Economic Policy


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18 December 2014

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.

09 December 2014

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.

27 November 2014

On the face of it, the €315 billion euro in additional investment announced by Juncker to kickstart Europe’s economy should make a material difference. But, explains Daniel Gros, without actually having any margin of manoeuvre in the EU budget there cannot be any financing for new investment and there cannot be any real growth impulse. The European Commission should have made the completion of the internal market, in particular the integration of Europe’s energy markets, a precondition for any new investment plan.

Daniel Gros is Director of CEPS.

18 November 2014

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.

18 November 2014


The book is co-published with Rowman and Littlefield International (RLI) and can be purchased for £12.95 either in paperback or as an e-Book from the RLI website.

14 November 2014

This Commentary aims to contribute to the current analysis of sovereign QE (quantitative easing) that the ECB has already initiated through its internal working groups. The authors see a specific opportunity in sovereign QE that could provide for a game-changer in the course of the European crisis. They argue that the ECB intervention would be less distortive and more effective if it could leverage on the existence of a liquid market for a public security representing the eurozone as a whole, based on the securitisation of the different underlying national public securities.

13 November 2014

On November 15-16th, world leaders will gather in Brisbane, Australia for the ninth G-20 summit, aimed at increasing world GDP and charting a pathway to sustainable, inclusive growth and resilience through both short and medium-term actions.  Experts from think tanks around the world were commissioned by the Brookings Institution to address in a comprehensive report interrelated debates about growth, convergence and income distribution, three key elements that are likely to shape policy debates beyond the Brisbane summit.

12 November 2014

Two recent instances of flagrant infringement of agreed EU rules – the submission by Italy and France of budget plans for 2015 that clearly violated their governments’ vows of continued austerity under the Stability and Growth Pact and David Cameron’s petulant refusal to pay a back payment of billions of euros to the EU budget – threaten the EU’s fundamental workings, which are based on a clear rulebook enforced vigorously by a strong Commission.

05 November 2014

Following the Commission’s autumn forecast showing that only five euro-area countries exhibit a fiscal balance better than the 0.5% of GDP deficit allowed by the Fiscal Compact, Daniel Gros and Cinzia Alcidi attempt to explain in this new Commentary why there is precious little policy debate over these flagrant treaty violations. They find that it is not possible to put fiscal policy in a legal straightjacket and that the tight rules enshrined in the new Treaty and in national constitutions are discarded as soon as they become politically inconvenient.

04 November 2014

The surprise revelation that the UK would be paying a surcharge to the EU budget of €2.1 billion sent Prime Minister Cameron into a rampage. How could this misunderstanding have arisen, as the resources mechanism of the EU budget uses a rather rigid method of calculation agreed by all member states?

04 November 2014

Aside from David Cameron’s ill-tempered protest at the news that the UK owed an additional €2 billion to the EU budget by December 1st, there is not much further to be said on the matter. As underlined in this Commentary, the basic point is simple: clear rules on the contributions of member states were agreed, by common consent, whose implementation essentially involved putting numbers into a spreadsheet. This was done expressly in order to remove the political element out of a potentially contentious process.

04 November 2014

January 2014 marked the 20th anniversary of the establishment of the European Monetary Institute, the predecessor of the European Central Bank. On 12 February 2014, the European Central Bank and the National Bank of Belgium co-hosted a conference in Brussels to commemorate this key milestone on the way to Economic and Monetary Union. This book, edited by Ivo Maes and Frank Moss brings together the papers presented at the conference which was entitled “Progress through crisis? Conference for the 20th anniversary of the establishment of the European Monetary Institute”.

09 October 2014

With inflation in the eurozone stubbornly remaining on a downward trajectory, pressure is growing on the ECB to do “something” to prevent outright deflation. But, given the financial structure of eurozone countries, would the preferred "something" – quantitative easing – actually do the trick?

01 October 2014

This report reviews the various ways in which the Member States of the European Union handle the collection of revenues for the EU budget, as well as the classification and treatment of EU expenditures. The study finds a substantial diversity in these practices among the Member States and calls for a full harmonisation of the accounting procedures. It concludes with some options for transforming the Gross National Income resource into a ‘genuine’ resource for the EU and assesses the potential of a real VAT resource.

01 October 2014

In presenting their priorities for the new European Commission, Miroslav Beblavý and Ilaria Maselli assert in this CEPS Commentary that the time has come to devise an EU-level shock absorption mechanism. In their view, the instrument that best aligns varying political and economic objectives is a form of reinsurance of national systems of unemployment insurance.

18 September 2014

In recent months, the ECB has taken several steps to revitalise credit. In June, it decided to offer banks targeted longer-term refinancing operations (TLTROs), and in September, it announced its intention to buy large (as yet unspecified) amounts of asset-backed securities (ABS), also with the aim of improving the financing conditions for investment, especially for small and medium enterprises (SMEs). However, this focus on bank balance sheets as an inhibitor of lending might be misplaced.

12 September 2014

The exchange rate can have a very significant influence on the euro area, which is a rather open economy. Indeed the share of exports amounts to about 27% of GDP, which is much higher than for other economies of similar size (US or even Japan). However, the impact of exchange rates on exports is usually limited in the short run.

08 September 2014

Ansgar Belke and Daniel Gros have published an article in International Economics and Economic Policy, September 2014, Volume 11, Issue 3, pp 413-430. Entitled “A simple model of an oil-based global savings glut—the ‘China factor’ and the OPEC cartel”, this contribution illustrates the interaction between oil prices and the global savings equilibrium, which can invert the usual IS-type relationship between growth and interest rates. Higher growth is usually associated with higher interest rates.

08 September 2014

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.

08 September 2014

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.

12 August 2014

Daniel Gros explores in a new CEPS Commentary the feasibility of creating a common fund to provide compensation for the economic costs of sanctions as an integral part of the EU’s foreign-policy stance that is now emerging towards Russia, albeit slowly and painfully. 

Daniel Gros is Director of CEPS. An earlier version of this Commentary was originally published by Project Syndicate, 7 August 2014 (http://www.project-syndicate.org/columnist/daniel-gros#AjP1vwU8bkf1j4Vm.99) and is reprinted here with its kind permission.

 

05 August 2014

Daniel Gros argues in this commentary that the cause of the transatlantic growth gap following the recovery starting in 2010 from the global financial crisis should not be sought in excessive eurozone austerity or the excessive prudence of the European Central Bank. Rather, compared to the US, he argues that the excess debt created in the EU during the boom years has been much more difficult to work off.

24 July 2014

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.

Stefano Micossi is Director General of Assonime, visiting professor at the College of Europe in Bruges and a member of CEPS Board of Directors. Fabrizia Peirce is Senior Economist in Assonime economic division.

26 June 2014

As the European Council convenes today and tomorrow (June 26-27th) to confirm Jean-Claude Juncker as the candidate for President of the European Commission, CEPS Director Daniel Gros shows in this Commentary that the Council should de facto also be considered more a 'mini parliament' than an assembly of states and that the European Parliament cannot claim the monopoly on democratic legitimacy.

20 June 2014

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.

13 June 2014

This report is based on discussions within the CEPS Task Force on “The Quantity and Quality of Human Capital in Higher Education: Comparing the EU, the US and China", chaired by Jan-Eric Sundgren, Senior Adviser to the CEO of Volvo, and former President of Chalmers University of Technology in Gothenburg. It aims to draw salient lessons from the successes and failures in higher education practices in the EU, the US and China by comparing key education indicators and policy trends.

14 May 2014

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.

06 May 2014

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.

28 April 2014

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.

08 April 2014

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.