Moving the EU from a Laggard to a Leader in Democracy Assistance: The Potential Role of the European Endowment for Democracy. CEPS Policy Brief No. 273, 15 June 2012

In their assessment of the proposed European Endowment for Democracy (EED), Hrant Kostanyan and Magdalena Nasieniak conclude that an instrument along the lines currently envisaged could and should take on the challenge to make the EU a truly committed, pro-active and effective leader of democracy assistance. A flexible and fast-track path of assessing needs and granting funds could become the most visible results of the EU’s assistance in this area, delivering almost immediate tangible results. They argue that the EED therefore needs to become an instrument free of nationally-driven decisions, European ‘turf wars’ and cumbersome bureaucracy.

A European Deposit Insurance and Resolution Fund - An Update. CEPS Policy Brief No. 283, 11 September 2012

Cross-border banking is currently not stable in Europe. Cross-border banks need a European safety net. Moreover, a truly integrated European level banking system may help to break the diabolical loop between the solvency of the domestic banking system and the fiscal standing of the national sovereign. This policy paper first sketches the building blocks of a banking union. Importantly, a new European Deposit Insurance and Resolution Authority (EDIRA) should start simultaneously with the ECB assuming supervisory powers. A combination of European supervision and local resolution cannot work because it is not ‘incentive compatible’. Next, this paper proposes a transition period to gradually phase in the European deposit insurance coverage. Finally, we calculate 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.

The European Union’s Role in the Formation of India’s Climate Change Policy. Bruges Regional Integration & Global Governance Papers 2/2012, September 2012

This paper focuses on the role of the European Union (EU) in the formation of India’s climate change policy; an increasingly high profile issue area. It is based on an extensive study of relevant literature, EU-India policy documents and the execution of thirteen semi-structured interviews with experts; many of whom have experienced EU-India cooperation on climate change first-hand. A three-point typology will be used to assess the extent of the EU’s leadership role, supporting role or equal partnership role in India, with several sub-roles within these categories. Further, for clarity and chronology purposes, three time periods will be distinguished to assess how India’s climate policy has evolved over time, alongside the EU’s role within that. The findings of the paper confirm that the EU has demonstrated signs of all three roles to some degree, although the EU-India relationship in climate policy is increasingly an equal partnership. It offers explanations for previous shortcomings in EU-India climate policy as well as policy recommendations to help ensure more effective cooperation and implementation of policies.

Options for a Euro-area fiscal capacity. Bruegel Policy Brief 2013/01, January 2013

Europe has responded to the crisis with strengthened budgetary and macroeconomic surveillance, the creation of the European Stability Mechanism, liquidity provisioning by resilient economies and the European Central Bank and a process towards a banking union. However, a monetary union requires some form of budget for fiscal stabilisation in case of shocks, and as a backstop to the banking union. This paper compares four quantitatively different schemes of fiscal stabilisation and proposes a new scheme based on GDP-indexed bonds. The options considered are: (i) A federal budget with unemployment and corporate taxes shifted to euro-area level; (ii) a support scheme based on deviations from potential output;(iii) an insurance scheme via which governments would issue bonds indexed to GDP, and (iv) a scheme in which access to jointly guaranteed borrowing is combined with gradual withdrawal of fiscal sovereignty. Our comparison is based on strong assumptions. We carry out a preliminary, limited simulation of how the debt-to-GDP ratio would have developed between 2008-14 under the four schemes for Greece, Ireland, Portugal, Spain and an ‘average’ country.The schemes have varying implications in each case for debt sustainability

The European Union-an expanding security community? EU Diplomacy Paper 06/2012, August 2012

This paper investigates why and how the geographical scope of the security community centered around the European Union (EU) is expanding. It starts from the assumption that the EU itself is a ‘tightly-coupled mature pluralistic security community’. The analysis of the expansion of this peaceful area is based on the theoretical framework first designed by Karl Deutsch and later developed by Emmanuel Adler and Michael Barnett. Contrary to the logic of the adage ‘si vis pacem para bellum’, I argue that the security community is expanding because the EU’s own origins and self-perception are driven by an ambition to create lasting peace. The key mechanisms I explore are the EU’s enlargement and neighborhood policies, which are best understood when analyzed against the concept of concentric circles: the regional EU-centered security community is a multi-speed security community, stronger at its core and weaker as it spreads towards its margins.

The European Union's promotion of regional economic integration in Southeast Asia: Norms, markets or both? Bruges Political Research Paper No. 25/May 2012

The EU‘s external action includes a preference for regional interlocutors and a tendency to promote regionalism. This work concentrates on the southeast Asian area and it aims at investigating the nature of EU‘s promotion of ASEAN regional integration. The EU‘s ideas and practices of regionalism as well as the single market experience influence the EU‘s international action. The power deriving from the EU‘s institutionalized market is used by the Union in a normative way to diffuse the EU‘s ideas and principles, advance the EU‘s interests and spread its model of economic integration through political dialogue, development cooperation and preferential trade arrangements. This action seems to result in a certain diffusion of the EU‘s ideas and practices in southeast Asia as well as in a subsequent reappropriation and redefinition of external inputs by ASEAN.

Should non-euro area countries join the single supervisory mechanism? Bruegel Policy Contribution 2013/06, 13 March 2013

Irrespective of the euro crisis, a European banking union makes sense, including for non-euro area countries, because of the extent of European Union financial integration. The Single Supervisory Mechanism (SSM) is the first element of the banking union. From the point of view of non-euro countries, the draft SSM regulation as amended by the EU Council includes strong safeguards relating to decision-making, accountability, attention to financial stability in small countries and the applicability of national macro-prudential measures. Non-euro countries will also have the right to leave the SSM and thereby exempt themselves from a supervisory decision. The SSM by itself cannot bring the full benefits of the banking union, but would foster financial integration, improve the supervision of cross-border banks, ensure greater consistency of supervisory practices, increase the quality of supervision,avoid competitive distortions and provide ample supervisory information. While the decision to join the SSM is made difficult by the uncertainty about other elements of the banking union, including the possible burden sharing, we conclude that non-euro EU members should stand ready to join the SSM and be prepared for the negotiations of the other elements of the banking union.

EU-IMF assistance to euro area countries: an early assessment. Bruegel Blueprint [No. 19?], 16 May 2013

Three years ago, in May 2010, Greece became the first euro-area country to receive financial assistance from the European Union and the International Monetary Fund in exchange for implementing an economic programme designed by the Troika of the European Commission, the European Central Bank and the IMF. Within a year, Ireland and Portugal went down the same path. This study provides an early evaluation of these assistance programmes implemented by the Troika in these three countries. The study assesses the economic impact of the programmes and the consequences of their particular institutional set-up.

Inflation persistence in Central and Eastern European countries. Bruegel Working Paper 2013/04, 22 July 2013

This paper studies inflation persistence with time-varying coefficient autoregressions for twelve central European countries,in comparison with the United States and the euro area. Inflation persistence tends to be higher in times of high inflation. Since the oil price shocks, inflation persistence has declined both in the US and euro-area. In most central and eastern European countries, for which our study covers 1993-2012, inflation persistence has also declined, with the main exceptions of the Czech Republic, Slovakia and Slovenia, where persistence seems to be rather stable.

Corporate social responsibility: a European perspective. Jean Monnet/Robert Schuman Paper Series Vol. 13 No. 6, June 2013

From the Introduction. CSR grows at different rhythms. CSR varies from continent to continent, country from country, sector from sector and corporation from corporation. The Responsible Competitive Index (RCI) from the UK NGO Accountability and the Brazilian Business School, Fundaçao Dom Cabral, looks at how countries are performing in their efforts to promote responsible business practices and issues periodical indexes about such performances. The RCI’s index for 2007 analysed 108 countries (96% of global GDP). The analysis showed that more advanced economies do better in this area. The top 20 countries, by the ranking order of best performance, were the following: 1 Sweden, 2 Denmark, 3 Finland, 4 Iceland, 5 UK, 6 Norway, 7 New Zealand, 8 Ireland, 9 Australia, 10 Canada, 11 Germany, 12, Netherlands, 13 Switzerland, 14 Belgium, 15 Singapore, 16 Austria, 17 France, 18 USA, 19 Japan, and 20 Hong Kong, etc. However, it is important to bear in mind that advanced economies have often moved their more dirty industries to other parts of the world where there are less stringent environmental and social standards. As a result, other countries may be polluting on their behalf, and the indexes do not factor those in.2

The euro area's tightrope walk: debt and competitiveness in Italy and Spain. Bruegel Policy Contribution 2013/11, September 2013

Competitiveness adjustment in struggling southern euro-area members requires persistently lower inflation than in major trading partners, but low inflation worsens public debt sustainability. When average euro-area inflation undershoots the two percent target, the conflict between intra-euro relative price adjustment and debt sustainability is more severe. In our baseline scenario, the projected public debt ratio reduction in Italy and Spain is too slow and does not meet the European fiscal rule. Debt projections are very sensitive to underlying assumptions and even small negative deviations from GDP growth, inflation and budget surplus assumptions can easily result in a runaway debt trajectory. The case for a greater than five percent of GDP primary budget surplus is very weak. Beyond vitally important structural reforms, the top priority is to ensure that euro area inflation does not undershoot the two percent target, which requires national policy actions and more accommodative monetary policy. The latter would weaken the euro exchange rate, thereby facilitating further intra-euro adjustment. More effective policies are needed to foster growth. But if all else fails, the European Central Bank’s Outright Monetary Transactions could reduce borrowing costs.

Does the European Semester deliver the right policy advice? Bruegel Policy Contribution 2013/12, 20 September 2013

The July 2013 European Council recommendations to the euro area recognise a number of fiscal and macrostructural challenges, but do not fully exploit the options made possible by the European economic governance framework. There are particular problems with the Council's suggestions for the euro area as whole, which are not (or not adequately) reflected by the country-specific recommendations. A major drawback is that the Council recommendations do not give sufficient importance to symmetric intra-euro area adjustments. Reference to the euro area's ‘aggregate fiscal stance’ is empty rhetoric. Insufficient attention is paid to demand management. The most comprehensive recommendations are made on structural reforms. The July/August 2013 Article IV IMF recommendations on macroeconomic policies could also have been more ambitious, but they correspond better to the economic situation of the euro area than the Council’s recommendations. The President of the Eurogroup should continue discussions on the completion of the economic governance framework, including completion of the banking union and the setting-up of a euro-area institution responsible for managing the euro area’s aggregate fiscal stance.