooperation%20in%20TTIP.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10659 Template-Type: ReDIF-Paper 1.0 Author-Name: Valiante, Diego Title: The �visible hand� of the ECB�s quantitative easing Abstract: In the midst of the market turbulence of recent years, policy rates have reached the zero lower bound, with central banks aggressively deploying their balance sheet with an array of �unconventional� monetary policies to ensure the transmission of monetary policy impulses in disrupted financial markets, ultimately to set the conditions for economic recovery. Since March 9th, the European Central Bank (ECB) has also joined the club of central banks deploying the most feared monetary policy tool in its armoury. Unsterilised outright asset purchases (so-called �quantitative easing�, or QE) aim to re-establish control over the transmission of monetary policy impulse via policy rates by improving conditions for unsecured interbank market activity. This paper examines three dimensions of quantitative easing: i) the rationale behind the ECB�s new monetary policy stance, ii) the operational challenges of QE and iii) preliminary evidence on the effects of QE on markets. Length: 18 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/WD408_DV_QE_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10611 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: The Monetary Policy of the European Central Bank (2002-2015) Abstract: This Special Report examines the policies pursued by the European Central Bank (ECB) since the inception of the euro. The ECB was originally set up to pursue price stability, with an eye also to economic growth and financial stability as subsidiary goals, once the primary goal was secured. The application of a single monetary policy to a diverse economic area has entailed a pronounced pro-cyclicality in its real economic effects on the eurozone periphery. Later, monetary policy became the main policy instrument to tackle financial instability elicited by the failure of Lehman Brothers and the sovereign debt crisis in the eurozone. In the process, the ECB emerged as the lender of last resort in the sovereign debt markets of participating countries. Persistent economic depression and deflation eventually brought the ECB into the uncharted waters of unconventional policies. That the ECB could legally perform all of these tasks bears witness to the flexibility of the TFEU and its Statute, but its tools and operating procedures were stretched to their limit. In the end, the place of the ECB amongst EU policy-making institutions has been greatly enhanced, but has entailed repeated intrusions into the broader domain of economic policies � not least because of its market intervention policies � whose consequences have yet to be ascertained. Length: 40 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/SR%20109%20SM%20Monetary%20Policy%20of%20the%20ECB_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10610 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Why Greece is different Abstract: With Greece�s economy tanking again, the country�s government is convinced that it is the victim of the wrong treatment in the form of excessive austerity and is calling for a renegotiation of the bailout deal it made with its international creditors. In Daniel Gros� view, however, this narrative overlooks the fact that the approach worked in other peripheral countries: Portugal, Ireland, Spain and even Cyprus, are all visibly recovering. As he points out in this CEPS Commentary, it was their strong export performance which allowed these countries to escape the austerity trap and he accordingly urges Greece�s policy-makers to focus their attention on stimulating exports rather than only discussing the budget. Length: 4 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/DG%20Why%20Greece%20is%20different.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10609 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Title: Too good to be true? A quick assessment of the EC�s new Better Regulation Package Abstract: On 19 May 2015, the European Commission published a very comprehensive, ambitious and innovative Better Regulation package, which contains new guidelines on various phases of the policy cycle and various documents setting out the rules and functioning of entirely new consultation platforms and a new body in charge of regulatory scrutiny. This Special Report presents some initial impressions on the content of this remarkable set of new documents, which will shape the way in which EU policies will be prepared, shaped, monitored and evaluated in the years to come. Length: 14 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/SR108AR_BetterRegulation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10600 Template-Type: ReDIF-Paper 1.0 Author-Name: Mayer, Thomas Title: A Parallel Currency for Greece Abstract:Greece and its creditors seem to be engaged in a game of chicken: both sides expect the other to yield at the last moment. The game will almost certainly end with each side deviating somewhat from its preferred course. This High-Level Brief discusses how a parallel currency could contribute to a resolution of the conflict. In the author's view, it would be the least-bad option for both sides among three possible options on the table. Length: 7 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/No4_TM%20Parallel%20Currency_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10586 Template-Type: ReDIF-Paper 1.0 Author-Name: Messerlin, Patrick Title: The Services Dimension of TTIP Abstract:This CEPS Special Report examines the main facets of the debate about TTIP and services. First, it looks at the political and economic context and the various alternatives in terms of political support, stressing that only a partnership that ensures substantial economic gains will attract the support of the top policy-makers. Second, the paper makes the point that large economic gains in services require deep discussions on regulatory issues, and third, such discussions cannot rely on the negotiating techniques normally used for goods. There is thus a need to adopt a new approach, based on the mutual recognition and equivalence of regulations enforced in the services concerned, preceded by a mutual evaluation to grant such equivalence � all measures to be carried out by the regulatory bodies concerned, not by trade negotiators. This new game is a complex one but it has huge side benefits: it induces each TTIP partner to review the quality of their own regulations; it is at ease with the notion of a �living� (evolving) agreement; and it can easily be open to third countries. All these benefits should reassure a general public that is fearful of a hastily baked deal. Length: 23 pages Creation-Date: 2015-05 File-URL:http://www.ceps.eu/system/files/SR106%20TTIP%20Services%20Messerlin%20.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10550 Template-Type: ReDIF-Paper 1.0 Author-Name: Hamilton, Daniel Author-Name: Blockmans, Steven Title: The Geostrategic Implications of TTIP Abstract:The strategic considerations that define the perceived need for transatlantic renewal are the focus of this CEPS Special Report, in which the authors examine the geo-economic impact of the Transatlantic Trade and Investment Partnership (TTIP) on both emerging powers and poorer countries. Daniel Hamilton and Steven Blockmans argue that TTIP has the potential to be a catalyst for trade liberalisation at the global level, but only if the US and the EU are proactive about making the �open architecture� of TTIP a reality. Length: 16 pages Creation-Date: 2015-04 File-URL:http://www.ceps.eu/system/files/SR105%20Geopolitics%20of%20TTIP%20Hamilton%20and%20Blockmans.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10476 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Title: Antitrust, Regulation and the Neutrality Trap Abstract:EU Internet policy seems bewitched by the term �neutrality�, applied to networks and now search engines and other online platforms. Andrea Renda questions in this latest Special Report whether this is this a good way to protect end users. Originally confined to the infrastructure layer, today the neutrality rhetoric is being expanded to multi-sided platforms such as search engines and more generally online intermediaries. Policies for search neutrality and platform neutrality are invoked to pursue a variety of policy objectives, encompassing competition, consumer protection, privacy and media pluralism. This paper analyses this emerging debate and comes to a number of conclusions. First, mandating net neutrality at the infrastructure layer might have some merit, but it certainly would not make the Internet neutral. Second, since most of the objectives initially associated with network neutrality cannot be realistically achieved by such a rule, the case for network neutrality legislation would have to stand on different grounds. Third, the fact that the Internet is not neutral is mostly a good thing for end users, who benefit from intermediaries that provide them with a selection of the over-abundant information available on the Web. Fourth, search neutrality and platform neutrality are fundamentally flawed principles that contradict the economics of the Internet. Fifth, neutrality is a very poor and ineffective recipe for media pluralism, and as such should not be invoked as the basis of future media policy. All these conclusions have important consequences for the debate on the future EU policy for the Digital Single Market. Length: 23 pages Creation-Date: 2015-04 File-URL:http://www.ceps.eu/system/files/SR104_AR_NetNeutrality.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10472 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Author-Name: De Groen, Willem Pieter Title: Lessons from Quantitative Easing: Much ado about so little? Abstract:It is difficult to measure the impact of the different episodes of quantitative easing (QE) undertaken since 2008 in the major advanced economies (the US, the UK and Japan). One can clearly discern QE in the expansion of the balance sheets of the central banks concerned, but the impact on (long-term) interest rates is difficult to isolate, given the global trend toward slower rates and the high degree of co-movement across major currency areas. For example, in the US, QE is credited with a strong fall in interest rates, but rates have also fallen as much in the euro area without the stimulus of QE until now. This simple finding implies that the studies that neglect the global trend might mistakenly credit QE with a fall in interest rates that was global and would have occurred anyway. The observation that QE did not have any impact on interest rate differentials is compatible with the fact that there is little evidence of a systematic effect of QE on the exchange rate. Moreover, the available academic studies find substantial impact when financial markets were in turmoil in 2008-09, but much smaller effects from the later QE operations. The medium-term impact of QE on growth and inflation seems to have been modest. It is too early to estimate the cost of exiting or reversing QE. The logic of the arguments for QE implies that the cost should be equal to the benefits of undertaking QE. Length: 32 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/WD406%20Current%20Account%20Core-Periphery%20Dualism.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10317 Template-Type: ReDIF-Paper 1.0 Author-Name: Cesaroni, Tatiana Author-Name: De Santis, Roberta Title: Current Account �Core-Periphery Dualism� in the EMU Abstract: Current account dispersion within EU member states has been increasing since the 1990s. Interestingly, the persistent deficits in many peripheral countries have not been accompanied by a significant growth process that is able to stimulate a long-run rebalancing, as neoclassical theory predicts. To shed light on the issue this paper investigates the determinants of eurozone current account imbalances, focusing on the role played by financial integration. The analysis considers two samples of 22 OECD and 15 EU countries; three time horizons corresponding to various steps in European integration; different control variables; and several panel econometric methods. The results suggest that within the OECD and EU groups, financial integration helped to explain CA deterioration in the peripheral countries, especially in the post-EMU period. The business cycle seems to have played a growing role over time, whereas the role of competiveness seems to have diminished. Length: 32 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/WD406%20Current%20Account%20Core-Periphery%20Dualism.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10317 Template-Type: ReDIF-Paper 1.0 Author-Name: Brender, Anton Author-Name: Pisani, Florence Author-Name: Gagna, Emile Title: Money, Finance and the Real Economy: What went wrong? Abstract: The functions of the financial system of a developed economy are often badly understood. This can largely be attributed to free-market ideology, which has spread the belief that leaving finance to its own devices would provide the best possible mechanism for allocating savings. The latest financial crisis has sparked the beginnings of a new awareness on this point, but it is far from having led to an improved understanding of the role of the financial institutions. For many people, finance remains more an enemy to be resisted than an instrument to be intelligently exploited. Its institutions, which issue and circulate money, play an important role in the working of the real economy that it would be imprudent to neglect. The allocation of savings, but also the level of activity and the growth rate depend on it. In this book, the authors carefully analyse the close links between money, finance and the real economy. In the process, they show why today the existence of a substantial potential of saving, instead of being an opportunity for the world economy, could threaten it with �secular stagnation�. Length: 120 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/Money_Finance_Real%20economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10290 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Title: The ECB�s QE: Time to break the doom loop between banks and their governments Abstract: The recent crises have shown that the eurozone countries� government debt is not immune to default. Applying a large-exposure requirement also to eurozone government debt would be a logical measure towards breaking the bank-government doom loop, given the low probability and high loss-given government default. But what would be the impact of the application of the large-exposure requirement on the banking sector as well as on government funding? This CEPS Policy Brief presents the results of a simulation exercise performed for 109 systemic banks in the eurozone, showing that their eurozone government debt portfolios would have to decrease by 3.2% or �63 billion, if a 50% of own-funds cap would be applied on large exposures. The eurozone central banks� demand for sovereign bonds under the extended asset purchase programme further creates momentum to start gradually implementing the restriction. Length: 13 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/PB328%20WPDG%20BreakingSovereignBankNexus.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10299 Template-Type: ReDIF-Paper 1.0 Author-Name: Baetens, Freya Title: Transatlantic Investment Treaty Protection � A Response to Poulsen, Bonnitcha and Yackee Abstract: An investment chapter in TTIP offers an unprecedented opportunity to reform and improve the system of investment law. If the EU and the US seize this opportunity, it would set an important precedent in treaty-drafting, allowing for the incorporation of public policy objectives, thereby protecting states� right to regulate. Ultimately, this type of concerted strategy is likely to be far stronger than the individual country strategy necessitated by the present system of over 3,000 bilateral treaties. The most important conclusion that should emerge from current discussions is that that there is a need for correct, timely and complete information for law- and policy-makers as well as the broader public, in relation to international investment law and procedures for investor-state dispute settlement (ISDS). Length: 16 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/SR103_ISDS_Baetens.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10297 Template-Type: ReDIF-Paper 1.0 Author-Name: Poulsen, Lauge Author-Name: Bonnitcha, Jonathan Author-Name: Yackee, Jason Title: Transatlantic Investment Treaty Protection Abstract: This paper presents an informal cost-benefit analysis of the inclusion of investment protection provisions, including investor-state arbitration, in an investment chapter in TTIP. The analysis is conducted from the perspective of the EU and its member states. It argues that there is little evidence to suggest that investor-state arbitration will provide the EU with meaningful benefits, such as increased foreign investment from the US. In contrast, investor-state arbitration may impose non-trivial costs, in the form of litigation expenses and reduced policy space. This is due to the huge volume of US investment that would be covered by the investment chapter, as well as the fact that an investment chapter would almost certainly give foreign investors greater rights than they currently enjoy under EU and member state law. We conclude that, from the perspective of the EU, the case for including investor-state arbitration in TTIP is weak. Although we do not conduct a cost-benefit analysis from the perspective of the US, such an analysis would likely raise similar issues. Length: 37 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/SR102_ISDS.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10295 Template-Type: ReDIF-Paper 1.0 Author-Name: Pelkmans, Jacques Author-Name: Correia de Brito, Anabe Title: Transatlantic MRAs: Lessons for TTIP? Abstract: It is striking that there is little or no mention in the TTIP debate so far of the US-EU Mutual Recognition Agreement (MRA) concluded in 1998. At the time, expectations of the gains from the MRA were high. One should expect the MRA to be instructive for TTIP and entail some lessons to be learned for today�s attempt to lower technical barriers to trade (TBTs) across the North Atlantic. We offer an analysis of the 1998 MRA, the difficulties in the prior negotiations and those during the implementation phase, the subsequent and present status of sectoral approaches. The MRA experience revealed clearly how difficult it is to accomplish the acceptance of all relevant aspects of conformity assessment of the trading partner for the mere purpose of testing and certifying export goods on the requirements of the importing economy. The MRA has succeeded only in a few sectors. However, the ambition in TTIP with respect to TBTs is said to go so much further. It is therefore important for all those involved or interested in TTIP to learn the lessons of this early exercise in lowering TBT costs. This paper reaches two main conclusions: i) the US-EU MRA was only partially successful and only for some one-fifth of the export flows at the time: a disappointing outcome and a far cry from the expectations of business and political leaders; and ii) the EU�s attempt to �balance� the negotiations in 1995 by bringing in three relatively competitive sectors did not work out � it was precisely there that problems accumulated. It is critical that domestic regulators must be satisfied during and after the negotiations that their pursuit of health, safety, environment and consumer protection objectives will not be watered down in any way. Lessons drawn include, among others: MRAs are not about regulatory change (by definition), but if initial regulatory cleavages between trading partners are too wide, conditions become so restrictive that parties may regard them as a denial of the very purpose of the MRA. There are incentives to opt for alternatives in the market for the formalised designation of conformity assessment bodies in the MRA and these are often cheaper and faster, while equally qualified. Even in heavily regulated sectors such as medicines and medical devices, the narrow MRA has been superseded by near-global forms of effective cost-reducing cooperative (i.e. not treaty-based) regulatory alignment, a confirmation of the OECD approach that governments should think in terms of an entire spectrum of forms of regulatory cooperation. Length: 23 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/SR101MRAs.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10298 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Teteryatnikova, Mariya Author-Name: Thum, Anna-Elisabeth Title: Does the growth in higher education mean a decline in the quality of degrees? Abstract: In this paper the authors construct a theory about how the expansion of higher education could be associated with several factors that indicate a decline in the quality of degrees. They assume that the expansion of tertiary education takes place through three channels, and show how these channels are likely to reduce average study time, lower academic requirements and average wages, and inflate grades. First, universities have an incentive to increase their student body through public and private funding schemes beyond a level at which they can keep their academic requirements high. Second, due to skill-biased technological change, employers have an incentive to recruit staff with a higher education degree. Third, students have an incentive to acquire a college degree due to employers� preferences for such qualifications; the university application procedures; and through the growing social value placed on education. The authors develop a parsimonious dynamic model in which a student, a college and an employer repeatedly make decisions about requirement levels, performance and wage levels. Their model shows that if i) universities have the incentive to decrease entrance requirements, ii) employers are more likely to employ staff with a higher education degree and iii) all types of students enrol in colleges, the final grade will not necessarily induce weaker students to study more to catch up with more able students. In order to re-establish a quality-guarantee mechanism, entrance requirements should be set at a higher level. Length: 31 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/WD%20405%20Growth%20of%20higher%20education%20decline%20in%20quality%20of%20degrees.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10258 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Maselli, Ilaria Author-Name: Veselkova, Marcela Title: Green, Pink & Silver? The Future of Labour in Europe, Vol. 2 Abstract: Work is both an essential part of our daily lives and one of the major policy concerns across Europe. In this second volume of The Future of Labour in Europe, the authors explain in accessible language the findings of the NEUJOBS project on the job prospects of key industries and groups of people. They use three colours � green, pink and silver � to pinpoint areas with the largest challenges as well as the greatest potential. The conclusions are addressed to policy-makers, the business world, journalists, fellow academics and to anyone interested in the shape, size and character of the labour markets of tomorrow. Length: 319 pages Creation-Date: 2015-03 File-URL:http://www.ceps.eu/system/files/NEUJOBS%20Future%20of%20Labour%20Vol%20II_Final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10268 Template-Type: ReDIF-Paper 1.0 Author-Name: Beckmann, Joscha Author-Name: Belke, Ansgar Author-Name: Dreger, Christian Title: The Relevance of International Spillovers and Asymmetric Effects in the Taylor Rule Abstract: Deviations of policy interest rates from the levels implied by the Taylor rule have been persistent before the financial crisis and increased especially after the turn of the century. Compared to the Taylor benchmark, policy rates were often too low. This paper provides evidence that both international spillovers, for instance international dependencies in the interest rate-setting of central banks, and nonlinear reaction patterns can offer a more realistic specification of the Taylor rule in the main industrial countries. The inclusion of international spillovers and, even more, nonlinear dynamics improves the explanatory power of standard Taylor reaction functions. Deviations from Taylor rates tend to be smaller and their negative trend can be eliminated. Length: 19 pages Creation-Date: 2015-02 File-URL:http://www.ceps.eu/system/files/WD403TaylorRule.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:10029 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Giovannini, Alessandro Author-Name: Piedrafita, Sonia Title: Enhancing the Legitimacy of EMU Governance Abstract: This CEPS Special Report investigates ways to enhance the legitimacy of economic governance in the Economic and Monetary Union (EMU) without introducing Treaty changes. It suggests changes in the governance framework at both the institutional and economic level. Input-oriented legitimacy can be improved by increasing parliamentary oversight on decisions related to EMU and increasing the accountability of the Eurogroup. Output-oriented legitimacy can be improved by strengthening the ability of EMU to reduce the emergence of negative externalities and to mitigate their impact, through market and fiscal risk-sharing mechanisms. Length: 92 pages Creation-Date: 2014-12 File-URL:http://www.ceps.eu/system/files/CEPS%20SR%2098%20Enhancing%20the%20Legitimacy%20of%20the%20Euro%20Area.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9914 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: ECB Banking Supervision and beyond Abstract: With publication of the results of its Comprehensive Assessment at the end of October 2014, the European Central Bank has set the standard for its new mandate as supervisor. But this was only the beginning. The heavy work started in early November, with the day-to-day supervision of the 120 most significant banks in the eurozone under the Single Supervisory Mechanism. The centralisation of the supervision in the eurozone will pose a number of challenges for the ECB in the coming months and years ahead. This report analyses these challenges in detail, drawing on the discussions and presentations in the CEPS Task Force on ECB Banking Supervision, and reinforced by extensive research undertaken by the rapporteur. Jos� Mar�a Rold�n, Presidente, Asociaci�n Espa�ola de Banca, served as Chairman of the Task Force. Length: 104 pages Creation-Date: 2014-12 File-URL:http://www.ceps.eu/system/files/ECB%20Banking%20Supervision.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9897 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Maselli, Ilaria Title: An Unemployment Insurance Scheme for the Euro Area: A simulation exercise of two options Abstract: This study offers an in-depth economic analysis of the two main proposals for the creation of a European unemployment insurance scheme. One proposes the creation of a harmonised European unemployment benefit scheme that would apply automatically to every eligible unemployed person. The alternative, termed �reinsurance� here, would transfer funds to national unemployment insurance schemes to finance benefits from the centre to the periphery when unemployment is measurably higher than normal. The rationale behind these proposals is to set up an EU-level shock absorber to overcome coordination failures and the crisis-budget constraints of individual countries. The authors consider the possible trade-offs and challenges of, for example, the definition of the trigger, the fiscal rule and the harmonisation of national benefits. They conclude that while both options are viable, �reinsurance� offers a stronger stabilisation effect for the same amount of European distribution. Length: 74 pages Creation-Date: 2014-12 File-URL:http://www.ceps.eu/system/files/CEPS%20Special%20Report%20An%20EU%20Unemployment%20Insurance%20Scheme%20Beblavy%20and%20Masselli.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9889 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: ECB Banking Supervision and beyond Abstract: With publication of the results of its Comprehensive Assessment at the end of October 2014, the European Central Bank has set the standard for its new mandate as supervisor. But this was only the beginning. The heavy work started in early November, with the day-to-day supervision of the 120 most significant banks in the eurozone under the Single Supervisory Mechanism. The centralisation of the supervision in the eurozone will pose a number of challenges for the ECB in the coming months and years ahead. This report analyses these challenges in detail, drawing on the discussions and presentations in the CEPS Task Force on ECB Banking Supervision, and reinforced by extensive research undertaken by the rapporteur. Jos� Mar�a Rold�n, Presidente, Asociaci�n Espa�ola de Banca, served as Chairman of the Task Force. Length: 104 pages Creation-Date: 2014-12 File-URL:http://www.ceps.eu/system/files/ECB%20Banking%20Supervision_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9897 Template-Type: ReDIF-Paper 1.0 Author-Name: Pelkmans, Jacques Author-Name: Renda, Andrea Title: Does EU regulation hinder or stimulate innovation? Abstract: One frequently hears the question posed in the title to this report, but there is little systematic analytical literature on the issue. Fragmented evidence or anecdotes dominate debates among EU regulatory decision-makers and in European business, insofar as there is a genuine debate at all. This CEPS Special Report focuses on the multi-faceted, ambiguous and complex relationship between (EU) regulation and innovation in the economy, and discusses the innovation-enhancing potential of certain regulatory approaches as well as factors that tend to reduce incentives to innovate. It adopts an 'ecosystem' approach to both regulation and innovation, and study the interactions between the two ecosystems. This general analysis and survey are complemented by seven case studies of EU regulation enabling and disabling innovation, two horizontal and five sectoral ones. The case studies are preceded by a broader contextual analysis of trends in EU regulation over the last three decades. These trends show the significant transformation of the nature as well as improvement of the quality of EU regulation, largely in the deepened internal market, which tend to have a favourable and lasting effect on the rate of innovation in the EU (other things being equal). Among the findings include the following: Regulation can at times be a powerful stimulus to innovation. EU regulation matters at all stages of the innovation process. Different types of regulation can be identified in terms of innovation impact: general or horizontal, innovation-specific and sector-specific regulation. More prescriptive regulation tends to hamper innovative activity, whereas the more flexible EU regulation is, the better innovation can be stimulated. Lower compliance and red-tape burdens have a positive effect on innovation. The authors recommend incorporating a specific test on innovation impacts in the ex-ante impact assessment of EU legislation as well as in ex-post evaluation. There is ample potential for fostering innovation by reviewing the EU regulatory acquis. Length: 38 pages Creation-Date: 2014-11 File-URL:http://www.ceps.eu/system/files/No%2096%20EU%20Legislation%20and%20Innovation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9822 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Investment as the key to recovery in the euro area? Abstract: Investment has declined in the euro area since the start of the economic and financial crisis, but this does not mean that there is necessarily an �investment gap�, explains Daniel Gros in this CEPS Policy Brief. Investment was probably above a sustainable level due to the credit boom before 2007. Moreover, the fall in the euro area�s potential growth - due to a combination of a sharp demographic slowdown and lower total factor productivity (TFP) growth - should also lead to a permanently lower investment rate. Increasing the investment rate might thus be the wrong target for economic policy. The author advises that the aim of economic policy should be to increase consumption, rather than investment overall. Increasing infrastructure investment might be justified in some member countries, but it is not a �free lunch� when efficiency levels are low, which seems to be the case in some of the financially stressed euro area countries. Length: 12 pages Creation-Date: 2014-11 File-URL:http://www.ceps.eu/system/files/PB%20326%20DG%20What%20role%20for%20investment%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9821 Template-Type: ReDIF-Paper 1.0 Author-Name: De Groen, Willem Pieter Title: Was the ECB�s Comprehensive Assessment up to standard? Abstract: The Comprehensive Assessment conducted by the European Central Bank (ECB) represents a considerable step forward in enhancing transparency in euro-area banks� balance sheets. The most notable progress since the previous European stress test has been the harmonisation of the definition of non-performing loans and other concepts as well as uncovering hidden losses, which resulted in a �34 billion aggregate capital-charge net of taxes. Despite this tightening, most banks were able to meet the 5.5% common equity tier 1 (CET1) threshold applied in the test, which suggests that the large majority of the euro-area banks have improved their financial position sufficiently that they should no longer be constrained in financing the economy. As shown in this CEPS Policy Brief by Willem Pieter de Groen, however, the detailed results provide a more nuanced picture: there remain a large number of the banks in the euro area that are still highly leveraged and in many cases unable to meet the regulatory capital requirements that will be introduced in the coming years under the adverse stress test scenario. Length: 20 pages Creation-Date: 2014-11 File-URL:http://www.ceps.eu/system/files/PB%20No%20325%20WPdG%20ECB%20Comprehensive%20Assessment_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9795 Template-Type: ReDIF-Paper 1.0 Author-Name: de Vries, Anthonius W. Author-Name: Portela, Clara Author-Name: Guijarro-Usobiaga, Borja Title: Improving the Effectiveness of Sanctions: A Checklist for the EU Abstract: The increasingly frequent imposition of sanctions by the EU over the past decade has not been accompanied by a thorough pre-assessment and contingency planning stage, which, argue the authors, has led to the formulation of suboptimal sanctions regimes. This paper proposes a practical pre-assessment and contingency planning of sanctions � a checklist, which departs from the �ad hoc-ism� of current decision-making on sanctions. The checklist includes the identification of resources linked to the objectionable policies; the leverage of the EU; the costs to the EU; the legality of the measures; their unintended effects; the expected contribution towards EU goals; their coherence with overall EU external relations; and the communication of these policies. Length: 17 pages Creation-Date: 2014-11 File-URL:http://www.ceps.eu/system/files/CEPS%20Special%20Report%20No%2095%20SanctionsChecklistDeVriesPortelaGuijarri.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9792 Template-Type: ReDIF-Paper 1.0 Author-Name: Renda, Andrea Title: The Review of the Europe 2020 Strategy: From austerity to prosperity? Abstract: The future of Europe 2020 lies in its ability to become the protagonist of a new season in EU policy, in which countries can apply for more flexibility only if they can prove both structural reform and good governance, argues the author. By establishing a �new deal� among member states, an improved Europe 2020 strategy can help Europe to complete its transition from austerity to prosperity. This Policy Brief makes the case for approaching the mid-term review of Europe 2020 on three different levels: i) the revision and update of the content of the Europe 2020 strategy, including its objectives, targets and major flagship initiatives; ii) the reform of the governance of the strategy; and iii) the repositioning of the strategy at the core of EU policy. The content of the strategy should be revised to include initiatives on infrastructure, the internal market and administrative capacity at all levels of government. The author sets out a number of policy recommendations for the European Commission and the member states to help realise these objectives. Length: 13 pages Creation-Date: 2014-10 File-URL:http://www.ceps.eu/system/files/CEPS%20PB%20322%20AR%20on%20Europe%202020%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9745 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: De Groen, Willem Pieter Title: Banking Business Models Monitor 2014: Europe Abstract: CEPS and the International Observatory on Financial Services Cooperatives (IOFSC) at HEC Montreal have initiated an annual monitoring exercise on banking business models in the EU. Based on their balance sheet structures, 147 European banks that account for more than 80% of the industry assets were categorised in four business models. The Monitor emphasises the ownership structures and assesses the financial and economic performance, resilience and robustness, before, during and after the financial and economic crises across retail diversified-, retail focused-, investment-, and wholesale oriented banks. Inter alia, this edition of the Monitor finds that banks that engage more in traditional retail banking activities with a mix of funding sources fared well as compared to other bank models during the different phases of the crisis. Length: 68 pages Creation-Date: 2014-10 File-URL:http://www.ceps.eu/system/files/Banking%20Business%20Models%202014.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9713 Template-Type: ReDIF-Paper 1.0 Author-Name: Pelkmans, Jacques Author-Name: Lejour, Arjan Author-Name: Schrefler, Lorna Author-Name: Mustilli, Federica Author-Name: Timini, Jacopo Title: The Impact of TTIP: The underlying economic model and comparisons Abstract: What are the economic and other impacts of the Transatlantic Trade and Investment Partnership? At the request of the European Parliament, CEPS has provided an appraisal of the TTIP Impact Assessment carried out by the European Commission, with special elaboration of the underlying economic model. The methodology applied by the Centre for Economic Policy Research (CEPR) for this economic modelling is analysed in depth, together with the assumptions used to make TTIP amenable to an economic appraisal. The research paper also compares the IA on TTIP with selected previous empirical economic assessments of EU trade agreements and with a set of alternative studies on TTIP itself. In reading our findings, two central caveats should be kept in mind that affect any analysis of the CGE model included in the European Commission�s Impact Assessment. First, TTIP is a rather unusual bilateral trade agreement; and second, TTIP is so wide-ranging that an alternative approach, such as the so-called �partial� (equilibrium) approach � already a second-best solution � would be totally inappropriate to the case under examination. Length: 76 pages Creation-Date: 2014-10 File-URL:http://www.ceps.eu/system/files/No%2093%20Appraisal%20of%20IA%20on%20TTIP.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9710 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Busse, Matthias Title: Making the Most of EU Labour Mobility Abstract: This Task Force report combines the most recent data from Eurostat with national sources to highlight the most significant labour mobility trends within the EU. Overall, the recent recession has not induced previously immobile workers to become more mobile, at least not in the larger member states. Mobility flows have moved away from crisis countries in response to the economic downturn but the desired increase in south-north mobility has not been observed so far. This leads the authors to conclude that successfully fostering mobility within EU15 countries requires tremendous effort. It is important that workers who are willing and able to move are not discouraged from doing so by unnecessary barriers to mobility. Improving the workings of the EURES system and its online job-matching platform; better cooperation of national employment agencies; streamlining the recognition of qualifications; and supporting language training within the EU are important contributions to labour mobility. The authors conclude that the EU is right to defend the free movement of workers. National governments should keep in mind that their ability to tap into an attractive foreign labour supply also hinges upon the perception of how mobile workers are treated in destination countries. If the political imperative requires regulations to be changed, such as the one guiding the coordination of social security, it is essential that no new mobility barriers are put in place. Length: 52 pages Creation-Date: 2014-10 File-URL:http://www.ceps.eu/system/files/CEPS%20Making%20the%20Most%20of%20Labour%20Mobility%20Oct-3.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9701 Template-Type: ReDIF-Paper 1.0 Author-Name: Marcu, Andrei Title: The Framework for Various Approaches and the New Market Mechanism Abstract: In its conclusions in June 2014, the 40th session of the Subsidiary Body for Scientific and Technological Advice (SBSTA 40) invited submissions on the Framework for Various Approaches (FVA), New Market Mechanism (NMM) and Non Market Approaches (NMA) by 22 September 2014. This document is the submission by the Centre from European Policy Studies (CEPS) in response to that invitation, and covers both FVA and NMM. Length: 13 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/No%2090%20CMF%20on%20FVA%20and%20NMM.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9694 Template-Type: ReDIF-Paper 1.0 Author-Name: Marcu, Andrei Title: The Market Stability Reserve in Perspective Abstract: This Special Report aims to contribute to the debate on the Market Stability Reserve (MSR), which was introduced by the European Commission in a legislative proposal of January 2014. The MSR would introduce a degree of supply management into the EU Emissions Trading System (ETS). This report is the result of various meetings with ETS-stakeholders throughout 2014. It discusses the MSR�s rationale and reviews the different options available for its design, governance and timing, as well as its consequences for the functioning of the EU ETS and the EU�s climate and energy policy. Length: 18 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/No%2091%20CMF%20Market%20Stability%20Reserve_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9695 Template-Type: ReDIF-Paper 1.0 Author-Name: Cenusa, Denis Author-Name: Emerson, Michael Author-Name: Kovziridse, Tamara Author-Name: Movchan, Veronika Title: Russia�s Punitive Trade Policy Measures towards Ukraine, Moldova and Georgia Abstract: While EU and US sanctions against Russia over its aggression in Ukraine, and Russia�s counter-sanctions, are much discussed due to their evident political significance, less attention has been given to Russia�s punitive sanctions against the three Eastern European states � Ukraine, Moldova and Georgia � that have signed with the EU Association Agreements (AA), which include Deep and Comprehensive Free Trade Area (DCFTA) provisions. This paper therefore documents these trade policy restrictions and embargoes imposed by Russia, and provides some first indications of their impact. The immediate impact on trade flows, especially for agri-food products, has been substantial, albeit with some leakage through Belarus. The main instrument for the Russian measures has been allegations of non-conformity with Russian technical standards, although the correlation of these allegations with movements in Russia�s geopolitical postures makes it obvious that the Russian technical agencies are following political guidelines dressed up as scientific evidence. These measures also push the three states into diversifying their trade marketing efforts in favour of the EU and other world markets, with Georgia already having taken significant steps in this direction, since in its case the Russian sanctions date back to 2006. In the case of Ukraine, Russia�s threat to cancel CIS free trade preferences infiltrated trilateral talks between the EU, Ukraine and Russia, leading on 12 September to their proposed postponement until the end of 2015 of the �provisional� implementation of a large part of the AA/DCFTA. This was immediately followed on 16 September by ratification of the AA/DCFTA by both the Rada in Kyiv and the European Parliament, which will lead to its full and definitive entry into force when the 28 EU member states have also ratified it. However Putin followed the day after with a letter to Poroshenko making an abusive interpretation of the 12 September understanding. Length: 13 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/WD%20300%20Punitive%20Trade%20Measures%20by%20Russia.pdf%20JHA%20Policy_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9668 Template-Type: ReDIF-Paper 1.0 Author-Name: Carrera, Sergio Author-Name: Guild, Elspeth Title: The Juncker Commission: A New Start for EU Justice and Home Affairs Policy? Abstract: Does Jean-Claude Juncker�s Commission herald a new start for Justice and Home Affairs cooperation in the EU? This essay outlines the main structural and thematic changes introduced by the new Commission, in particular those with direct or indirect relevance to Justice and Home Affairs or to the Area of Freedom, Security and Justice. The authors also reflect on what the new institutional configuration might mean for the substantive work of the Commission services and for their intra- and inter-institutional relations. They conclude with a set of policy priorities for the new European Commission. Length: 15 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/Essay%20S%20Carrera%20and%20E%20Guild%20A%20New%20Commission%20a%20New%20JHA%20Policy_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9649 Template-Type: ReDIF-Paper 1.0 Author-Name: Eisele, Katharina Title: The US Labour Immigration Scheme � All about being attractive? EU Perceptions and Stakeholders� Perspectives Reviewed Abstract: Labour immigration schemes that effectively attract qualified immigrant workers are a policy priority for many governments. But what are �attractive� labour immigration schemes and policies? To whom are (or should) such policies (be) attractive? In Europe, the US is often portrayed as one of the most �attractive� countries of immigration � if not the most �attractive�. This paper aims to analyse and provide a better understanding of the elements of the US immigration system that are supposedly attractive to foreign workers, by examining key features of the current and prospective US labour immigration rules. The paper finds that �attractiveness� in this policy context is a highly malleable and flexible concept: What might be �attractive� to one key stakeholder might not be to another. Length: 25 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/No%2067%20Eisele%20US%20Labour%20Immigration.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9642 Template-Type: ReDIF-Paper 1.0 Author-Name: Renman, Vilde Author-Name: Conroy, Caroline Title: Advances in EU Gender Equality: Missing the mark? Abstract: Gender balance has been a particularly salient issue in the recent process of formulating the list of designated commissioners. Jean-Claude Juncker�s success, as President-elect of the European Commission, in securing the designation of nine women as commissioners should be seen in perspective. Female representation in top EU positions remains low. This paper analyses the EP committees, finding a clear divergence in legislative influence between committees chaired by men and women. Although female political representation has been increasing, this is happening at a very slow pace and the most influential leadership roles in the EP remain dominated by men. This raises questions of the possible need to resort to stronger measures to improve female representation in the EU institutions. Length: 12 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/EPIN_41%20Renman%20and%20Conroy%20on%20Gender%20Equality.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9639 Template-Type: ReDIF-Paper 1.0 Author-Name: Blockmans, Steven Title: War Crimes and Shifting Borders in the Middle East Abstract: The summer of 2014 saw an explosion of violence in the Middle East. Geopolitically, the advance of the Islamic State and the emergence of a de facto independent Iraqi Kurdistan are the most important recent developments. Any way out of the quagmire will now require a grand bargain � one that establishes a new security order in the whole region, draws borders accordingly and offers transitional justice to the victims of the many atrocities that have taken place. Length: 7 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/CEPS%20Essay%20No%2014%20SB%20Burning%20sand%2011-9%20.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9633 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Maselli, Ilaria Author-Name: Veselkova, Marcela Title: Let�s get to Work! The Future of Labour in Europe Abstract: Work is both an essential part of our daily lives and one of the major policy concerns across Europe. Yet the public debate of labour issues is all too often driven by political rhetoric and short-term concerns. In this volume, researchers from seven European countries explain, in accessible language, the findings from various social sciences and what they mean for the future of labour in Europe. The conclusions they reach are addressed to policy-makers, the business world, journalists and fellow academics, and to anyone interested in the shape, size and character of the labour markets of tomorrow. �Many valuable synergies emerged between the various strands of NEUJOBS and the in-house analytical work of the European Commission.� L�szl� Andor, European Commissioner for Employment, Social Affairs and Inclusion. Length: 267 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/NEUJOBS%20Future%20of%20Labour%20Vol%20I_FINAL.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9486 Template-Type: ReDIF-Paper 1.0 Author-Name: Baas, Timo Author-Name: Belke, Ansgar Title: Labour Market Reforms and Current Account Imbalances: Beggar-thy-neighbour policies in a currency union? Abstract: Member countries of the Economic and Monetary Union (EMU) initiated wide-ranging labour market reforms in the last decade. This process is ongoing as countries that are faced with serious labour market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggar-thy-neighbour policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyse the impact of labour market reforms on the transmission of macroeconomic shocks in both non-reforming and reforming countries. By analysing the impact of reforms on foreign debt, we contribute to the debate on whether labour market reforms increase or reduce current account imbalances. Length: 38 pages Creation-Date: 2014-09 File-URL:http://www.ceps.eu/system/files/WD399%20Belke%20and%20Baas.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9621 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Author-Name: Peirce, Fabrizia Title: Flexibility clauses in the Stability and Growth Pact: No need for revision Abstract: After an in-depth review of the Stability and Growth Pact, the authors of this CEPS Policy Brief conclude that there is sufficient flexibility within the Pact to accommodate any unexpected drop in economic activity and has ample margin to finance structural reforms during transition to the new regime. Length: 14 pages Creation-Date: 2014-07 File-URL:http://www.ceps.be/system/files/PB%20319%20Flexibility%20in%20SGP%2024%20July%20formatted.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9514 Template-Type: ReDIF-Paper 1.0 Author-Name: Fuertes, Ana-Maria Author-Name: Kalotychou, Elena Author-Name: Saka, Orkun Title: ECB Policy and Eurozone Fragility: Was De Grauwe Right? Abstract: The authors test Paul De Grauwe�s eurozone fragility hypothesis using a time window around the announcement of the Outright Monetary Transactions (OMT) programme. The findings reveal significant contagion from Spain to other eurozone countries, but solely during the pre-announcement period. The authors conclude that in this case the OMT programme has succeeded in mitigating the self-fulfilling dynamics within the eurozone. Length: 35 pages Creation-Date: 2014-06 File-URL:http://www.ceps.eu/system/files/WD397%20Saka%20et%20al%20ECB%20Policy%20and%20Eurozone%20Fragility_Final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9414 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Author-Name: Bruzzone, Ginevra Author-Name: Cassella, Miriam Title: Bail-in Provisions in State Aid and Resolution Procedures: Are they consistent with systemic stability? Abstract: This CEPS Policy Brief examines the provisions for bail-in in the European Union � that is, the principle whereby any public measure to recapitalise a bank with insufficient prudential capital must be preceded by a write-down or conversion into equity of creditors� claims � in state aid policies and in the new resolution framework for failing banks, with two aims: i) to assess whether and how they are coordinated and ii) more importantly, whether they address satisfactorily the question of systemic stability that may arise when investors fear that creditors� claims are likely to be bailed-in in a bank crisis. The issue is especially relevant in the present context, as the comprehensive assessment exercise underway for EU banks falling under the direct supervision of the European Central Bank may lead supervisors to require substantial capital injections simultaneously for many of the banks involved, possibly shaking investors� confidence across EU banking markets. The authors conclude that the two sets of rules are, broadly speaking, mutually consistent and that they already contain sufficient safeguards to address systemic stability concerns. However, the balance of the elements underpinning the European Commission�s decisions in individual cases may not be clear to bank creditors and potential investors in financial markets. The impression of unneeded rigidity on this very sensitive issue has been heightened by official statements over-emphasising that each case will be assessed individually under competition rules, thus feeding the concern that the systemic dimension of the issue may have been underestimated. Therefore, further clarification by the Commission may be needed on how the various criteria will be applied during the ongoing transition to banking union � perhaps through a new communication completing the state aid framework for banks in view of the adoption of the new resolution rules. Length: 10 pages Creation-Date: 2014-05 File-URL:http://www.ceps.eu/system/files/PB%20318%20SM%20et%20al%20Bail-in%20Provisions%20in%20State%20Aid%20and%20Resolution%20Procedures%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9279 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: Disappearing government bond spreads in the eurozone � Back to normal? Abstract: Since the announcement of the Outright Monetary Transactions (OMT) programme by Mario Draghi, President of the ECB, in 2012, the government bond spreads began a strong decline. This paper finds that most of this decline is due to the positive market sentiments that the OMT programme has triggered and is not related to underlying fundamentals, such as the debt-to-GDP ratios or the external debt position that have continued to increase in most countries. The authors even argue that the market�s euphoria may have gone too far in taking into account the same market fundamentals. They conclude with some thoughts about the future governance of the OMT programme. Length: 12 pages Creation-Date: 2014-05 File-URL:http://www.ceps.eu/system/files/CEPS%20WD%20396.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9249 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Oeking, Anne Author-Name: Setzer, Ralph Title: Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries Abstract: The significant gains in export market shares made in a number of vulnerable euro-area crisis countries have not been accompanied by an appropriate improvement in price competitiveness. This paper argues that, under certain conditions, firms consider export activity as a substitute for serving domestic demand. The strength of the link between domestic demand and exports is dependent on capacity constraints. Our econometric model for six euro-area countries suggests domestic demand pressure and capacity-constraint restrictions as additional variables of a properly specified export equation. As an innovation to the literature, we assess the empirical significance through the logistic and the exponential variant of the non-linear smooth transition regression model. We find that domestic demand developments are relevant for the short-run dynamics of exports in particular during more extreme stages of the business cycle. A strong substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade. Length: 34 pages Creation-Date: 2014-05 File-URL:http://www.ceps.eu/system/files/WD395%20Belke%20et%20al%20Exports%20%2526%20Capacity%20Constraints.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9228 Template-Type: ReDIF-Paper 1.0 Author-Name: Mizsei, K�lm�n Author-Name: Kullmann, �d�m Title: Struggling with an Opportunity: The first 10 years with the EU for Central Europe and the Baltics Abstract: In their new CEPS Essay, K�lm�n Mizsei and �d�m Kullmann offer some interesting and instructive insights from the experience in the newest member states following their accession 10 years ago for improving the effectiveness with which the EU structural and cohesion funds are spent. Length: 4 pages Creation-Date: 2014-05 File-URL:http://www.ceps.eu/system/files/CEPS%20Essay%20No%2012%20NMS%20at%2010.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9220 Template-Type: ReDIF-Paper 1.0 Author-Name: N��ez Ferrer, Jorge Author-Name: Katarivas, Moni Title: What are the effects of the EU budget: Driving force or drop in the ocean? Abstract: The study presents an overview of the impact of the main investment tools of the EU budget. The focus is on the increasing role of the financial instruments, which are fundamentally changing the budget�s nature and reach. Through these instruments, the EU can invest more efficiently in more areas and mobilise a multiple of funds. The EU budget has the potential to influence the European economy much more than its modest size in terms of GDP may suggest. Length: 40 pages Creation-Date: 2014-04 File-URL:http://www.ceps.eu/system/files/SR%20No%2086%20Effects%20of%20the%20EU%20Budget_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9197 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Restarting Ukraine�s Economy Abstract: Notes Regardless of whether Ukraine is �lost�, or who lost it, Daniel Gros finds in this new Commentary that the country can still offer an attractive future for all of its citizens if unavoidable economic reforms can be made compatible with regional cohesion. He urges the EU to play an essential role in the process by opening its market and providing funding and technical assistance in crucial areas. Length: 2 pages Creation-Date: 2014-04 File-URL:http://www.ceps.eu/system/files/DG%20Restarting%20Ukraine%27s%20economy.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9152 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Title: The Global Economy in 2030: Trends and Strategies for Europe Abstract: This groundbreaking study concentrates on a set of critical economic factors that will shape future economic growth at the global level and offers a description of the possible evolution of their reach and scope. Our goal in pursuing this research is not to make precise predictions about growth rates or the size of individual economies, but to provide a guide for EU policy-makers by presenting an assessment of the possible implications of such trends for the global economy and the policy challenges they raise for Europe. In an attempt to respond to this need, this study concentrates on a set of critical economic factors that will shape future economic growth at the global level and offers a description of the possible evolution of their reach and scope, which often go beyond the purely economic dimension. Our ultimate goal is to provide a guide for policy-makers by presenting an assessment of the possible implications of such trends for the global economy and the policy challenges they raise for Europe. Length: 200 pages Creation-Date: 2014-04 File-URL:http://www.ceps.eu/system/files/Global%20Economy%20in%202030_small.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9142 Template-Type: ReDIF-Paper 1.0 Author-Name: N��ez Ferrer, Jorge Author-Name: Katarivas, Moni Title: What are the effects of the EU budget: Driving force or drop in the ocean? Abstract: The study presents an overview of the impact of the main investment tools of the EU budget. The focus is on the increasing role of the financial instruments, which are fundamentally changing the budget�s nature and reach. Through these instruments, the EU can invest more efficiently in more areas and mobilise a multiple of funds. The EU budget has the potential to influence the European economy much more than its modest size in terms of GDP may suggest. Length: 40 pages Creation-Date: 2014-04 File-URL:http://www.ceps.eu/system/files/SR%20No%2086%20Effects%20of%20the%20EU%20Budget_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9197 Template-Type: ReDIF-Paper 1.0 Author-Name: Belke, Ansgar Author-Name: Oeking, Anne Author-Name: Setzer, Ralph Title: Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries Abstract: The significant gains in export market shares made in a number of vulnerable euro-area crisis countries have not been accompanied by an appropriate improvement in price competitiveness. This paper argues that, under certain conditions, firms consider export activity as a substitute for serving domestic demand. The strength of the link between domestic demand and exports is dependent on capacity constraints. Our econometric model for six euro-area countries suggests domestic demand pressure and capacity-constraint restrictions as additional variables of a properly specified export equation. As an innovation to the literature, we assess the empirical significance through the logistic and the exponential variant of the non-linear smooth transition regression model. We find that domestic demand developments are relevant for the short-run dynamics of exports in particular during more extreme stages of the business cycle. A strong substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade. Length: 34 pages Creation-Date: 2014-05 File-URL:http://www.ceps.eu/system/files/WD395%20Belke%20et%20al%20Exports%20%2526%20Capacity%20Constraints.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9228 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The EMS Crisis of the 1990s: Parallels with the present crisis? Abstract: The EMS crisis of the 1990s illustrated the importance of a lack of confidence in price or exchange rate stability, whereas the present crisis illustrates the importance of a lack of confidence in fiscal sustainability. Theoretically the difference between the two should be minor since, in terms of the real return to an investor, the loss of purchasing power can be the same when inflation is unexpectedly high, or when the nominal value of government debt is cut in a formal default. Experience has shown, however, that expropriation via a formal default is much more disruptive than via inflation. The paper starts by providing a brief review of the EMS crisis, emphasising that the most interesting period might be the �post-EMS� crisis of 1993-95. It then reviews in section 2 the crisis factors, comparing the EMS crisis to today�s euro crisis. Section 3 outlines the main analytical issue, namely the potential instability of high public debt within and outside a monetary union. Section 4 then compares the pressure on public finance coming from the crises for the case of Italy. Section 5 uses data on �foreign currency� debt to disentangle expectations of devaluation/inflation from expectations of default. Section 6 concludes. Length: 12 pages Creation-Date: 2014-03 File-URL:http://www.ceps.eu/system/files/WD393%20DG%20EMS%20Crisis%20of%20the%201990s.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9119 Template-Type: ReDIF-Paper 1.0 Author-Name: Barnebeck Andersen, Thomas Author-Name: Malchow-M�ller, Nikolaj Author-Name: Nordvig, Jens Title: Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession Abstract: Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates weathered the crisis much better than countries with other monetary regimes, predominantly countries with fixed exchange rates. Part of this difference in growth performance reflects differences in export performance during the initial years of the crisis, which in turn can be explained by real exchange rate depreciations. However, IT seems also to confer other benefits on the countries above and beyond the effects from currency depreciation. Length: 29 pages Creation-Date: 2014-03 File-URL:http://www.ceps.eu/system/files/WD394%20Andersen%20et%20al%20Inflation%20Targeting.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9116 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Author-Name: Belke, Ansgar Author-Name: Coutinho, Leonor Author-Name: Giovannini, Alessandro Title: Implementation of the Macroeconomic Adjustment Programmes in the Euro Area: State-of-Play Abstract: Two of the four macroeconomic adjustment programmes � in Portugal and Ireland � can be considered a success in the sense that the initial expectations in terms of adjustment, both fiscal and external, were broadly fulfilled. A rebound based on exports has taken hold in these two countries, but a full recovery will take years. In Greece the initial plans were insufficient. While the strong impact of the fiscal adjustment on demand could have been partially anticipated at the time, the resistance to structural reforms was more surprising and remains difficult to cure. The fiscal adjustment is now almost completed, but the external adjustment has not proceeded well. Exports are stagnating despite impressive falls in wage costs. In Cyprus, the outcome has so far been less severe than initially feared. It is still too early to find robust evidence in any country that the programmes have increased the long-term growth potential. Survey-based evidence suggests that structural reforms have not yet taken hold. The EU-led macroeconomic adjustment programmes outside the euro area (e.g. Latvia) seem to have been much stricter, but the adjustment was quicker and followed by a stronger rebound. Length: 79 pages Creation-Date: 2014-03 File-URL:http://www.ceps.eu/system/files/Macroeconomic%20Adjustment%20Programmes%20in%20Euro%20Area%20e-book.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:9017 Template-Type: ReDIF-Paper 1.0 Author-Name: Biggs, Michael Author-Name: Mayer, Thomas Title: Latvia and Greece: Less is more Abstract: Despite considerable differences, there were also many similarities in economic performance between Latvia and Greece before their respective adjustment crises. After the immediate crisis, however, economic activity rebounded sharply in Latvia but continued to contract in Greece. This paper argues that this difference was due primarily to developments in credit. In Latvia credit growth fell sharply, and the economy was deleveraging aggressively by 2009. When the pace of deleveraging started to stabilise, the rebound in the credit impulse caused domestic demand growth to recover. Real GDP has increased about 20% since reaching its trough in the third quarter of 2009. Length: 12 pages Creation-Date: 2014-02 File-URL:http://www.ceps.eu/system/files/HLB%20Biggs%20%2526%20Mayer%20Latvia%20and%20Greece_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8922 Template-Type: ReDIF-Paper 1.0 Author-Name: Arnberg, S�ren Author-Name: Barslund, Mikkel Title: The Crowding-out Effect of Mandatory Labour Market Pension Schemes on Private Savings: Evidence from renters in Denmark Abstract: This paper aims to estimate the crowding-out effect of the Danish mandatory labour market pension reforms begun in 1993 on the level of total household savings for renters. The effect is identified via a large panel of individual administrative records utilising the differences in speed, timing and sectoral coverage of the implementation of the reform in the period 1997 to 2005. Little substitutability was found between current mandatory labour market pension savings and private voluntary savings. Each euro paid into mandatory labour market pension accounts results in a reduction in private savings of approximately 0 to 30 cents, depending on age. This low rate of substitution is only, to a minor extent, explained by liquidity constraints. The results point to mandatory pension savings having a large effect on total household savings. Thus, pension reforms that introduce mandatory savings have macroeconomic implications. Length: 25 pages Creation-Date: 2014-02 File-URL:http://www.ceps.eu/system/files/WD389%20Arnberg%20%2526%20Barslund%20Pension%20Crowding%20Out%20formatted.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8911 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: A European Glass-Steagall to preserve the single market Abstract: In his assessment of the EU proposal on banking structural reform, unveiled on January 29th, Karel Lannoo observes that the Commission must perform a delicate balancing act between preserving the single market and at the same time accommodating existing EU measures covering resolution and trading activities. Length: 2 pages Creation-Date: 2014-02 File-URL:http://www.ceps.eu/system/files/KL%20Europe%27s%20Glass%20Steagall.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8914 Template-Type: ReDIF-Paper 1.0 Author-Name: Valiante, Diego Title: Framing Banking Union in the Euro Area: Some empirical evidence Abstract: Evidence shows that financial integration in the euro area is retrenching at a quicker pace than outside the union. Home bias persists: Governments compete on funding costs by supporting �their� banks with massive state aids, which distorts the playing field and feeds the risk-aversion loop. This situation intensifies friction in credit markets, thus hampering the transmission of monetary policies and, potentially, economic growth. This paper discusses the theoretical foundations of a banking union in a common currency area and the legal and economic aspects of EU responses. As a result, two remedies are proposed to deal with moral hazard in a common currency area: a common (unlimited) financial backstop to a privately funded recapitalisation/resolution fund and a blanket prohibition on state aids. Length: 26 pages Creation-Date: 2014-02 File-URL:http://www.ceps.eu/system/files/WD389%20DV%20Banking%20Union.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8882 Template-Type: ReDIF-Paper 1.0 Author-Name: Acharya, Viral V. Author-Name: Steffen, Sascha Title: Falling short of expectations? Stress-testing the European banking system Abstract: Before the ECB takes over responsibility for overseeing Europe�s largest banks, as foreseen in the establishment of a eurozone banking union, it plans to conduct an Asset Quality Review (AQR) throughout the coming year, which will identify the capital shortfalls of these banks. This study finds that a comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks. The authors provide estimates of the capital shortfalls of banks that will be stress-tested under the AQR using publicly available data and a series of shortfall measures. Their analysis identifies which banks will most likely need capital, where a public back stop is likely to be needed and, since many countries are already highly leveraged, where an EU-wide backstop might be necessary. Length: 21 pages Creation-Date: 2014-01 File-URL:http://www.ceps.eu/system/files/No%20315%20Acharya%20%2526%20Steffen%20AQR%20StressTests.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8803 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: De Groen, Willem Pieter Title: Micro-, Small- and Medium-Sized Enterprises with High-Growth Potential in the Southern Mediterranean: Identifying Obstacles and Policy Responses Abstract: The Arab Spring, which took root in Tunisia and Egypt in the beginning of 2011 and gradually spread to other countries in the southern Mediterranean, highlighted the importance of private-sector development, job creation, improved governance and a fairer distribution of economic opportunities. The developments led to domestic and international calls for the region�s governments to implement the needed reforms to enhance business and investment conditions, modernise their economies and support the development of enterprises. Central to these demands are calls to enhance the growth prospects of micro-, small- and medium-sized enterprises (MSMEs), which represent an overwhelming majority of the region�s economic activity. On the basis of interviews conducted among high-growth potential MSMEs in selected countries in the southern Mediterranean � Algeria, Egypt, Morocco and Tunisia � this report identifies and ranks key obstacles preventing MSMEs from reaching their high-growth potential and puts forward effective policy responses to reduce these obstacles. If implemented, the authors argue that these policies could unlock the MSMEs potential to contribute more to their economies. Length: 88 pages Creation-Date: 2014-01 File-URL:http://www.ceps.eu/system/files/High-Growth%20Potential%20MSMEs%20in%20SoMed.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8796 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Title: Yes, it�s the economy, stupid, but is it demand or supply? Abstract: Paul De Grauwe writes in this new CEPS Commentary that the recent and surprising conversion of Fran�ois Hollande to supply-side economics completes the victory of the northern European policy-makers who believe that insufficient aggregate demand should be fought exclusively by supply-side measures. In his view, however, it is not the first time in post-war history that economists and policy-makers apply the wrong medicine; or to put it differently, it's akin to some generals who fight a new war by applying the strategies developed for the previous war. Length: 4 pages Creation-Date: 2014-01 File-URL:http://www.ceps.eu/system/files/PDG%20Supply%20or%20Demand.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8830 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: De Groen, Willem Pieter Title: Paving the Way for Micro-, Small- and Medium-Sized Enterprises in the Southern Mediterranean Abstract: The upheavals of the Arab Spring in the southern Mediterranean led to domestic and international demands on the governments in the region to implement reforms aimed at enhancing business and investment conditions especially for micro, small- and medium-sized enterprises (MSMEs), which carry out an overwhelming majority of the region�s economic activity. A comprehensive survey among some 600 high-growth potential MSMEs in Algeria, Egypt, Morocco and Tunisia identified and ranked the key obstacles impeding their high-growth potential. This Policy Brief summarises the main results and policy recommendations that can be drawn from this survey, which has been analysed in depth by Ayadi & De Groen (2014). Length: 8 pages Creation-Date: 2014-01 File-URL:http://www.ceps.eu/system/files/PB%20314%20RA%20%2526%20WPDG%20MSMEs%20in%20the%20SoMed.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8798 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: What direction for reforms in China? Abstract: Following the recent �third plenum� in China, CEPS Director Daniel Gros finds that China has reached a difficult crossroads in terms of making the necessary reforms that will foster continued growth and productivity. Continuing in the direction that so far has been followed with astounding success, namely giving the market a greater role and opening to the rest of the world, might no longer be sufficient. He points out, for example, that combating pollution requires more state intervention, not less. And similarly, strengthening a huge, potentially unstable, financial system requires stronger oversight and some continuing separation from the global financial system. Navigating this change in the right direction will be crucial not only for China, but also for the global economy. Length: 4 pages Creation-Date: 2014-01 File-URL:http://www.ceps.eu/system/files/DG%20What%20direction%20for%20China%27s%20reformers.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8788 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The SRM and the dream to resolve banks without public money Abstract: In his assessment of the compromise agreement reached on the Single Resolution Mechanisn (SRM), Daniel Gros finds that the popular perception that the periphery has the most to gain from the establishment of a unified resolution regime might have gotten it backwards. In reality, he finds that Germany and other surplus countries have a bigger interest in tying the hands of their national resolution authorities, which have a tendency to be too generous. Length: 2 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/DG%20SRM%20and%20the%20dream%20to%20resolve%20banks%20without%20public%20money.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8774 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The Asset Quality Review and Capital Needs: Why re-capitalise banks with public money? Abstract: It is generally assumed that any capital needs discovered by the Asset Quality Review the ECB is scheduled to finish by the end of 2014 should be filled by public funding (= fiscal backstop). This assumption is wrong, however. Banks that do not have enough capital should be asked to obtain it from the market; or be restructured using the procedures and rules recently agreed. The Directorate-General for Competition at the European Commission should be particularly vigilant to ensure that no further state aid flows to an already oversized European banking system. The case for a public backstop was strong when the entire euro area banking system was under stress, but this is no longer the case. Banks with a viable business model can find capital; those without should be closed because any public-sector re-capitalisation would likely mean throwing good money after bad. Length: 7 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/PB311%20DG%20Asset%20Quality%20Review.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8775 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The Bank Resolution Compromise: Incomplete, but workable? Abstract: Calling the Single Resolution Mechanism an �inelegant step in the right direction�, this Commentary singles out the Single Resolution Fund, with its considerable mutualisation of risk, as the key advance � but one that will require changes over time in the extremely complex decision-making mechanisms agreed. Length: 2 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/DG%20Bank%20Resolution%20Compromise.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8776 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Title: Macroeconomic and Financial Crisis Management in the Southern and Eastern Mediterranean: Diagnosis and Prospects Abstract: This note takes a look at the development of monetary aggregates and debt in the G7 (US, UK, France, Germany, Italy, Canada and Japan), plus non-G7 euro-area countries, which have an important bearing on the future development of price levels. It also discusses the problem of restoring external competitiveness in the weaker euro-area countries without aggravating their debt burden. The key conclusions are i) monetary and debt developments in the G7 countries point to relatively sluggish growth but do not signal deflation risks and ii) the realignment of �internal real exchange rates� in the euro area will most likely come through a rise in prices in Germany (and a few other stronger countries). The lessons learned in the early 1930s have made a come-back of deflation quite unlikely. Length: 262 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/Macro%20%2526%20Fin%20Crisis%20Mgt%20in%20SEMCs.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8756 Template-Type: ReDIF-Paper 1.0 Author-Name: Mayer, Thomas Title: The Ghost of Deflation Past Abstract: This note takes a look at the development of monetary aggregates and debt in the G7 (US, UK, France, Germany, Italy, Canada and Japan), plus non-G7 euro-area countries, which have an important bearing on the future development of price levels. It also discusses the problem of restoring external competitiveness in the weaker euro-area countries without aggravating their debt burden. The key conclusions are i) monetary and debt developments in the G7 countries point to relatively sluggish growth but do not signal deflation risks and ii) the realignment of �internal real exchange rates� in the euro area will most likely come through a rise in prices in Germany (and a few other stronger countries). The lessons learned in the early 1930s have made a come-back of deflation quite unlikely. Length: 9 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/TM%20Ghost%20of%20Deflation%20Past.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8757 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: De Groen, Willem Pieter Title: Policy Lessons for Macroeconomic and Financial Crisis Management in the Southern and Eastern Mediterranean Abstract: This Policy Brief attempts to draw lessons from the combination of the global financial crisis and the Arab uprisings focusing on the domains related to fiscal, monetary and financial policies. It does so by answering the following questions: What has been the impact of the crisis and the uprisings on the fiscal, monetary and financial policies of the SEMCs? What have been the crisis management actions? And what policy lessons can be drawn for crisis management in the future? And how can the EU contribute to this within the Euro-Med Partnership? Length: 11 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/PB308%20RA%20%2526%20WPDG%20Macro%20and%20Fin%20Crisis%20Mgt%20in%20SoMed.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8758 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Germany as Scapegoat Abstract: Germany has been an attractive target for external-deficit countries in Europe and beyond, but beating up on Germany alone appears to be the wrong way to get results. This CEPS Commentary by Daniel Gros argues that the discussion of Germany�s surplus confuses the issues in two ways. First, he points out that although the German economy and its surplus loom large in the context of Europe, an adjustment by Germany alone would only modestly benefit the eurozone periphery. Second, in the global context, he finds that adjustment by Germany alone would benefit many countries a little, but other surplus countries including Russia, China and Japan, would benefit disproportionally. Length: 2 pages Creation-Date: 2013-12 File-URL:http://www.ceps.eu/system/files/Germany%20as%20Scapegoat.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8721 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: Strong Governments, Weak Banks Abstract: Banks in the northern eurozone have capital ratios that are, on average, less than half of the capital ratios of banks in the eurozone�s periphery. The authors explain this by the fact that northern eurozone banks profit from the financial solidity of their governments and follow business strategies aimed at issuing too much subsidised debt. In doing so, they weaken their balance sheets and become more fragile � less able to withstand future shocks. Paradoxically, financially strong governments breed fragile banks. The opposite occurs in countries with financially weak governments. In these countries banks are forced to strengthen themselves because they are unable to rely on their governments. As a result they have significantly more capital and reserves than banks in the northern eurozone. Recommendations More than in the south, the governments of northern Europe should stand up and force the banks to issue more equity. This should go much further than what is foreseen in the Basel III accord. If the experience of the southern eurozone countries is any guide, banks in the north of the eurozone should at least double the capital and the reserves as a percentage of their balance sheets. Failure to do so risks destroying the financial solidity of the northern European governments when, in the future, negative shocks force these governments to come to the rescue of their undercapitalised banks. The new responsibilities entrusted to the European Central Bank as the single supervisor in the eurozone create a unique opportunity for that institution to change the regulatory and supervisory culture in the eurozone � one that has allowed the large banks to continue living dangerously, with insufficient capital. Length: 6 pages Creation-Date: 2013-11 File-URL:http://www.ceps.eu/system/files/PB305%20PDG%20%2526%20YJ%20Strong%20Govts%20Weak%20Banks%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8646 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: Financial Services and the Transatlantic Trade and Investment Partnership Abstract: Given the size of the financial markets on both sides of the Atlantic and the symmetry in the follow-up of the G-20 standards, Karel Lannoo argues in this Policy Brief that the Transatlantic Trade and Investment Partnership (TTIP) provides a good opportunity to put in place a more institutionalised framework. He finds that both blocs have reacted in similar ways to the financial crisis in strengthening their regulatory and supervisory frameworks and incorporating the G-20 recommendations into federal law. He also notes that consumer protection has been reinforced, certainly in the US, with the creation of the Consumer Financial Protection Bureau. And on the EU side, the Single Supervisory Mechanism (SSM) will radically change banking supervision. In his view, inclusion of financial services could also be an opportunity to strengthen prudential rules and consumer protection provisions on both sides. Rather than leading to a reduction of consumer protection, as had been feared in the post-crisis environment, it could lead to an examination, exchange and recognition of best practices in regulation and enforcement. Finally, he concludes that inclusion of financial services would make it part of the permanent regulatory dialogue that will be established as a result of a successful TTIP. Length: 11 pages Creation-Date: 2013-11 File-URL:http://www.ceps.eu/system/files/PB%20No%20302%20Financial%20Services%20and%20TTIP.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8616 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Author-Name: Bruzzone, Ginevra Author-Name: Carmassi, Jacopo Title: The New European Framework for Managing Bank Crises Abstract: This Policy Brief describes and discusses the proposals for a European Single Resolution Mechanism (SRM) for banks and for a Directive on Bank Recovery and Resolution (BRR). The authors find that the proposals are generally well designed and present a consistent approach, yet there is room for improvement, including the streamlining of procedures for the start of resolution, which now entail much overlap in the powers attributed to the various institutions involved (the Commission, the Single Resolution Board and the European Central Bank). The paper makes a number of key recommendations to facilitate discussions for stakeholders and regulators. Length: 21 pages Creation-Date: 2013-11 File-URL:http://www.ceps.eu/system/files/PB%20304%20Micossi%20et%20al%20The%20new%20European%20framework%20for%20managing%20bank%20crises%20FINAL_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8620 Template-Type: ReDIF-Paper 1.0 Author-Name: Contreras, Nicolas Author-Name: Martellucci, Elisa Author-Name: Thum, Anna-Elisabeth Title: Extending Working Life in Belgium Abstract: This report aims at understanding how persons aged 50 years and older are and can be integrated into the working society in Belgium. We are interested in how people in this age group can be induced to engage in various forms of employment and lifelong learning. Based on secondary literature, descriptive databases as well as interviews with experts and focus groups, we find that the discussion on active ageing in Belgium is well advanced with numerous contributions by academics, stakeholders, social partners, the public administration and interest groups. The wish to retire at 60 is widely shared, but at the same time the majority of Belgium�s elderly are able and would be willing to work under specific conditions. Therefore, we recommend that Belgium should invest in more flexible systems including a revision of the tax scheme, such as the part-time retirement system proposed by the insurance company Delta Lloyd. An equally relevant recommendation would be to ensure that public employment agencies, employers and agencies that provide training encourage all workers to work and learn regardless of their age. Length: 62 pages Creation-Date: 2013-11 File-URL:http://www.ceps.eu/system/files/No%20386%20MOPACT%20Belgium%20report.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8623 Template-Type: ReDIF-Paper 1.0 Author-Name: von Werder, Marten Author-Name: Thum, Anna-Elisabeth Title: Extending Working Life in Finland Abstract: This report reviews national and private initiatives to allow the elderly to continue their participation in the Finnish labour market and provides an analysis of the labour market and living conditions of seniors. We are interested in how those over 50 can be engaged in various forms of employment and lifelong learning. We find strong evidence that Finland generally provides good institutional conditions for active ageing. The quick and early ageing process was tackled by the fundamental pension reform that already prolonged retirement substantially and will probably facilitate later retirement as the attitudes concerning retirement change. On the other hand, Finland still seems to lag behind the other Nordic welfare states, has considerable problems in providing the same health conditions to low educated people in physically demanding occupations and could - � with respect to family pension in particular � invest further efforts in reforming the pension system. While many of the reforms Finland has conducted seem to be favourable and transferable to other European countries that still face the steepest phases of ageing in their societies, a reluctance towards changing attitudes that we observe in Finland, shows that organizing active ageing is a long-term project. Length: 40 pages Creation-Date: 2013-11 File-URL:http://www.ceps.eu/system/files/WD387%20MOPACT%20Finland%20report.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8625 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Busse, Matthias Title: The Macroeconomic Imbalance Procedure and Germany: When is a surplus an �imbalance�? Abstract: In this new Policy Brief, CEPS Director Daniel Gros argues that the 13 November announcement of the European Commission that Germany is running an excessive current account surplus appears to be much ado about little. All the Commission can, and will, do is to start an �in depth analysis�. This might lead to strong political reactions and an enormous echo in the media. But nothing of concrete substance is likely to follow. Length: 5 pages Creation-Date: 2013-11 File-URL: http://www.ceps.eu/system/files/PB%20No%20301%20DG%20%2526%20MB%20on%20EIP.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8593 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: The European Banking Disunion Abstract: In this CEPS Commentary Daniel Gros argues that the purpose of the euro was to create fully integrated financial markets; but, since the start of the financial crisis in 2008, markets have increasingly separated along national lines. So the future of the eurozone depends crucially on whether that trend continues or is reversed and Europe�s financial markets in the end become fully integrated. But either outcome would be preferable to something in between � neither fish nor fowl. Unfortunately, that is where the eurozone appears to be headed. Length: 3 pages Creation-Date: 2013-11 File-URL:http://www.ceps.eu/system/files/DGros%20Commentary%20EU%20Banking%20Disunion.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8596 Template-Type: ReDIF-Paper 1.0 Author-Name: Delbecque, Bernard Title: Proposal for a Stabilisation Fund for the EMU Abstract: This paper argues that it should be possible to complement Europe�s Economic and Monetary Union with an insurance-type shock absorption mechanism to increase the resilience of member countries to economic shocks and reduce output volatility. Such a mechanism would neither require the establishment of a central authority, nor would it lead to permanent transfers between countries. For this mechanism to become a reality, however, it would be necessary to overcome certain technical problems linked to the difficulty of anticipating correctly the position of an economy in the business cycle. Length: 15 pages Creation-Date: 2013-10 File-URL:http://www.ceps.eu/system/files/WD385%20B%20Delbecque%20Stabiliisation%20Fund%20formatted_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8494 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: The Legacy of Austerity in the Eurozone Abstract: The recent slight improvement in the GDP growth rates in the eurozone has led European policy-makers to proclaim victory and assert that the austerity programmes imposed within the eurozone are paying off. But is this really the case? In this Commentary Paul De Grauwe and Yuemei Ji argue that the improvement in the eurozone business cycle is the result of the ECB�s announcement of its Outright Monetary Transaction (OMT) programme, and that austerity has left a legacy of unsustainable debt that will test the political resilience of the debtor countries. Length: 6 pages Creation-Date: 2013-10 File-URL:http://www.ceps.eu/system/files/PGD%20%2526%20YJ%20Austerity.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8472 Template-Type: ReDIF-Paper 1.0 Author-Name: Barnebeck Andersen,Thomas Author-Name: Barslund, Mikkel Author-Name: Worm Hansen, Casper Author-Name: Harr, Thomas Author-Name: Sandholt Jensen, Peter Title: How much did China�s WTO accession increase economic growth in resource-rich countries? Abstract: This Working Document provides an estimate of China�s impact on the growth rate of resource-rich countries since its WTO accession in December 2001. The authors� empirical approach follows the logic of the differences-in-differences estimator. In addition to temporal variation arising from the WTO accession, which they argue was exogenous to other countries� growth trajectories, the authors exploit spatial variation arising from differences in natural resource wealth. In this way they can compare changes in economic growth in the pre- and post-accession periods between countries that benefited from the surge in demand for industrial commodities brought about by China�s WTO accession and countries that were less able to do so. They find that that roughly one-tenth of the average annual post-accession growth in resource-rich countries was due to China�s increased appetite for commodities. The authors use this finding to inform the debate about what will happen to economic growth in resource-rich countries as China rebalances and its demand for commodities weakens. Length: 19 pages Creation-Date: 2013-10 File-URL:http://www.ceps.eu/system/files/WD384%20MB%20Economic%20Growth%20in%20Resource-Rich%20Counties%20formatted%20Revised.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8471 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth,Felix Author-Name: Thum, Anna-Elisabeth Title: Does intangible capital affect economic growth? Abstract: Using new international comparable data on intangible capital investment by business within a panel analysis from 1995-2005 in an EU-15 country sample, this paper finds a positive and significant relationship between intangible capital investment by business and labour productivity growth. This relationship is cross-sectional in nature and proves to be robust to a range of alterations. Our empirical analysis confirms previous findings that the inclusion of business intangible capital investment into the asset boundary of the national accounting framework increases the rate of change of output per worker more rapidly. In addition, intangible capital is able to explain a significant portion of the unexplained international variance in labour productivity growth and when incorporating business intangibles, capital deepening becomes an even more significant source of growth. The relationship is slightly stronger in the time period 1995-2000 and seems to be driven by the coordinated countries within the EU-15. Length: 34 pages Creation-Date: 2010-09 File-URL:http://www.ceps.eu/system/files/book/2010/09/WD335%20Roth%20and%20Thum%20Innodrive%20final%20report.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:3667 Template-Type: ReDIF-Paper 1.0 Author-Name: Thum, Anna-Elisabeth Author-Name: Roth,Felix Title: The Key Role of Education in the Europe 2020 Strategy Abstract: The EU 2020 Agenda has taken an important step forward by setting the target for tertiary graduation rates at an ambitious 40%. This paper finds that many European countries, however, including the largest economy � Germany � will not be able to meet this target. Moreover, the crucial topic of educational quality is not even touched upon. Comparing the EU with China in total numbers, the authors find that China�s education system already produces the same number of graduates with tertiary education as the whole EU15. Given the large output of graduates, which is the key to productive spending on R&D, this means that China is likely to soon become a growing power in innovation. Initially the country is expected to concentrate on incremental innovation, with radical innovation to come only later and it is here, the authors warn, that the quality of the university system might represent a major obstacle in the Chinese government�s efforts to close the gap with the US and the EU15 in terms of innovation potential. Length: 17 pages Creation-Date: 2010-10 File-URL:http://www.ceps.eu/system/files/book/2010/10/WD338%20Roth%20and%20Thum%20on%20Education.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:3827 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Thum, Anna-Elisabeth Author-Name: Veselkova, Marcela Title: Education Policy and Welfare Regimes in OECD Countries: Social Stratification and Equal Opportunity in Education Abstract: This Working Document looks at which OECD countries deliberately attempt to reproduce social stratification through educational policies, and which countries put greater emphasis on intervening in the stratification process. The research findings challenge a one-policy-fits-all approach that advocates education policy reforms designed to increase equal opportunities in education. The authors argue that the context of each country needs to be considered before the implementation of such policies. Length: 36 pages Creation-Date: 2011-12 File-URL:http://www.ceps.eu/system/files/WD%20357%20Beblavy%20Thum%20%20Veselkova_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6497 Template-Type: ReDIF-Paper 1.0 Author-Name: Beblav�, Miroslav Author-Name: Thum, Anna-Elisabeth Author-Name: Potjagailo, Galina Title: When do adults learn? A cohort analysis of adult education in Europe Abstract: Adult learning is seen as a key factor for enhancing employment, innovation and growth, and it should concern all age cohorts. The aim of this paper is to understand the points in the life cycle at which adult learning takes place and whether it leads to reaching a medium or high level of educational attainment. To this end we perform a synthetic panel analysis of adult learning for cohorts aged 25 to 64 in 27 European countries using the European Labour Force Survey. We find, as previous results suggest, that a rise in educational attainment as well as participation in education and training happens mostly at the age range of 25-29. However, investment across the life cycle by cohorts older than 25 still occurs: in most countries in our sample, participation in education and training as well as educational attainment increases observably across all cohorts. We also find that the decline with age slows down or is even reversed for older cohorts, for both participation in education and educational attainment. Finally, we can identify a Nordic model in which adult learning is achieved through participation in education and training, a Central European model in which adult learning occurs in the form of increasing educational attainment and a liberal model in which both approaches to adult learning are observable. Length: 30 pages Creation-Date: 2013-05 File-URL:http://www.ceps.eu/system/files/WD%20383%20When%20do%20adults%20learn%20_NEUJOBS_.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8059 Template-Type: ReDIF-Paper 1.0 Author-Name: Mortensen, J�rgen Title: Economic Policy Coordination in the Economic and Monetary Union: From Maastricht via the SGP to the Fiscal Pact Abstract: This paper first takes a step backwards with an attempt to situate the recent adoption of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union in the context of discussions on the Stability and Growth Pact (SGP) and the �Maastricht criteria�, as fixed in the Maastricht Treaty for membership in the Economic and Monetary Union (EMU) in a longer perspective of the sharing of competences for macroeconomic policy-making within the EU. It then presents the main features of the new so-called �Fiscal Compact� and its relationship to the SGP and draws some conclusions as regards the importance and relevance of this new step in the process of economic policy coordination. It concludes that the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union does not seem to offer a definitive solution to the problem of finding the appropriate budgetary-monetary policy mix in EMU, which was already well identified in the Delors report in 1989 and regularly emphasised ever since and is now seriously aggravated due to the crisis in the eurozone. Furthermore, implementation of this Treaty may under certain circumstances contribute to an increase in the uncertainties as regards the distribution of the competences between the European Parliament and national parliaments and between the former and the Commission and the Council. Length: 23 pages Creation-Date: 2013-08 File-URL:http://www.ceps.eu/system/files/WD381%20JM%20Economic%20Policy%20Coordination.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8310 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Giovannini, Alessandro Author-Name: Gros, Daniel Title: History repeating itself: From the Argentine default to the Greek tragedy? Abstract: Since the onset of the debt crisis in late 2009, the comparisons between Greece and Argentina have multiplied, with an emphasis more on the similarities than the differences. This is not surprising given the stunning parallels. This Commentary draws a systematic comparison between the two countries over the decade before the crisis and the management of the crisis. Overall it suggests that there may be little left for Greece to do to avoid a repeat of the Argentine default, but on a larger scale. Length: 8 pages Creation-Date: 2011-07 File-URL: http://www.ceps.eu/system/files/book/2011/07/CA%2C%20AG%20%2526%20DG%20Commentary%20on%20Argentina%20%2B%20Greece.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5836 Template-Type: ReDIF-Paper 1.0 Author-Name: Mayer, Thomas Title: A Copernican turn in Banking Union urgently needed Abstract: Despite broad agreement among central bankers, policy-makers and economists that creation of a �Banking Union� is essential for the survival of the euro, progress in building this union has been painfully slow. This is largely due to the protracted fights over which government will be the payer of last resort when banks fail because of bad loans made in the past. Taking a cue from Copernicus, Thomas Mayer suggests in this new CEPS Policy Brief that the impasse may be broken by turning the whole process on its head. So, instead of trying to move from common bank supervision, over to bank resolution and then on to deposit insurance, he proposes reversing the process by starting with deposit insurance, moving from there to resolution and ending with supervision. Length: 6 pages Creation-Date: 2013-07 File-URL:http://www.ceps.eu/system/files/PB%20297%20TM%20Copernican%20turn%20for%20Banking%20Union%20updated.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8263 Template-Type: ReDIF-Paper 1.0 Author-Name: Barslund, Mikkel Author-Name: Gros, Daniel Title: Unemployment is the scourge, not youth unemployment per se: The misguided policy preoccupation with youth Abstract: This Policy Brief argues that too much effort and political capital is being spent by the Commission and member states on being seen to be doing something quickly about youth unemployment when, in fact, the structural measures proposed will only have long-term effects. Expectations of immediate relief are running well above what can be delivered, especially at the EU level. Given the macroeconomic situation, no policy option will deliver a significant dent in either youth unemployment or unemployment in general. The EU policies on the table that are supposed to have an immediate effect, such as increased lending from the European Investment Bank to SMEs for the hiring of young people, will only have a very marginal impact on youth unemployment. Moreover, this impact will come mostly to the detriment of older unemployed persons excluded from such a scheme. Given the perceived need to �be seen to be doing something�, we fear that policies subsidising young workers de facto at the expense of older workers or, even worse, policies that subsidise older workers for not taking young people�s jobs, will proliferate. In fact, it is not at all clear that young people suffer more from being unemployed than older people, or even disproportionately more than older unemployed individuals. In particular, it is not clear that the much-publicised notion of a �lost generation� with permanent �scars� is relevant only to the young generation. The paper ends by highlighting the much-neglected policy option of encouraging labour mobility within the internal market. Although the Commission is �upgrading and modernising� its tools, much more could be done in this area � to the benefit of the individuals concerned, the member states, and European integration in general. Length: 11 pages Creation-Date: 2013-06 File-URL:http://www.ceps.eu/system/files/PB294_Unemployment.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8187 Template-Type: ReDIF-Paper 1.0 Author-Name: Mayer, Thomas Author-Name: Gros, Daniel Title: Debt reduction without default? Abstract: This paper proposes a two-step, market-based approach to debt reduction: Step 1. The European Financial Stability Facility (EFSF) would offer holders of debt of the countries with an EFSF programme (probably Greece, Ireland and Portugal = GIP) an exchange into EFSF paper at the market price prior to their entry into an EFSF-funded programme. The offer would be valid for 90 days. Banks would be forced in the context of the ongoing stress tests to write down even their banking book and thus would have an incentive to accept the offer. Step 2. Once the EFSF had acquired most of the GIP debt, it would assess debt sustainability country by country. If the market price discount at which it acquired the bonds is enough to ensure sustainability, the EFSF will write down the nominal value of its claims to this amount, provided the country agrees to additional adjustment efforts (and, in some cases, asset sales). If under a central scenario this discount is not enough to ensure sustainability, the EFSF might agree on a lower interest rate, but with GDP warrants to participate in the upside. A key condition for this approach to succeed in restoring access to private capital markets is that the EFSF claims are not made senior to the remaining claims and the new private bondholders. EFSF support must be comparable to an injection of equity into the country. While the EFSF concentrates on the exchange of the stock of bonds, the IMF could fund the remaining deficits in the usual way with bridge financing, until the fiscal adjustment is completed. The ECB would of course immediately stop its �Securities Market Programme�, which would have lost its raison d��tre. Length: 13 pages Creation-Date: 2011-02 File-URL:http://www.ceps.eu/system/files/book/2011/02/Policy%20Brief%20No%20233%20Gros%20%2526%20Mayer%20on%20the%20EMF%20dilemma.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:4150 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Felix Author-Name: Nowak-Lehmann D., Felicitas Author-Name: Otter, Thomas Title: Has the financial crisis shattered citizens� trust in national and European governmental institutions? Evidence from the EU member states, 1999-2010 Abstract: The financial crisis has affected trust in national and European governmental institutions in different ways. This paper analyses the determinants of trust in the national and European institutions over the last decade and comes to the conclusion that inflation reduces citizens� trust only when the economy runs smoothly. In times of crisis, citizens do not worry about inflation but rather about jobs and the effects of a recession. Declining trust in national governments is related to an increase in unemployment in the EU-15 in all time periods, whereas trust in the European Commission and the European Parliament seems to be strongly associated with the situation in the real economy (unemployment and growth of GDP per capita) only in times of crisis. Yet in the EU-27, falling levels of trust in the national and European governmental institutions during times of crisis seem to be primarily related to an increase in government debt. In an EU-15 country sample, this negative relationship appears to be driven by countries that owe a larger share of their increase in government debt to aiding/bailing out their financial sector and the implementation of significant austerity measures. Length: 28 pages Creation-Date: 2011-02 File-URL:http://www.ceps.eu/system/files/book/2011/02/WD%20343%20Roth%20et%20al%20on%20trust.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:4159 Template-Type: ReDIF-Paper 1.0 Author-Name: Peirce, Fabrizia Author-Name: Micossi, Stefano Author-Name: Carmassi, Jacopo Title: On the Tasks of the European Stability Mechanism Abstract: At its forthcoming spring meeting, on March 24th-25th, the European Council will consider a comprehensive package of measures that can open a new age of European economic governance: one that is truly collective; capable of enforcing economic policy coordination and preventing the build-up of unsustainable imbalances in government as well as private balance sheets; and backed up by credible, quasi-automatic sanctions for any member state posing a threat to collective stability. This CEPS Policy Brief aims to contribute to Council deliberations first by clarifying the proper role of EU financial assistance to member states confronted with sovereign debt crises and second, by outlining the tasks that the new European Stability Mechanism (ESM) should be able to perform in order to put in place an effective and credible crisis management system for both the eurozone and the European Union. Length: 12 pages Creation-Date: 2011-03 File-URL:http://www.ceps.eu/system/files/book/2011/03/PB%20No%20235%20Micossi%20et%20al%20on%20the%20ESM.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:4262 Template-Type: ReDIF-Paper 1.0 Author-Name: Kopf, Christian Title: Restoring financial stability in the euro area Abstract: The pricing of sovereign credit risk is a necessary component of the financial architecture of the European Monetary Union. However, unnecessarily high and volatile risk premia on government bonds are currently preventing effective financial intermediation within the euro area, thereby inhibiting its economic recovery. Several proposals have been made on how these risk premia should be brought down, namely i) permanent pooling of funding through joint bond issuance, ii) temporary liquidity assistance through multilateral funds, iii) debt buybacks using multilateral funds, and iv) debt restructuring. This Policy Brief by Christian Kopf, Director of Economic Research and Investment Strategy of the Spinnaker Capital Group, UK, attempts to evaluate these four proposals. He argues that joint bond issuance will not achieve a meaningful reduction of liquidity premia in the sovereign bond market; these instruments would either create perverse incentives or accelerate the sovereign debt crisis for peripheral Europe. An institution to provide temporary liquidity assistance is a necessary addition to the institutional framework of EMU � there needs to be an EMF to complement the ECB. Debt buybacks using multilateral funds can be a very useful tool for solvent countries such as Spain; they can prevent an overshooting of risk premia that could turn a sovereign liquidity crisis into a solvency crisis. However, a quantitative assessment shows that debt buybacks at market prices are insufficient to correct Greece�s debt overhang. In the case of Greece, a voluntary exchange of existing government bonds into new obligations, complemented by a buyback option at a steep discount to face value, could restore sovereign creditworthiness and allow the private sector to regain market access at acceptable interest rates. In the absence of such an orderly and controlled public debt reduction, highly indebted euro area governments will likely opt to restructure their sovereign debt unilaterally, if they fail to regain market access after several years. This could have unwelcome consequences for financial stability in the euro area, which should be avoided through a creative and cooperative approach to the problem. Length: 26 pages Creation-Date: 2011-03 File-URL:http://www.ceps.eu/system/files/book/2011/03/Policy%20Brief%20No%20237%20Kopf%20on%20Restoring%20Financial%20Stability%20rev.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:4292 Template-Type: ReDIF-Paper 1.0 Author-Name: Fioramanti, Marco Author-Name: Vicarelli, Claudio Title: The New Stability and Growth Pact: Primum non nocere Abstract: The recent economic and financial crises have shown the weakness of EU economic governance. A process of strengthening macroeconomic and fiscal surveillance started in the course of 2010; among other proposals, the European Commission suggested a new binding criterion of debt reduction: debt-to-GDP ratio is to be considered sufficiently diminishing if its distance with respect to the 60% of GDP reference value has reduced over the previous three years at a rate of the order of one-twentieth per year. In this Working Document, ISTAT Researchers Marco Fioramanti and Claudio Vicarelli try to evaluate, with the support of the Oxford Economic Global Model, the economic consequences of the simultaneous attempt of all euro area countries to fulfil this one-twentieth criterion in the 2011-2015 period. Simulation results show that the mechanical application of the debt rule proposed by the European Commission would be only marginally efficient in reducing the debt to GDP ratio at best, but with high costs represented by the loss of flexibility, and counterproductive at worst. Length: 12 pages Creation-Date: 2011-03 File-URL:http://www.ceps.eu/system/files/book/2011/03/WD%20344%20Fioramanti%20%20Vicarelli%20on%20New%20SGP%20rev.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:4370 Template-Type: ReDIF-Paper 1.0 Author-Name: Haug, Jutta Author-Name: Lamassoure, Alain Author-Name: Verhofstadt, Guy Author-Name: Gros, Daniel Author-Name: De Grauwe, Paul Author-Name: Ricard-Nihoul, Ga�tane Author-Name: Rubio, Eulalia Title: Europe for Growth: For a Radical Change in Financing the EU Abstract: The system for financing the EU today is on its last legs. Indeed, with the EU budget being predominantly financed by national contributions, member states attach great importance to what they get in return, which in the end affects the European principle of solidarity and makes every budgetary negotiation a potential arena for political blockage. The economic and financial crisis, with its corresponding increase in the public deficit of member states, has unfortunately worsened the situation. Fully funding the European Union with own resources is the only way to put an end to the fair return approach and to make the necessary changes to EU spending that would provide it with the financial means equal to its needs and allow it to face the challenges of the future. On the eve of the presentation of a new proposal for own resources announced by the European Commission, Jutta Haug, Alain Lamassoure and Guy Verhofstadt, Members of the European Parliament belonging to three different political groups, have brought together their views and present this report as their contribution to the debate. Economists Daniel Gros and Paul De Grauwe of CEPS and Ga�tane Ricard-Nihoul and Eulalia Rubio of Notre Europe have collaborated with them in this important project They demonstrate in this report that fully financing an EU budget of the size it is today with genuine own resources is not a dream but that such a change is feasible, provided that the political will to reform the current system can be summoned. Moreover, they find that it would not infringe on the member states� fiscal sovereignty. On the contrary, it would reinforce the link between the European Union and its citizens, putting an end to member states' tendency to calculate their net returns and possibly even enabling them to make cuts to their public expenditure. Finally, such a reform would represent a return to the spirit and the letter of the Treaty of Rome, which contained a clear aspiration for financial autonomy and which prevailed until the end of the 1980s. Length: 86 pages Creation-Date: 2011-04 File-URL:http://www.ceps.eu/system/files/book/2011/04/Europe%20for%20Growth%20e-version.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:4374 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Title: Adjustment Difficulties and Debt Overhangs in the Eurozone Periphery Abstract: This paper describes four key drivers behind the adjustment difficulties in the periphery of the eurozone: � The adjustment will be particularly difficult for Greece and Portugal, as two relatively closed economies with low savings rates. Both of these countries combine high external debt levels with low growth rates, which suggest they are facing a solvency problem. In both countries fiscal adjustment is a necessary condition for overall sustainability, but it not sufficient by itself. A sharp cut in domestic consumption (or an unrealistically large jump in exports) is required to quickly establish external sustainability. An internal devaluation (a cut in nominal wages in the private sector) is unavoidable in the longer run. Without such this adjustment in the private sector, even continuing large-scale provision of official funding will not stave off default. � Ireland�s problems are different. They stem from the exceptionally large losses in the Irish banks, which were taken on by the national government, leading to an explosion of government debt. However, the Irish sovereign should be solvent because the country has little net foreign debt. � Spain faces a similar problem as Ireland, although its foreign debt is somewhat higher but its construction bubble has been less extreme. The government should thus also be solvent, although further losses in the banking system seem unavoidable. � Italy seems to have a better starting position on almost on all accounts. But its domestic savings rate has deteriorated substantially over the last decade. Length: 27 pages Creation-Date: 2011-05 File-URL:http://www.ceps.eu/system/files/book/2011/05/WD%20347%20Gros%20%2526%20Alcidi%20GIPSY%20update.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5525 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Title: Governance of a Fragile Eurozone Abstract: When entering a monetary union, member countries change the nature of their sovereign debt in a fundamental way, i.e. they cease to have control over the currency in which their debt is issued. As a result, financial markets can force these countries� sovereigns into default. In this sense, the status of member countries of a monetary union is downgraded to that of an emerging economy. This makes the monetary union fragile and vulnerable to changing market sentiments. It also makes it possible that self-fulfilling multiple equilibria arise. This paper analyses the implications of this fragility for the governance of the eurozone. It concludes that the new governance structure (ESM) does not sufficiently recognize this fragility. Some of the features of the new financial assistance in fact are likely to increase this fragility. In addition, it is also likely to prevent member countries from using the automatic stabilizers during a recession. This is surely a step backward in the long history of social progress in Europe. The author suggests a different approach to deal with these problems. Length: 28 pages Creation-Date: 2011-05 File-URL:http://www.ceps.eu/system/files/book/2011/05/WD%20346%20De%20Grauwe%20on%20Eurozone%20Governance.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5523 Template-Type: ReDIF-Paper 1.0 Author-Name: Pacchioli, Consuelo Title: Is the EU internal market suffering from an integration deficit? Abstract: As an alternative to measuring the extent of market integration, �home-bias� indicates the degree to which economic agents �over-prefer� to transact with domestic agents rather than agents from other EU countries. Such an exclusive preference is measured against a benchmark of (ideal) market integration and is called �home-bias�. This CEPS Working Document by former CEPS Researcher Consuelo Pacchioli addresses the estimation of a �normal trade� gravity equation to establish the possible existence of home-bias effects in the US market and the EU internal market, which are the two most integrated regions in the world. Estimations based on pooled OLS cross-section analysis, with the novelty of the inclusion of time dummies in order to obtain unique indexes and panel data-fixed effects, both reject the hypothesis of no internal barrier to trade. This shows a tendency to �over-trade� within borders both in the US and the EU. Taking the finding for the US market as a benchmark, a direct comparison with the EU internal market is considered: the estimated results show that an average EU country still trades more within its borders than with other member states � about three to four times as much as a random US state does. A number of explanations are offered for this relatively low level of EU internal market integration. Length: 31 pages Creation-Date: 2011-05 File-URL:http://www.ceps.eu/system/files/book/2011/05/WD_348_Consuelo_on_Internal_Market_final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5528 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: External versus Domestic Debt in the Euro Crisis Abstract: As EU leaders muddle through the eurozone crisis, the debate about its root causes continues. CEPS Director Daniel Gros argues in this Policy Brief that the debate is important if we are to understand how to prevent future crises. In his view, external debt is the key to the turmoil in European economies and that the focus on total public debt is therefore misleading. Length: 6 pages Creation-Date: 2011-05 File-URL:http://www.ceps.eu/system/files/book/2011/05/No%20243%20Gros%20on%20external%20vs%20domestic%20debt%20in%20EZ%20crisis.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5677 Template-Type: ReDIF-Paper 1.0 Author-Name: Kopf, Christian Title: An evaluation of the French proposal for a restructuring of Greek debt Abstract: This paper analyses the implications of a continued divergence of TARGET2 balances for monetary policy in the euro area. The accumulation of TARGET2 claims (liabilities) would make the ECB�s liquidity management asymmetric once the TARGET2 claims in core countries have crowded out central bank credit in those regions. Then while providing scarce liquidity to banks in countries with TARGET2 liabilities, the ECB will need to absorb excess liquidity in countries with TARGET2 claims. We discuss three alternatives and their implications for absorbing excess liquidity in core regions: 1) using market-based measures might accelerate the capital flight from periphery to core countries and would add to the accumulation of risky assets by the ECB; 2) conducting non-market based measures, such as imposing differential (unremunerated) reserve requirements, would distort banking markets and would support the development of shadow banking; and 3) staying passive would lead to decreasing interest rates in core Europe entailing inflationary pressure and overinvestment in those regions and possibly future instability of the banking system. Length: 9 pages Creation-Date: 2011-07 File-URL:http://www.ceps.eu/system/files/book/2011/07/No%20247%20Kopf%20on%20France%27s%20proposal%20for%20restructuring%20Greek%20debt.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5833 Template-Type: ReDIF-Paper 1.0 Author-Name: Abad, Jos� M. Author-Name: L�ffler, Axel Author-Name: Zemanek, Holger Title: TARGET2 Unlimited: Monetary Policy Implications of Asymmetric Liquidity Management within the Euro Area Abstract: This paper analyses the implications of a continued divergence of TARGET2 balances for monetary policy in the euro area. The accumulation of TARGET2 claims (liabilities) would make the ECB�s liquidity management asymmetric once the TARGET2 claims in core countries have crowded out central bank credit in those regions. Then while providing scarce liquidity to banks in countries with TARGET2 liabilities, the ECB will need to absorb excess liquidity in countries with TARGET2 claims. We discuss three alternatives and their implications for absorbing excess liquidity in core regions: 1) using market-based measures might accelerate the capital flight from periphery to core countries and would add to the accumulation of risky assets by the ECB; 2) conducting non-market based measures, such as imposing differential (unremunerated) reserve requirements, would distort banking markets and would support the development of shadow banking; and 3) staying passive would lead to decreasing interest rates in core Europe entailing inflationary pressure and overinvestment in those regions and possibly future instability of the banking system. Length: 10 pages Creation-Date: 2011-07 File-URL:http://www.ceps.eu/system/files/book/2011/07/Target2%20Unlimited%20e-version%20updated.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5904 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Title: Only a more active ECB can solve the euro crisis Abstract: This paper asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders. Until recently, the European Central Bank performed this role either directly by buying government bonds, or indirectly by accepting government bonds as collateral in its liquidity provision to the banking system, but it has made it clear that it is now unwilling to continue to do so. The author argues that this reluctance of the ECB to take up its responsibility as a lender of last resort is the single most important factor explaining why the forces of contagion in the eurozone�s sovereign bond markets have not been stopped. Length: 8 pages Creation-Date: 2011-08 File-URL:http://www.ceps.eu/system/files/book/2011/08/CEPS%20PB%20No%20250%20PDG%20on%20the%20ECB.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5963 Template-Type: ReDIF-Paper 1.0 Author-Name: Valiante, Diego Title: The Eurozone Debt Crisis: From its origins to a way forward Abstract: As the Eurozone debt crisis reaches a turning point, this Policy Brief argues for a more organised intervention by the ECB to stop contagion through the creation of a quantitative easing programme, coupled with a political agreement among member states on a more federalist budget for the Eurozone. The roots of this crisis and how institutions have repeated some of the mistakes of the Argentine crisis, both in 1998 and 2010, are considered in this paper. The author analyses the reasons why the ECB should start a quantitative easing programme to contain government bond yields, and shows that it can be done with limited impact on inflation targeting policies. The importance of reinforcing the new policy announced by the ECB, which has lain rather dormant during the Eurozone crisis, is also highlighted as a pre-condition for a broader political agreement on more harmonised fiscal policies and to stabilise market conditions. Valiante finds that responses should be organised on three levels: institutional competences, monetary policy support, and fiscal policy coordination. Length: 12 pages Creation-Date: 2011-08 File-URL:http://www.ceps.eu/system/files/book/2011/08/PB%20251%20Valiante%20on%20Euro%20Crisis.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5985 Template-Type: ReDIF-Paper 1.0 Author-Name: D�bel, Hans-Joachim Title: Partial sovereign bond insurance by the eurozone: A more efficient alternative to blue (Euro-)bonds Abstract: �Blue� or Eurobonds guaranteed via joint and several liability by the eurozone member states have been proposed as an important tool to stabilise and structure the eurozone sovereign bond markets. But in this new Policy Brief, Hans-Joachim D�bel argues the case for a partial insurance of sovereign bonds by the European Stability Mechanism. Length: 11 pages Creation-Date: 2011-08 File-URL:http://www.ceps.eu/system/files/book/2011/08/PB%20No%20252%20Duebel%20on%20Partial%20Bond%20Insurance%20by%20the%20Eurozone.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:5999 Template-Type: ReDIF-Paper 1.0 Author-Name: Miroslav Beblav� Title: Why has the crisis been bad for private pensions, but good for the flat tax? The sustainability of �neoliberal� reforms in the new EU member states Abstract: This paper examines two questions related to the sustainability of the major neoliberal, economic and social reforms in the new EU member states, namely the flat income tax and private pension pillars. First, we look at the relationship between the political consensus/controversy at the time major policy reforms were passed and the future sustainability of these reforms after a change of government. Second, we explore what we call a paradox of reverse sustainability, whereby the flat income tax has been more politically resilient during the global financial and economic crisis than private pensions, even though ex ante expectations and the literature would lead us to expect the opposite. The paper shows that controversy at the time the reforms were passed had no effect on subsequent sustainability, and the levels of partisanship and public support with regard to a specific reform seem less important than the political costs and benefits. We also find that despite their apparent neoliberal bent, the two policies are versatile enough to be shaped towards a variety of policy goals, allowing their introduction and retention in a variety of economic and social circumstances. In other words, even though private pensions and particularly the flat tax have powerful political connotations, they are by no means policy straitjackets. While both reforms could sustain themselves throughout the �good� times before the global crisis, their fates diverged during the crisis. Neither public support nor the large constituency of savers could fully protect private pensions from a policy reversal during a period of exceptional fiscal pressure. That is because a reversal was associated with significant, short-term fiscal gains and the states where these reversals took place also took a range of other decisions that were politically extraordinarily difficult. On the other hand, we demonstrate that the introduction or potential reversal of the flat tax was not associated with significant, short-term revenue gains. It is the relatively �cheap� nature of the flat tax that distinguishes it from private pensions, because it sends a highly cost-effective signal in terms of revenues lost owing to its existence. Length: 23 pages Creation-Date: 2011-10 File-URL:http://www.ceps.eu/system/files/book/2011/10/WD%20356%20Beblavy%20on%20Neoliberal%20Reforms%20in%20NMS.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6313 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Speculative Attacks within or outside a Monetary Union: Default versus Inflation (what to do today) Abstract: In this analytical policy brief, CEPS Director Daniel Gros explores whether there is a fundamental difference between a formal sovereign default with a haircut and debt monetisation, which reduces the purchasing power for investors by the same amount. He argues that there is indeed a difference because a formal sovereign default invariably leads to a banking crisis. Moreover, within a monetary union a sovereign is more exposed to liquidity problems than a country with an independent currency and any of its problems quickly spill over into the banking system, which cannot survive without a reliable source of liquidity given that banks are by nature highly leveraged institutions. In terms of policy prescriptions, one conclusion is that less effort and financing should be devoted to trying to lower yields on peripheral government debt, but a lender of last resort is needed for both sovereigns and the banks. Another policy priority should be to stabilise the banking system in such a way that it can survive even if government debt yields increase. Length: 10 pages Creation-Date: 2011-11 File-URL:https://cdn.ceps.eu/wp-content/uploads/2011/11/DG%20on%20Speculative%20Attacks.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6359 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Agreement needed on liquidity provision to restore confidence in the eurozone Abstract: The multiple attempts to restore confidence in the eurozone over the 18 months that have passed since the first Greek rescue in May 2010, have clearly failed. Indeed, following each round of emergency measures agreed by the eurozone summits, matters have turned for the worse. This contribution by Stefano Micossi exhorts the leaders of the eurozone to go back to the drawing board and overcome their political disagreements on how to proceed. Arguing that straitened policies in all the member states will not suffice, he insists on the need for an adequate provision of liquidity � as large as needed in order to stop the ongoing currency run. If this cannot be agreed upon, Micossi warns that the eurozone will break down, with gigantic economic dislocations. Length: 7 pages Creation-Date: 2011-11 File-URL:http://www.ceps.eu/system/files/book/2011/11/No%20258%20Micossi%20Restoring%20confidence%20in%20the%20eurozone.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6483 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Roth, Felix Title: Do Germans support the euro? Abstract: It is widely assumed in Germany, and elsewhere, that German citizens have turned against the centrepiece of the process of deeper European integration: the euro. The German Allensbach Institute, which conducts public opinion poll research, showed that levels of trust in the euro started to decline in April 2010, and more recently, other publications claim that an overwhelming majority of German citizens have lost trust in the euro. In contrast, Daniel Gros, CEPS Director, and Felix Roth, Research Fellow at CEPS, find in this study that even in the midst of the �euro� debt crisis, more German citizens support the euro than do not. They give explanations for these very different findings in this new CEPS Working Document. Length: 19 pages Creation-Date: 2011-12 File-URL:http://www.ceps.eu/system/files/book/2011/12/WD359%20Do%20Germans%20support%20the%20euro.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6515 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Misguided policies risk breaking up the eurozone and the EU Abstract: This latest contribution by Stefano Micossi, Director General Assonime, Visiting Professor at the College of Europe and member of the CEPS Board of Directors, assesses the new decisions on economic governance taken at the European Council on December 8-9 and questions whether they are truly feasible, either technically or politically. Length: 9 pages Creation-Date: 2011-12 File-URL:http://www.ceps.eu/system/files/book/2011/12/PB260%20Micossi%20on%20Misguided%20Policies%20Risk%20Breaking%20Eurozone.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6514 Template-Type: ReDIF-Paper 1.0 Author-Name: Roth, Felix Author-Name: Jonung, Lars Author-Name: Nowak-Lehmann D.,Felicitas Title: The Enduring Popularity of the Euro throughout the Crisis Abstract: This paper analyses the evolution of public support for the euro from 1990 to 2011, using a popularity function approach, focusing on the most recent period of the financial and sovereign debt crisis. Exploring a huge database of close to half a million observations covering the 12 original euro area member countries, we find that the ongoing crisis has only marginally reduced citizens� support for the euro � at least so far. This result is in stark contrast to the sharp fall in public trust in the European Central Bank. We conclude that the crisis has hardly dented popular support for the euro while the central bank supplying the single currency has lost sharply in public trust. Thus, the euro appears to have established a credibility of its own � separate from the institutional framework behind the euro. Length: 17 pages Creation-Date: 2011-12 File-URL:http://www.ceps.eu/system/files/book/2011/12/WD358%20Roth%20et%20al%20Enduring%20Popularity%20of%20the%20Euro.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6512 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Banking Union with a Sovereign Virus: The self-serving regulatory treatment of sovereign debt in the euro area Abstract: In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however, that the relative concentration of public debt on bank balance sheets is not just a result of the euro crisis, for there are strong additional incentives for banks in some countries to increase their sovereign. His contribution discusses a number of these regulatory incentives � the most important of which is specific to the euro area � and explores ways in which euro area banks can be weaned from massive investments in government bonds. Length: 8 pages Creation-Date: 2013-03 File-URL:http://www.ceps.eu/system/files/PB%20No%20289%20DG%20BU%20with%20a%20Sovereign%20Virus.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7904 Template-Type: ReDIF-Paper 1.0 Author-Name: Coutinho, Leonor Title: Determinants of Growth and Inflation in Southern Mediterranean Countries Abstract: Despite significant economic reforms in many EU neighbouring countries in the Southern Mediterranean, their growth performance has on average been subdued. This study analyses the differences in growth performance and macroeconomic stability across Mediterranean countries, to draw lessons for the future. The main findings are that Southern Mediterranean countries should benefit from closer ties with the EU that result in higher levels of trade and FDI inflows, once the turbulence of the �Arab Spring� is resolved, and from the development of financial markets and infrastructure. They will also benefit in keeping inflation under control, which will depend in great part on their ability to maintain fiscal discipline and sustainable current accounts. One of the main challenges for the region will be to implement structural reforms that can help them absorb a large pool of unemployed without creating upward risks to inflation. Length: 36 pages Creation-Date: 2012-03 File-URL:http://www.ceps.eu/system/files/book/2012/03/No%2010%20Coutinho%20Determinants%20of%20Growth%20and%20Inflation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6736 Template-Type: ReDIF-Paper 1.0 Author-Name: Sekkat, Khalid Title: Manufactured Exports and FDI in Southern Mediterranean Countries: Evolution, determinants and prospects Abstract: This paper investigates the evolution and determinants of manufactured exports and foreign direct investment (FDI) in 11 southern Mediterranean countries over the period 1985�2009 as well as their prospects under different scenarios pertaining to the development of the determinants. The econometric analysis confirms the role of exchange rate depreciation, the openness of the economy and the quality of institutions and infrastructure in fostering manufactured exports and FDI inflows in the region. The assessment of the prospects suggests that a scenario of deeper integration with the EU entails superior performance for manufactured exports and FDI compared with either the status quo or less integration with the EU but greater integration within the region. Length: 33 pages Creation-Date: 2012-04 File-URL:http://www.ceps.eu/system/files/book/2012/04/MEDPRO%20TR14%20Dekkat%20Manufactured%20Exports%20and%20FDI.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6849 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Author-Name: Giovannini, Alessandro Title: Central Banks in Times of Crisis: The FED vs. the ECB Abstract: Different economic and financial structures require different crisis responses. Different crises also require different tools and resources. The first �stage� of the financial crisis (2007-09) was similar on both sides of the Atlantic, and the response was also quite similar. The second stage of the crisis is unique to the euro area. Increasing financial disintegration within the region has forced the ECB to become the central counterparty for the entire cross-border banking market and to intervene in the sovereign bond market of some stressed countries. The actions undertaken by the European Central Bank (ECB), however, have not always represented the best response, in terms of effectiveness, consistency and transparency. This is especially true for the Securities Markets Programme (SMP): by de facto imposing its absolute seniority during the Greek PSI (private sector involvement), the ECB has probably killed its future effectiveness. Length: 12 pages Creation-Date: 2012-07 File-URL:http://www.ceps.eu/system/files/book/2012/07/PB276%20DG%2C%20CA%20%2526%20AG%20Central%20Banks.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7160 Template-Type: ReDIF-Paper 1.0 Author-Name: Maselli, Ilaria Title: The evolving supply and demand of skills in the labour market Abstract: This paper analyses labour demand and supply with respect to skills and tasks. The literature on this topic is abundant, especially in light of education expansion and the impact of technology on labour demand. The goal of this work is not to add evidence to the causes and effects of labour demand and supply but rather to sketch the broader picture of their equilibrium and then to try to anticipate what type of skills mismatch EU countries will encounter during the next decade. The paper begins with separate considerations of labour demand and supply with respect to qualifi cation, outlining the main trends and their causes. This is followed by an analysis of their equilibrium and a matrix which can be used to understand the potential types of mismatches. Finally, conclusions and avenues for future research are drawn. Length: 8 pages Creation-Date: 2012-02 File-URL:http://www.ceps.eu/system/files/article/2012/02/Forum%20-%20Maselli.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7911 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Beck, Thorsten Title: Monetary Policy and Banking Supervision: Coordination instead of separation Abstract: Following the June 2012 European Council decision to place the �Single Supervisory Mechanism� (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be �Chinese walls� between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be �independents� in order to reduce the tendency of supervisors to unduly delay the recognition of losses. Length: 10 pages Creation-Date: 2012-12 File-URL:http://www.ceps.eu/system/files/PB286%20Beck%20%2526%20Gros%20Banking%20Supervision%20in%20ECB_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7528 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Author-Name: Giovannini, Alessandro Title: Brazil and the EU in the Global Economy Abstract: The structure of the world economy has been changing quickly during the last decade. The emerging global economy is much more fragmented than in the past and characterised by different global actors, each one with specific features and roles. In this setting, both Brazil and the European Union play role. This paper, without pretending to provide a full analysis of the European and Brazilian economies, offers a description of their main international economic features to understand their current and future role in the global order. Section 1 looks at the macroeconomics: it first focuses on Brazil and assesses arguments that international exchange rate misalignments represent a real grievance for Brazilian policy-makers in their struggle to get the economy onto a satisfactory trajectory. The attention is then turned to Europe, and especially to the euro area, with a focus on the still-unresolved crisis and its position vis-�-vis the rest of the world. Section 2 analyses the place of the euro area in the international financial institution system. It assesses how far it may be both overrepresented in terms of the weight of the sum of its member states, while being underrepresented as such institutionally as a major monetary union. While this issue may be seen as relevant only for Europe, the analysis shows that it has significant implications for emerging economies, Brazil included. The conclusions explore macro-policy options for improving the EU-Brazil partnership and suggest that a new initiative launched by them would be economically desirable. Length: 18 pages Creation-Date: 2013-02 File-URL:http://www.ceps.eu/system/files/WD%20371%20Brazil-EU%20in%20Global%20Economy%20DG%20CA%20%2526%20AG_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7722 Template-Type: ReDIF-Paper 1.0 Author-Name: Messerlin, Patrick Title: The Mercosur�EU Preferential Trade Agreement: A view from Europe Abstract: This paper first aims at assessing the economic and political importance of Mercosur for the EU�s interests in the short and medium run � say for the one or two coming decades or so. As Mercosur�s size is largely determined by Brazil�s size, this paper focuses on Brazil � although the paper assumes that, from Brazil�s perspective, a Brazil�EU preferential trade agreement (PTA) is a non-starter. It then aims at positioning the Mercosur�EU (MEU) PTA in the context of the EU�s current trade policy. In particular, it tries to assess, once one takes into account all the crucial goals to be met by the EU, whether the EU is likely to find the time and the resources necessary for dealing properly with a MEU PTA; this effort is notably complicated by the very divergent views on the role of trade between Brazil on the one hand, and Argentina and Venezuela, on the other hand. Finally, the paper examines the PTA options that can be seen as reasonably feasible. It suggests that, unless there are dramatic changes in Mercosur�s present trajectory, the goal of negotiating a fully-fledged MEU PTA should be set aside for some time � at least a decade or so. This does not mean leaving the negotiating table, but rather focusing on negotiating topics that remain attractive to both sides in the current context, and manageable and flexible enough to overcome the broad general problems confronted by Mercosur and the EU. Length: 12 pages Creation-Date: 2013-02 File-URL:http://www.ceps.eu/system/files/WD%20377%20Messerlin%20Mercosur-EU%20Trade.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7764 Template-Type: ReDIF-Paper 1.0 Author-Name: Fl�res Jr, Renato G. Title: In Search of a Feasible EU-Mercosul Free Trade Agreement Abstract: This paper aims at identifying ways to pursue the EU�Mercosul negotiations leading to a free trade agreement (FTA). After reviewing their already long history, it outlines a basic framework, in goods, services and other themes, judged possible. The main point is that, given the prevailing conditions on both sides, an agreement to be signed within a reasonable time must be modest, i.e. along the described lines. It then clearly sets up the decisions confronting the negotiators: either to pursue the modest, feasible option or to terminate negotiations under the FTA heading. The latter, however, does not imply an end to the dialogue. Many actions and measures may be taken � which are easier to discuss and fix � that could pave the way for, in due time, a closer-to-ideal FTA to be considered again. These are the subjects of a last section. Length: 12 pages Creation-Date: 2013-02 File-URL:http://www.ceps.eu/system/files/WD%20378%20Flores%20EU-Mercosul%20FTA.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7767 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Principles of a Two-Tier European Deposit (Re-)Insurance System Abstract: There is general agreement that banking supervision and resolution have to be organised at the same level. It is often argued, however, that there is no need to tackle deposit insurance because it is too politically sensitive. This note proposes to apply the principles of subsidiarity and re-insurance to deposit insurance: Existing national deposit guarantee schemes (DGSs) would continue to operate much as before (with only minimal standards set by an EU directive), but they would be required to take out re-insurance against risks that would be too large to be covered by them. A European Reinsurance Fund (EReIF) would provide this reinsurance financed by premia paid by the national DGSs, just as any reinsurance company does in the private sector. The European Fund would pay out only in case of large losses. This �deductible� would provide the national authorities with the proper incentives, but the reinsurance cover would stabilize depositor confidence even in the case of large shocks. Ideally the national DGSs would be responsible also for resolution. Experience has shown banking systems are more stable if deposit insurers are also responsible for resolution. The approach proposed here could thus be also used to design the �Single Resolution Mechanism� (SRM) which is being discussed as a complement to the �Single Supervisory Mechanism� (SSM). It will of course take time to build up the funding for such a reinsurance fund. This approach is thus not meant to deal with legacy problems from the current crisis. Length: 11 pages Creation-Date: 2013-04 File-URL:http://www.ceps.eu/system/files/PB%20No%20288%20DG%20Deposit%20Reinsurance.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7958 Template-Type: ReDIF-Paper 1.0 Author-Name: Pape, Wolfgang Title: The Evolving Integration in East Asia - Too many reservations? Abstract: East Asian economic integration is less well known in Europe than is desirable in the EU�s own enlightened self-interest. It is also badly understood, not least because a range of �soft� cultural, historical and political aspects are insufficiently appreciated in Europe. This CEPS Essay offers a deeper personal reflection on the emergence and development of East Asian economic cooperation and market-driven integration. It attempts to address some of the lingering reservations on both sides and to render the reservations in East Asia more intelligible to Europeans. Length: 16 pages Creation-Date: 2013-04 File-URL:http://www.ceps.eu/system/files/No%205%20%20WP%20on%20Political%20Union%20East%20Asian%20Integration.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7974 Template-Type: ReDIF-Paper 1.0 Author-Name: Paroussos, Leonidas Author-Name: Fragkiadakis, Kostas Author-Name: Charalampidis, Ioannis Author-Name: Tsani, Stella Author-Name: Capros, Pantelis Title: Quantitative Reference Scenario for the MEDPRO Project Abstract: In general equilibrium models the reference scenario is important, as the evaluation of the alternative policies modelled is based on their deviation from the reference scenario. The reference scenario relates to the development of an economic outlook for each region and sector of the model. This means that assumptions are made about the main drivers of growth, e.g. population growth and technical progress. This report provides the main assumptions used for the development of the reference scenario in the MEDPRO project. The report also provides a brief country and sectoral overview for each of the southern and eastern Mediterranean countries covered by the MEDPRO project. Length: 17 pages Creation-Date: 2013-05 File-URL:http://www.ceps.eu/system/files/MEDPRO%20Report%20No%206%20on%20quantitative%20reference%20scenario%20-%20Edited%20final_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8097 Template-Type: ReDIF-Paper 1.0 Author-Name: Paroussos, Leonidas Author-Name: Tsani, Stella Author-Name: Vrontisi, Zoi Title: Economic and Structural Database for the MEDPRO Project Abstract: This report presents the economic and structural database compiled for the MEDPRO project. The database includes governance, infrastructure, finance, environment, energy, agricultural data and development indicators for the 11 southern and eastern Mediterranean countries (SEMCs) studied in the MEDPRO project. The report further details the data and the methods used for the construction of social accounting, bilateral trade, consumption and investment matrices for each of the SEMCs. Length: 27 pages Creation-Date: 2013-05 File-URL:http://www.ceps.eu/system/files/MEDPRO%20Report%20No%205%20Economic%20%20Structural%20database.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8087 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: Arbak, Emrah Author-Name: Ben-Naceur, Sami Author-Name: De Groen, Willem Pieter Title: Determinants of Financial Development across the Mediterranean Abstract: Casual observation shows that that the financial systems in the southern and eastern Mediterranean are unable (or unwilling) to divert the financial resources that are available to them as funding opportunities to private enterprises. Using a sample of northern and southern Mediterranean countries for the years 1985 to 2009, this study empirically assesses the reasons underlying such conditions. The results show that strong legal institutions, good democratic governance and adequate implementation of financial reforms can have a substantial positive impact on financial development only when they are present collectively. Moreover, inflation appears to undermine banking development, but less so when the capital account is open. Government debt growth appears to weaken credit growth, which confirms that public debt �crowds out� private debt. Lastly, capital inflows appear to primarily have an income effect, increasing income and thereby national savings, and thus increasing the availability of credit. Length: 30 pages Creation-Date: 2013-02 File-URL: http://www.ceps.eu/system/files/Determinants%20of%20FD%20Ayadi%20et%20al%20rev.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7770 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: Arbak, Emrah Author-Name: Ben-Naceur, Sami Author-Name: De Groen, Willem Pieter Title: Financial Development, Bank Efficiency and Economic Growth across the Mediterranean Abstract: This MEDPRO Technical Report explores the relationship between financial sector development and economic growth, using a sample of northern and southern Mediterranean countries for the years 1985-2009. The authors included several variables to measure the development of the financial sector to account both for quantity and quality effects. The results indicate that credit to the private sector and bank deposits are negatively associated with growth, which confirms deficiencies in credit allocation in the region and suggests weak financial regulation and supervision. On the stock market side, the results seem to indicate that stock market size and liquidity play a significant role in growth, especially when accounting for the quality of an institution. Investment, whether domestic or in the form of FDI, contributes significantly to economic growth. Stronger institutions and low inflation are key growth factors. Initial GDP has a persistently and significantly negative impact on growth, which implies that poorer countries are catching up richer countries in terms of economic growth. Length: 17 pages Creation-Date: 2013-03 File-URL: http://www.ceps.eu/system/files/Growth%20%2526%20Development.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7832 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: Arbak, Emrah Author-Name: De Groen, Willem Pieter Title: Convergence and Integration of Banking Sector Regulations in the Euro-Mediterranean area Abstract: This analysis of regulatory convergence shows that substantial improvements have been made in the southern and eastern Mediterranean countries (SEMCs), yet they still suffer from key weaknesses in deposit insurance, entry obstacles, political interference and the strength of legal rights. In particular, deposit insurance systems in many SEMCs are not explicit, which could lead to uncertainties in the provision of support to banks in case of default. Moreover, most systems do not attempt to align the banks� incentives in risk-taking with those of taxpayers by implementing risk-based premiums. Another persistent issue is the presence of entry obstacles, with signs of substantial barriers to entry and continued government ownership of banks. The comparison of regulatory systems also highlights that some SEMCs have barely been able to catch up with the strong increase in supervisory independence in EU Mediterranean countries in recent years. While creditor protection remains relatively weak, significant improvements in credit information have occurred since 2003, notably through the establishment of private credit bureaus with universal coverage. Length: 31 pages Creation-Date: 2013-03 File-URL:http://www.ceps.eu/system/files/MEDPRO%20TR34%20RA%2C%20EA%20%2526%20WPDG%20Convergence%20of%20Banking%20Sector%20Regulations%20-%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7853 Template-Type: ReDIF-Paper 1.0 Author-Name: Lannoo, Karel Title: The New Financial Regulatory Paradigm: A transatlantic perspective Abstract: This CEPS Policy Brief reviews key aspects of the new financial paradigm in a transatlantic perspective, focusing on the general approach in EU and US legislation in response to the financial crisis and the G-20 commitments and specifically as regards the extraterritorial implications. Following discussion of the institutional setting, conclusions are offered on what these changes mean in the context of the recently proposed Transatlantic Trade and Investment Partnership. In comparing the EU and the US efforts in re-engineering their regulatory regimes in response to the financial crisis, the paper finds, with the notable exception of the banking union, serious grounds for concern that the outcome may be an even more fragmented European financial market, access to which for third-country institutions is highly problematic. Length: 8 pages Creation-Date: 2013-03 File-URL:http://www.ceps.eu/system/files/PB287%20KL%20TAP%20in%20Finance.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7856 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: Arbak, Emrah Author-Name: Ben-Naceur, Sami Author-Name: De Groen, Willem Pieter Title: Benchmarking the Financial Sector in the Southern and Eastern Mediterranean Countries and Projecting 2030 Financial Sector Scenarios Abstract: This paper aims at devising scenarios for the development of the financial system in the southern and eastern Mediterranean countries (SEMCs), for the 2030 horizon. The results of the simulations indicate that bank credit to the private sector, meta-efficiency and stock market turnover could reach at best 108%, 78% and 121%, respectively, if the SEMCs adopt the best practices in Europe. These scenarios are much higher than those of the present levels in the region but still lower than the best performers in Europe. More specifically, we find that improving the quality of institutions, increasing per capita GDP, opening further capital account and lowering inflation are needed to enable the financial system in the region to converge with those of Europe. Length: 22 pages Creation-Date: 2013-03 File-URL:http://www.ceps.eu/system/files/MEDPRO%20TR31%20Benchmarking%20Financial%20Sector%20in%20SEMCs%20final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7868 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Title: Financial Sector Development and Integration in the Southern and Eastern Mediterranean: Towards a long-term sustainable transition Abstract: This MEDPRO Policy Paper examines the trends and prospects in financial-sector development and integration in the southern and eastern Mediterranean countries and concludes with an agenda for a long-term sustainable transition where finance turns to be a positive stimulus to long-term growth. Length: 7 pages Creation-Date: 2013-04 File-URL:http://www.ceps.eu/system/files/MEDPRO%20Policy%20Paper%20No%207%20RA%20Financial%20Sector%20Development.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7936 Template-Type: ReDIF-Paper 1.0 Author-Name: Ayadi, Rym Author-Name: Gadi, Salim Title: Access by MSMEs to Finance in the Southern and Eastern Mediterranean: What role for credit guarantee schemes? Abstract: Micro-, small- and medium-sized enterprises (MSMEs) in the Southern and Eastern Mediterranean suffer from credit constraints. Given their contribution to employment and growth, similarly as in other regions, policy-makers have developed credit guarantee schemes (CGSs) in order to facilitate small companies� access to debt capital. CGSs are risk-sharing mechanisms under which a guarantor ensures the lender against a share of the possible losses it incurs when extending a loan. Despite the maturity of some schemes, knowledge of the schemes� functioning, operating environment as well as performance in guaranteeing loans for MSMEs is scarce. Building on a previous study of CGSs in the region, this paper extends the available knowledge on the region�s schemes, building on the results of an exclusive questionnaire to gain insights into these mechanisms. First, the paper reviews the conditions of MSMEs� access to finance in the Southern and Eastern Mediterranean; second, it presents the results of the questionnaire across a number of dimensions ranging from ownership to financial performance; and third, the paper presents some avenues for future policy research in this area. Length: 32 pages Creation-Date: 2013-04 File-URL:http://www.ceps.eu/system/files/MEDPRO%20TP%20No%2035%20RA%20%2526%20SG%20MSME%20Access%20to%20Finance.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8061 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi,Stefano Title: A Viable Alternative to Basel III Prudential Capital Rules Abstract: Stefano Micossi argues in this paper that the Basel framework for bank prudential requirements is deeply flawed and that the Basel III revision has failed to correct these flaws, making the system even more complicated, opaque and open to manipulation. In practice, he finds that the present system does not offer regulators and financial markets a reliable capital standard for banks and its divergent implementation in the main jurisdictions of the European Union and the United States has broken the market into special fiefdoms governed by national regulators in response to untoward special interests. The time is ripe to stop tinkering with minor adjustment and revisions in order to rescue the system, because the system cannot be rescued. In response to the current situation, Micossi calls for abandoning reference to risk-weighted assets calculated by banks with their internal risk management models for the determination of banks� prudential capital, together with the preoccupation with the asset side of banks in correcting for risk exposure. He suggests that the alternative may be provided by a combination of a straight capital ratio and a properly designed deposit insurance system. It is a logical, complete and much less distortive alternative; it would serve better the cause of financial stability as well as the interest of the banks in clear, transparent and level playing field. Length: 8 pages Creation-Date: 2013-05 File-URL: http://www.ceps.eu/system/files/PB291%20SM%20Bank%20Capital%20Rules_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:8075 Template-Type: ReDIF-Paper 1.0 Author-Name: Clerc, Christophe Author-Name: Demarigny, Fabrice Author-Name: Valiante, Diego Author-Name: de Manuel, Mirzha Title: A Legal and Economic Assessment of European Takeover Regulation Abstract: Takeovers are one-off events, altering control and strategy within an organisation. But the chances of becoming the target of a bid, even where remote, daily influence corporate decision-making. Takeover rules are therefore central to company law and the balance of power among managers, shareholders and stakeholders alike. This study analyses the corporate governance drivers underpinning takeover bid regulations and assesses the implementation of the EU Directive on takeover bids and compares it with the legal framework of nine other major jurisdictions, including the US. It finds that similar rules have different effects depending on company-level and country-level characteristics and considers the use of modular legislation and optional provisions to cater for them. Length: 277 pages Creation-Date: 2012-12 File-URL: http://www.ceps.eu/system/files/Takeover%20Bids%20Directive%20book%20-%20Final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7525 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: How to deal with macroeconomic imbalances? Abstract: It is plainly apparent that now is the time to make adjustments to the severe macroeconomic imbalances created by the sudden stop in capital flows to the countries in the southern periphery of the eurozone. But crucial questions arise about how to correct the imbalances, how to share the burden of the adjustment and what is the role of the European institutions, foremost the European Central Bank (ECB), in this process. Against this background, this paper first identifies the macroeconomic imbalances, focusing on intra-euro area current account disequilibria and the role of competitiveness. It then assesses the role of the common monetary policy and the monetary transmission mechanisms in the build-up of the imbalances. Finally, it introduces the possible role of the ECB and the ESRB in the process of rebalancing and as potential sources of inconsistency. Length: 16 pages Creation-Date: 2012-11 File-URL: http://www.ceps.eu/system/files/SR%20No%2069%20How%20to%20deal%20with%20macroeconomic%20imbalances.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7479 Template-Type: ReDIF-Paper 1.0 Author-Name: N��ez Ferrer, Jorge Author-Name: Volkery, Axel Author-Name: Withana, Sirini Author-Name: Medarova-Bergstrom, Keti Title: The Use of Innovative Financial Instruments for Financing EU Policies and Objectives: Implications for EU and National Budgets Abstract: This CEPS Special Report analyses the proposed expansion of innovative financial instruments in the EU Multiannual Financial Framework for the 2014�20 period. It presents the economic rationale, governance principles and criteria that these instruments should follow and compares these with proposals from the European Commission. Based on this assessment, it makes recommendations for the proposed instruments. The study, which was originally commissioned by the European Parliament's Committee on Budgets, was carried out by a team of researchers from CEPS and the Institute for European Environmental Policy (IEEP). Length: 79 pages Creation-Date: 2012-10 File-URL: http://www.ceps.eu/system/files/Innovative%20Financial%20Instruments_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7408 Template-Type: ReDIF-Paper 1.0 Author-Name: Carmassi, Jacopo Author-Name: Di Noia, Carmine Author-Name: Micossi, Stefano Title: Banking Union: A federal model for the European Union with prompt corrective action Abstract: The European Commission has published its proposals for the transfer of supervisory responsibilities to the European Central Bank, under Article 127(6) of the TFEU, providing a comprehensive and courageous �first step� towards a European banking union, the other steps being European deposit insurance and resolution procedures. The Policy Brief proposes a strengthening of the Commission package through the establishment of a truly federal system and the enlargement of its scope of application to the entire Union. The European Banking Authority (EBA) should remain in charge of all secondary rule-making in the domain of banking and supervisory standards should be broadened to include all crisis-management powers under a prompt corrective action system �-la-FDIC in the US. Length: 8 pages Creation-Date: 2012-09 File-URL:http://www.ceps.eu/system/files/book/2012/09/PB%20282%20JC%20CdN%20%2526%20SM%20Federal%20Banking%20Union.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7308 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji,Yuemei Title: What Germany should fear most is its own fear: An analysis of Target2 and current account imbalances Abstract: This paper analyzes two claims that have been made about the Target2 payment system. The first one is that this system has been used to support unsustainable current account deficits of Southern European countries. The second one is that the large accumulation of Target2 claims by the Bundesbank represents an unacceptable risk for Germany if the eurozone were to break up. We argue that these claims are unfounded. They also lead to unnecessary fears in Germany that make a solution of the eurozone crisis more difficult. Ultimately, this fear increases the risk of a break-up of the eurozone. Or to paraphrase Franklin Roosevelt, what Germany should fear most is simply its own fear. Length: 25 pages Creation-Date: 2012-09 File-URL: http://www.ceps.eu/system/files/book/2012/09/WD%20No%20368%20PDG%20%2526%20YJ%20What%20Germany%20should%20fear%20most%20is%20its%20own%20fear.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7280 Template-Type: ReDIF-Paper 1.0 Author-Name: Schoenmaker, Dirk Author-Name: Gros, Daniel Title: A European Deposit Insurance and Resolution Fund - An Update Abstract: Cross-border firms supply goods and services throughout Europe and cross-border banks facilitate the cross-border traffic by persons and firms. European banks are thus an integral part of the internal market. Yet cross-border banking is not stable in the current institutional setting as national authorities focus on preserving the national parts of a cross-border bank and the integrated value of a bank is neglected. European banks therefore need a European safety net, which is a precondition for putting the supervisory framework on a European footing. This Policy Brief first shows the overall architecture for a banking union in the euro area and sketches the basic building blocks of such a safety net. Next, it provides a sketch of a prospective European Deposit Insurance and Resolution Fund and outlines how one could structure a gradual transition from the national deposit insurance funds to the new European fund. Finally, it calculates that a European Deposit Insurance Fund would amount to about �30-50 billion for the 75 euro area banks that were subject to the EBA stress tests. This Fund could be created over a period of time through risk-based deposit insurance premiums levied on these banks. Once up and running, the Fund would then turn into a European Deposit Insurance and Resolution Fund to also deal with the resolution of one or more of these European banks. Length: 12 pages Creation-Date: 2012-09 File-URL: https://cdn.ceps.eu/wp-content/uploads/2012/09/PB283%20Deposit%20Insurance.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7684 Template-Type: ReDIF-Paper 1.0 Author-Name: Casale, Alessandra Author-Name: Giovannini, Alessandro Author-Name: Gros, Daniel Author-Name: Ivan, Paul Author-Name: N��ez Ferrer, Jorge Author-Name: Peirce, Fabrizia Title: The Implications for the EU and National Budgets of the Use of EU Instruments for Macro-Financial Stability Abstract: The euro crisis has forced member states and the EU institutions to create a series of new instruments to safeguard macro-financial stability of the Union. This study describes the status of existing instruments, the role of the European Parliament and how the use of the instruments impinges on the EU budget also through their effects on national budgets. In addition, it presents a survey of other possible instruments that have been proposed in recent years (e.g. E-bonds and eurobonds), in order to provide an assessment of how EU macro-financial stability assistance could evolve in the future and what could be its impact on EU public finances. Length: 80 pages Creation-Date: 2012-09 File-URL:http://www.ceps.eu/system/files/No%2064%20Instruments%20for%20Macro-Financial%20Stability.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7257 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Roth, Felix Title: The Europe 2020 Strategy: Can it maintain the EU�s competitiveness in the world? Abstract: Launched in March 2010 by the European Commission, the Europe 2020 strategy aims at achieving �smart, sustainable and inclusive� growth. This growth is intended to be driven by three sets of engines: knowledge and innovation, a greener and more efficient use of resources and higher employment combined with social and territorial cohesion. This CEPS report takes an in-depth look at the Europe 2020 strategy and the goals it sets for the EU, with the aim of shedding light on the question of whether the strategy will succeed in fostering the global competitiveness of the European Union. While finding that the Europe 2020 strategy identifies the right key indicators for its targets, the authors advise that it should be revised in several important respects and conclude with relevant policy steps to foster the future capability of European economies and their prosperity. Length: 111 pages Creation-Date: 2012-09 File-URL: http://www.ceps.eu/system/files/book/2012/09/Europe%202020.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7260 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Mayer, Thomas Title: A Sovereign Wealth Fund to Lift Germany�s Curse of Excess Savings Abstract:As an alternative to the present system of intermediation of the German savings surplus, this paper suggests that the risk-adjusted rate of return could be improved by creating a sovereign wealth fund for Germany (designated DESWF), which could invest excess German savings globally. Such a DESWF would offer German savers a secure vehicle paying a guaranteed positive minimum real interest rate, with a top-up when real investment returns allowed. The vehicle would invest the funds in a portfolio that is highly diversified by geography and asset classes. Positive real returns can be expected in the long run based on positive real global growth. Since, in this case, a significant amount of funds would flow outside the euro area, the euro would depreciate, which would help crisis countries presently struggling to revive growth through exports and to close their external deficits so as to recoup their international credit-worthiness. Target imbalances would gradually disappear and German claims abroad would move from nominal claims on the ECB to diversified real and nominal claims on various private and public foreign entities in a variety of asset classes. Length: 7 pages Creation-Date: 2012-08 File-URL: http://www.ceps.eu/system/files/book/2012/08/PB280%20DG%20%2526%20TM%20on%20DESWF.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7229 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Can Italy and Spain survive rates of 6-7%? Abstract: The sentiment that the euro is now in real danger is based in large part on the widespread conviction that interest rates of 6-7% are simply unsustainable for both Italy and Spain., After taking a closer look at the fundamentals, however, Daniel Gros concludes in this new Policy Brief that both countries should be able to live with this level of interest rates for quite some time, but only if they mobilize domestic savings, which remain strong in both countries. For Spain, some debt/equity swaps are also needed. Length: 4 pages Creation-Date: 2012-07 File-URL: http://www.ceps.eu/system/files/book/2012/07/PB279%20Gros%20on%20IT%20and%20SP.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7211 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: A simple model of multiple equilibria and sovereign default Abstract: This Working Document by Daniel Gros presents a simple model that incorporates two types of sovereign default cost: first, a lump-sum cost due to the fact that the country does not service its debt fully and is recognised as being in default status, by ratings agencies, for example. Second, a cost that increases with the size of the losses (or haircut) imposed on creditors whose resistance to a haircut increases with the proportional loss inflicted upon them. One immediate implication of the model is that under some circumstances the creditors have a (collective) interest to forgive some debt in order to induce the country not to default. The model exhibits a potential for multiple equilibria, given that a higher interest rate charged by investors increases the debt service burden and thus the temptation to default. Under very high debt levels credit rationing can set in as the feedback loop between higher interest rates and the higher incentive to default can become explosive. The introduction of uncertainty makes multiple equilibria less likely and reduces their range. Length: 20 pages Creation-Date: 2012-07 File-URL: http://www.ceps.eu/system/files/book/2012/07/WD366%20DG%20Multiple%20Equilibria.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7174 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Unholy compromise in the eurozone and how to right it Abstract: This paper reviews the causes of the ongoing crisis in the eurozone and the policies needed to restore stability in financial markets and reassure a bewildered public. Its main message is that the EU will not overcome the crisis until it has a comprehensive and convincing set of policies in place; able to address simultaneously budgetary discipline and the sovereign debt crisis, the banking crisis, adequate liquidity provision by the ECB and dismal growth. The text updates and expands on his Policy Brief contributed in the run-up to the emergency European Council meeting at the end of June. Length: 13 pages Creation-Date: 2012-07 File-URL: http://www.ceps.eu/system/files/book/2012/07/PB278%20SM%20Unholy%20Compromise.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7175 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: Self-Fulfilling Crises in the Eurozone: An Empirical Test Abstract: This paper tests the hypothesis that government bond markets in the eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios and fiscal space variables, and was the result of negative self-fulfilling market sentiments that became very strong since the end of 2010. We argue that this can drive member countries of the eurozone into bad equilibria. We also find evidence that after years of neglecting high government debt, investors became increasingly worried about this in the eurozone, and reacted by raising the spreads. No such worries developed in stand-alone countries despite the fact that debt-to-GDP ratios and fiscal space variables were equally high and increasing in these countries. Length: 29 pages Creation-Date: 2012-06 File-URL: http://www.ceps.eu/system/files/WD%20No%20367%20PDG%20%2526%20YJ%20Empirical%20Test%20Fragility%20Eurozone_0.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7085 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Author-Name: Ji, Yuemei Title: Mispricing of Sovereign Risk and Multiple Equilibria in the Eurozone Abstract: This paper finds evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios, and was the result of negative market sentiments that became very strong since the end of 2010. We also find evidence that after years of neglecting high government debt, investors became increasingly worried about this in the eurozone, and reacted by raising the spreads. No such worries developed in stand-alone countries despite the fact that debt-to-GDP ratios were equally high and increasing in these countries. We interpreted this evidence as validating the hypothesis formulated in De Grauwe (2011) according to which government bond markets in a monetary union are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We argue that the systematic mispricing of sovereign risk in the eurozone intensifies macroeconomic instability, leading to bubbles in good years and excessive austerity in bad years. Length: 22 pages Creation-Date: 2012-01 File-URL: http://www.ceps.eu/system/files/book/2012/01/WD%20No.%20361%20De%20Grauwe%20%2526%20Ji%20Multiple%20Equilibria%20in%20EZ.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6548 Template-Type: ReDIF-Paper 1.0 Author-Name: Ferrer, Jorge N��ez Title: Investing where it matters: An EU Budget for Long-Term Growth Abstract: What share of the EU�s collective GDP should the EU budget represent? 1%? 1.05%? 0.95%? A Task Force set up by CEPS to explore this question finds that the EU member states, once again, are locked in a pointless battle. Their report argues that the amount is not decisive when it comes to EU spending, but that quality matters far more than quantity. And it is on the quality side that the most significant improvements can be made. This report warns that obsession with net balances is bound to lead to bad decisions and exhorts Europe�s decision-makers to unleash the potential of the EU budget to make a significant contribution to long-term growth. To achieve this end, the report calls for enhanced investment in innovation, infrastructure that reinforces the single market and key European public goods, such as the management of environmental resources. Length: 64 pages Creation-Date: 2012-02 File-URL: http://www.ceps.eu/system/files/book/2012/02/An%20EU%20Budget%20for%20Long-Term%20Growth.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6648 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: Stepping up Growth Policies Abstract: The eurozone is in recession and will show negative growth in 2012, notes Stefano Micossi in this new CEPS Policy Brief. Hopes that fiscal consolidation could spur growth by improving household and business confidence are not materialising, because in reality, domestic demand has been hit too hard by fiscal consolidation, and investment throughout the Union remains well below pre-crisis levels. The author calls upon the European Council to consider launching a new growth initiative, centered on mobilising vast resources at EU level for investment in worthy projects of common interest Europe-wide. The key goal is to make sure that there is light at the end of the tunnel, lest at some stage the unbearable social and political costs of adjustment lead to a breakdown of domestic political systems and disorderly default. Length: 4 pages Creation-Date: 2012-03 File-URL: http://www.ceps.eu/system/files/book/2012/03/Micossi%20on%20Growth.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6696 Template-Type: ReDIF-Paper 1.0 Author-Name: Carmassi, Jacopo Author-Name: Micossi, Stefano Title: Time to Set Banking Regulation Right Abstract: Excessive leverage and risk-taking by large international banks were the main causes of the 2008-09 financial crisis and the ensuing sharp drop in economic activity and employment. World leaders and central bankers promised that it would not happen again and, to this end, undertook to overhaul banking regulation, first and foremost by rectifying Basel prudential rules. This study argues that the new Basel III Accord and the ensuing EU Capital Requirements Directive IV fail to correct the two main shortcomings of international prudential rules: 1) reliance on banks� risk management models for the calculation of capital requirements and 2) the lack of accountability by supervisors. Accordingly, the authors propose the calculation of capital requirements without risk adjustment and creation of a system of mandated action by supervisors modelled on the US framework of Prompt Corrective Action (PCA). They also recommend that banks should be required to issue large amounts of debentures that are convertible into equity in order to strengthen market discipline on management and shareholders. Length: 80 pages Creation-Date: 2012-03 File-URL: http://www.ceps.eu/system/files/book/2012/03/Time%20to%20Set%20Banking%20Regulation%20Right.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6734 Template-Type: ReDIF-Paper 1.0 Author-Name: Teusch, Jonas Title: Renewables and the EU Internal Electricity Market: The case for an arranged marriage Abstract: This Policy Brief argues that pursuing the renewables objective could contribute to the completion of the internal electricity market, help to overcome opposition to transmission projects and decrease the market power of incumbents. Conversely, an integrated internal electricity market means less price volatility in specific regional markets, which allows for more efficient deployment and grid integration of renewables. Three sets of recommendations are proposed. Length: 9 pages Creation-Date: 2012-03 File-URL: http://www.ceps.eu/system/files/PB264%20Teusch%20on%20Electricity%20Market_Final.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6733 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Mayer, Thomas Title: Liquidity in times of crisis: Even the ESM needs it Abstract: Europe�s policy-makers are engaged in protracted discussion on whether and how to increase the size of the euro rescue funds (the EFSF and the ESM). In this Policy Brief, Daniel Gros and Thomas Mayer argue that this attention on the headline size of the EMS and EFSF is misplaced. They propose that a simpler solution would be to register the ESM as a bank, with access to the ECB under the same conditions as apply to any normal bank. This would provide a liquidity backstop for the EMS which could refinance any secondary market interventions at the ECB. The size of the guarantees given to the ESM would then become secondary. Length: 12 pages Creation-Date: 2012-03 File-URL: http://www.ceps.eu/system/files/book/2012/03/PB265%20DG%20%2526%20TM%20Liquidity%20in%20times%20of%20crisis.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6787 Template-Type: ReDIF-Paper 1.0 Author-Name: de Manuel, Mirzha Author-Name: Lannoo, Karel Title: Rethinking Asset Management: From Financial Stability to Investor Protection and Economic Growth Abstract: Fresh prospects are opening for asset managers as Europe seeks to reduce its historical reliance on banking and to promote capital markets. But following the financial crisis, the industry faces a dual challenge: regaining investors� trust and coping with the post-crisis regulatory reform. Much rides on its ability to make investment funds deliver better results to its investors. Distribution remains the major stumbling block, but action is also needed to promote the contribution of asset management to the real economy and to preserve financial stability. In response to these challenges, CEPS and ECMI formed a Task Force composed of market participants, international experts, regulators and academics who met regularly throughout 2011 to closely examine the workings of the asset management industry and its role in the EU economy. This report draws the link between asset management and several key issues: financial stability, product integrity, investor protection and the real economy. It evaluates the discussions on product integrity in UCITS and �shadow banking�, as well as the many legislative proposals that are currently under consideration � including implementation of the alternative investment fund managers Directive (AIFMD), the review of the markets in financial instruments Directive (MiFID II) and packaged retail investment products (PRIPS). In an effort to make these complex issues comprehensible to a broad group of readers, the report combines clear language and straightforward introductions with detailed analysis and technical illustrations. Length: 216 pages Creation-Date: 2012-04 File-URL: http://www.ceps.eu/system/files/book/2012/04/Rethinking%20Asset%20Management%20e-version.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6840 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Author-Name: Alcidi, Cinzia Title: The Spanish Hangover Abstract: Spain faces high unemployment and slow growth. This paper focuses on an important source of those problems, namely its housing market. While some adjustment has occurred since Spain's housing bubble burst in 2008, the authors find that house prices and construction need to decrease more to slow Spain's unsustainable accumulation of foreign debt. Length: 5 pages Creation-Date: 2012-04 File-URL: http://www.ceps.eu/system/files/book/2012/04/PB267%20CA%20%2526%20DG%20Spanish%20Overhang.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6836 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Macroeconomic Imbalances in the Euro Area: Symptom or cause of the crisis? Abstract: Lax financial conditions can foster credit booms. The global credit boom of the last decade led to large capital flows across the world, including large movements of resources from the Northern countries of the euro area towards the Southern part. Since the start of the crisis and more markedly after 2009, these flows have suddenly stopped, creating severe adjustment pressures. This paper argues that, at this point, the common monetary policy can only try to mitigate the unavoidable adjustment by maintaining overall financial stability. The challenge is to strike a delicate balance between providing liquidity for solvent institutions while keeping the overall pressure on for a rapid correction of the imbalances. Length: 12 pages Creation-Date: 2012-04 File-URL: http://www.ceps.eu/system/files/book/2012/04/PB266%20DG%20on%20Macroeconomic%20Imbalances%20in%20the%20Euro%20Area%20.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6865 Template-Type: ReDIF-Paper 1.0 Author-Name: Marcu, Andrei Title: Expanding Carbon Markets through New Market-based Mechanisms: A synthesis of discussions and submissions to the UNFCCC Abstract: At the Durban meeting of the United Nations Framework Convention on Climate Change (UNFCCC), Parties to the Convention and observer organisations were invited to make submissions on a number of issues relevant to the discussions on various approaches, including opportunities for using markets, to enhance the cost-effectiveness of mitigation actions. This Special Report, produced by the newly created CEPS Carbon Market Forum (CMF), reviews the submissions by Parties and observer organisations, with a view to facilitating progress in the expansion of a global carbon market. In this context, the report aims to contribute to the European debate on the development of new market mechanisms and carbon markets, as well as to the UNFCCC negotiating process. It attempts to identify some of the main issues that will need to be addressed this year, leading to the 18th Conference of the Parties (COP) in Doha, and discusses the various options proposed. As a first output of the CEPS CMF on this issue, and given the state of negotiations under the UNFCCC, it does not propose solutions. Length: 20 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/Expanding%20Carbon%20Markets%20through%20NMMs.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6879 Template-Type: ReDIF-Paper 1.0 Author-Name: De Grauwe, Paul Title: In Search of Symmetry in the Eurozone Abstract: The analysis in this Commentary provides strong evidence showing that the burden of the adjustments to the imbalances in the eurozone between the surplus and the deficit countries is borne almost exclusively by the deficit countries in the periphery. And although the European Commission has now been invested with an important responsibility of monitoring and correcting macroeconomic imbalances in the framework of the Macroeconomic Imbalance Procedure (MIP), the author finds that up to now it imposes a lot of pressure on the deficit countries but fails to impose a similar pressure on the surplus countries, with the effect that the eurozone is being kept in a deflationary straightjacket. Length: 5 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/book/2012/05/PB268%20PDG%20Symmetry%20in%20EZ.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6901 Template-Type: ReDIF-Paper 1.0 Author-Name: Schoenmaker, Dirk Author-Name: Gros, Daniel Title: A European Deposit Insurance and Resolution Fund Abstract: The eurozone is caught in a �diabolical loop� in which weak domestic banking systems damage sovereign fiscal positions and conversely, in which risky sovereign positions disproportionately threaten domestic banking stability. A European-level banking system could go a long way towards breaking this unfortunate loop and stabilising the eurozone. This would require a European safety net for cross-border banks. This paper sketches the building blocks of a European Deposit Insurance Fund. We calculate that such a Fund would amount to �55 billion for the 35 largest European banks. This Fund could be created over ten years through risk-based deposit insurance premiums levied on the top 35 banks. Once fully up and running, the Fund could also deal with the resolution of one or more of these 35 banks. The Fund would then be turned into a European Deposit Insurance and Resolution Fund. The paper aims to promote debate among policy-makers, industry and academia. Length: 12 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/book/2012/05/WD364%20DS%20%2526%20DG%20on%20European%20Deposit%20Insurance.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6918 Template-Type: ReDIF-Paper 1.0 Author-Name: Ruding, H. Onno Title: The Euro Crisis: Implications for the Internal Market and Harmonisation of Corporate Taxes Abstract: This CEPS Policy Brief looks at the ways in which the euro crisis has impacted the successful functioning of the internal market of the EU and the state of play with respect to the creation of a common consolidated corporate tax base in corporate taxation. Length: 6 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/book/2012/05/PB269%20HOR%20Corporate%20Taxation.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6949 Template-Type: ReDIF-Paper 1.0 Author-Name: Brender,Anton Author-Name: Pisani, Florence Author-Name: Gagna, Emile Title: The Sovereign Debt Crisis: Placing a curb on growth Abstract: To ward off the threat of a worldwide depression that loomed at the end of the 2000s, governments opted to run up substantial fiscal deficits. In doing so, they sowed the seeds of the sovereign debt crisis. Saddled with often high debt burdens and modest growth prospects, developed countries� governments must now rebalance their budgets. Doing so too rapidly, however, will choke growth. Faced with this dilemma, Japan and the United States have pursued growth policies while the euro area members are quickly trying to rebalance their budgets. This book explores the respective risks associated with these two strategies. It further investigates the consequences for the international monetary and financial system of developing countries� public debts ceasing to be risk-free. Length: 8 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/book/2012/05/Sovereign%20Debt%20Crisis%20e-version.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6951 Template-Type: ReDIF-Paper 1.0 Author-Name: Gros, Daniel Title: Europe�s Recurrent Employment Problems Abstract: As unemployment climbs to new heights, Europe�s policy-makers are desperately casting about for the few instruments with which the EU can claim to foster growth. After a thorough examination of the facts on the ground, however, this paper finds that the North and the South of the euro area are diverging so much that they need very different policy prescriptions. Moreover, it points out that the two instruments that the EU has at its disposal to address structural problems in the South (the EIB and the Structural Funds) are unlikely to be effective this time. Nevertheless, the paper concludes that the situation is not hopeless and that deep service-sector reforms in Germany would also be helpful to unlock the country�s productivity potential and open its market for the export of services from southern Europe. Opening the German market would yield a �double dividend�: not only would Germany benefit, but the South would also have the chance to find jobs for its rather well-educated youth, which right now face only the unhappy choice between unemployment and emigration. Length: 8 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/book/2012/05/PB271%20DG%20Europe%20looking%20for%20Employment.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6972 Template-Type: ReDIF-Paper 1.0 Author-Name: Alcidi, Cinzia Author-Name: Giovannini, Alessandro Author-Name: Gros, Daniel Title: �Grexit�: Who would pay for it? Abstract: The eurozone countries are currently sitting on an aggregate exposure to Greece exceeding �300 billion. If the country were to exit the eurozone, it would certainly not be able to service its debt in the short run when the exchange rate overshoots. Over the longer run, however, the exchange rate is likely to return to a longer-run equilibrium and growth is likely to slowly resume closing the output gap. Moreover, exports are likely to grow by more than GDP, thus increasing over time the capacity of the country to service foreign debt. Therefore, the authors conclude, whether or not an exit from the eurozone is followed by default on the official debt depends decisively on the willingness (and ability) of Greece�s European partners to wait and finance the bridge between the short and the long run. Length: 8 pages Creation-Date: 2012-05 File-URL: http://www.ceps.eu/system/files/book/2012/05/PB272%20CA%20AG%20%20DG%20Cost%20of%20Grexit.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6977 Template-Type: ReDIF-Paper 1.0 Author-Name: Micossi, Stefano Title: An agenda for the European Council: Feasible steps to bring the eurozone back from the precipice Abstract: In the run-up to the emergency European Council meeting at the end of June, Stefano Micossi outlines in this Policy Brief the main elements of a realistic and yet incisive policy package, capable of reassuring financial markets and a bewildered public opinion. It is more than Germany has been willing to accept so far but much less than many of the demands it will confront at the Council meeting. More importantly, it only requires a minimum of additional disbursements by the member states, while strengthening risk-sharing for sovereign and banking risks. Length: 12 pages Creation-Date: 2012-06 File-URL: http://www.ceps.eu/system/files/book/2012/06/Micossi%20Agenda%20for%20European%20Council.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7080 Template-Type: ReDIF-Paper 1.0 Author-Name:Lannoo, Karel Title: EU Federalism in Crisis Abstract: In the run-up to this week�s European Council, Karel Lannoo offers his assessment of what has been put on the table so far in response to the euro crisis � and what more needs to be done. He starts with an assessment of the measures taken in the �six-pack� and the debate on the Euro-plus Pact and then addresses some operational elements of the European Stability Mechanism and the question whether the EU is, as often alleged, a transfer union. The CEPS Chief Executive concludes his brief by proposing a pragmatic agenda of items on which the EU could advance towards a more federal economic union. Length: 9 pages Creation-Date: 2011-12 File-URL: http://www.ceps.eu/system/files/book/2011/12/PB256%20KL%20on%20EU%20Federalism%20in%20Crisis.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:6498 Template-Type: ReDIF-Paper 1.0 Author-Name: Cipollone, Angela Author-Name: Patacchini, Eleonora Author-Name: Vallanti, Giovanna Title: Women�s Labour Market Performance in Europe: Trends and Shaping Factors Abstract: The objective of this paper is two-fold. First, it aims to assess recent trends in women�s employment and labour market participation with a focus on the changes in the �type� of occupation (temporary vs. regular and part-time vs. full-time) women are involved in. Secondly, it examines the role played by the interplay of macro-institutional factors and policies and individual characteristics in explaining the observed trends and cross-country differences by means of a multi-level approach. In particular, it questions the role that the reforms towards a model of a �flexicure� labour market have played in explaining recent trends in women�s participation. Length: 62 pages Creation-Date: 2012-09 File-URL: http://www.ceps.eu/system/files/Women%20Labour%20Market%20Performance%20in%20Europe.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7329 Template-Type: ReDIF-Paper 1.0 Author-Name: Krastev, Ivan Title: The Political Logic of Disintegration: Seven Lessons from the Soviet Collapse Abstract: CEPS has inaugurated a new publication series of Essays with this highly thoughtful contribution by Ivan Krastev, Chairman of the Centre for Liberal Strategies in Sofia, which draws critical lessons from the disintegration of the Soviet Union for European political leaders struggling with the current crisis. While acknowledging fundamental differences between the USSR and the EU, the Bulgarian theorist argues that the game of disintegration is primarily a political one and that the ability of Europe�s leaders to manage a similarly volatile mix of political, economic and psychological factors that were at play in the Soviet collapse could prove decisive in the very survival of the EU. Length: 10 pages Creation-Date: 2012-09 File-URL: http://www.ceps.eu/system/files/Seven%20Lessons%20from%20the%20Soviet%20Collapse.pdf File-Format: Application/pdf Handle: RePEc:eps:cepswp:7332