Economic Policy


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06 February 2013

The experiences of small countries like Greece, the Baltic states and Iceland are often adduced as evidence to justify arguments both for or against austerity. In this Commentary, CEPS Director Daniel Gros observes, however, that the proponents in these disputes usually neglect to mention the key idiosyncratic characteristics and specific starting conditions that can make such direct comparisons meaningless. He points out that Latvia has recovered quickly whereas Greece is still in recession.

05 February 2013

In this Commentary, Paul De Grauwe and Yuemei Ji provide evidence to suggest that movements in the spreads in the eurozone – i.e. the difference between national government bond rates and the German rate – between 2010 and the middle of 2012, when the ECB announced its OMT (outright monetary transactions) programme, were driven by market sentiment. Later as the fear and panic subsided, thanks largely to the announcement of the ECB, these spreads declined spectacularly.

26 January 2013

This article was published by CEPS Director Daniel Gros in Kredit und Kapital, Vol. 45, No. 4, 2012.

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 politically too sensitive.

08 January 2013

While a banking union for Europe has been discussed by economists since even before the 2007 crisis, the issue has now moved up to the top of the eurozone agenda. But what kind of banking union? For whom? Financed how? And managed by whom? These questions are explored in a new Vox eBook comprisings 15 papers on the topic by leading economists from both sides of the Atlantic.

08 January 2013

CEPS Director Daniel Gros contributed a chapter entitled “Transforming the ESM into an EMF as Part of the IMF” to this set of proceedings of a conference held in October 2011 on “The international monetary system: Sustainability and reform proposals”, organised in Brussels in October 2011. The book aims to celebrate the 100th anniversary of Robert Triffin (1911-1993), whose life and works are recalled by historians and witnesses.

07 January 2013

Taking exception with the often-heard bromide that Europe needs more integration to save its social model, Daniel Gros reiterates his position in this new CEPS Commentary that faster economic and population growth are key to ensuring the future of Europe’s social security systems. Daniel Gros is Director of CEPS.

21 December 2012

In an attempt to understand why the Greek economy is collapsing, this Commentary points out two key aspects that are often overlooked – the country’s large multiplier and a bad export performance. When combined with the need for a large fiscal adjustment, these factors help explain how fiscal consolidation in Greece has been associated with such a large drop in GDP.

Cinzia Alcidi is LUISS Research Fellow at CEPS and Daniel Gros is Director of CEPS.

12 December 2012

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.

07 December 2012

In this new CEPS commentary, CEPS Director Daniel Gros takes a closer look at the US experience to point out that the federal budget provides much less insurance against state-specific shocks than widely assumed, while the US banking union act as a very powerful shock absorber. Accordingly, he argues that the euro’s long-term stability depends far more on completing plans for a European banking union than on the introduction of a fiscal capacity for the eurozone.

03 December 2012

H. Onno Ruding describes the negotiations on the EU budget, which will resume in 2013 following their collapse in late November, as “more awkward than usual”. In this new CEPS Commentary, he advises EU leaders to make the instrument more forward-looking in promoting economic growth in Europe and less focused on maintaining legacy entitlements of past years. In his view, this means more spending on research, innovation, education and infrastructure and also requires further reductions in the still-dominant agricultural subsidies as well as regional and structural funds.

30 November 2012

This book presents original research that examines the growth of international investment agreements as a means to attract foreign direct investment (FDI) and considers how this affects the ability of capital-importing countries to pursue their development goals. The hope of countries signing such treaties is that foreign capital will accelerate transfers of technologies, create employment and benefit the local economy through various types of linkages. But do international investment agreements in fact succeed in attracting foreign direct investment?

28 November 2012

In the wake of the collapsed talks on a new EU budget for 2014-20, a new CEPS Commentary by Jorge Núñez Ferrer allows that there is a good chance that agreement will be reached before the summer but that the instrument will remain largely disconnected from the fundamental needs of the EU, foremost of which is the imperative to address imbalances in the eurozone.
The author is an Associate Research Fellow at CEPS.

23 November 2012

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.

15 November 2012

This CEPS Commentary argues that the way in which the burden of adjustment to the imbalances in the eurozone is borne almost exclusively by the deficit countries in the periphery produces a deflationary bias in the region as a whole. Against the threat of double-dip recession, Paul De Grauwe asserts that the adjustment could be done differently and calls for implementation of a more symmetric macroeconomic policy that reduces the deflationary bias.

Paul De Grauwe is Professor at the London School of Economics and Associate Senior Fellow, CEPS.

06 November 2012

This Commentary attempts to discern the distinguishing features between the present euro crisis and the financial crisis brought on in the US by the subprime lending disaster and the ensuing collapse of banks and other financial institutions in 2007-08.

18 October 2012

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.

18 October 2012

Despite their surprising similarities – in size and their housing booms – Ireland and the American state of Nevada sharply parted company  when it came to who bore responsibility for bailing out their failed banks when the booms turned to bust. This latest Commentary by Daniel Gros vividly illustrates the importance of that difference and thus the shock-absorbing capacity of an integrated banking system and a banking union.

Daniel Gros is Director of CEPS.

15 October 2012

Against the background of the IMF’s latest global economic forecast, Jørgen Mortensen and Cinzia Alcidi raise questions in a new CEPS Commentary about the timing of the implementation and the effects of the three main categories of economic policy – fiscal, monetary and structural.

Jørgen Mortensen is Senior Research Fellow at CEPS and Cinzia Alcidi is LUISS Research Fellow at CEPS

05 October 2012

Underlining the fact that shale gas, like all natural resources, can only be used once, Daniel Gros observes in this CEPS Commentary that the real issue is not whether this resource should be developed in Europe, but when it should be used: today or tomorrow? Europe is already a heavy user of gas, but its consumption is stagnating (along with its economy). Despite the hype about the shale gas revolution, the extraction cost of (onshore) conventional gas remains below that of fracking.

05 October 2012

Citing evidence from around the world, including the recent Turkish-Greek reconciliation, Adam Balcer suggests in this CEPS Commentary that establishment of economic cooperation between the business communities of Cyprus and Turkey can facilitate a political rapprochement or at least can prevent a rise in tensions.

Adam Balcer is Programme Director at demosEUROPA Centre for European Strategy in Warsaw.

26 September 2012

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.

26 September 2012

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.

18 September 2012

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.

12 September 2012

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.

11 September 2012

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.

06 September 2012

The misguided belief that “this time is different” led policy-makers to permit the credit boom of the early 2000s to continue for too long, thus preparing the ground for the biggest financial crisis in living memory. But when it comes to the recovery this around, CEPS Director Daniel Gros argues in this Commentary that the belief that this time should not be different might be equally dangerous.

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06 September 2012

Arguing that the planned move to put the ECB in charge of banking supervision would be incomplete without a European Deposit Insurance and Resolution Authority (EDIRA), Daniel Gros and Dirk Schoenmaker spell out in a new CEPS Commentary some underlying principles to guide a gradual transition under which only future risks would be shared while past losses would remain at the national level. They show that ultimately such a new institution would serve as a genuine source of confidence in the European banking system.

04 September 2012

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.

04 September 2012

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.

30 August 2012

The proposal to move to a full banking union in the eurozone means a radical regime shift for the EU, since the European Central Bank will supervise the eurozone banks and effectively end ‘home country rule’. But how this is implemented raises a number of questions and needs close monitoring, explains CEPS CEO Karel Lannoo in this new Commentary.

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