Flashlight Europe No. 3, November 2014: European Social Policy? Prospects for the New EU Commission

Whilst the intricate set of national and genuine European competences is probably just as convoluted as it has always been, the expectations of EU citizens are nothing of the sort. This is especially true in the area of employment and social affairs. What they want from policymakers is social safety and risk protection. And whether these things are done on the European or national level is of little importance. We have studied the latest data on social justice in the EU in order to describe the most important tasks and challenges currently facing Marianne Thyssen, the new Social Affairs Commissioner.

Eurasian integration. Russia's attempt at the economic unification of the post-Soviet area. OSW Study 44/2013

In 2009, Vladimir Putin, the then Russian prime minister, gave impetus to the establishment of closer relations within what was then a still narrow group of three countries: Russia, Kazakhstan and Belarus. Russia was determined in embarking on the implementation of the principles of the Customs Union among these three states and, since 2012, within the Common Economic Space as well. This process of integration is intended to bring about the introduction of ‘four freedoms’ in this area: the free movement of goods, services, capital and labour. From Moscow’s point of view, building up such integration structures is especially necessary in order to counteract the economic expansion of the European Union and China. It also feels it is important to take measures against the loosening of the bonds between the CIS countries and Russia. At the same time, close co-operation is expected to guarantee for Russia that the strong politico-economic influences in this area will be maintained. Despite the numerous limitations of the integration process, such as the small number of the participating states or limited progress in implementing the CES, this is still the most advanced integration programme in the region seen since the collapse of the USSR. Progress in putting the rules of the Customs Union into practice can be seen as a success for Moscow. In turn, the formation of the CES is still at an early stage, and it is difficult to determine at this point to what extent the three countries will harmonise their markets.

‘Wrong number?’ The Use and Misuse of Asylum Data in the European Union. CEPS Paper in Liberty and Security in Europe No. 69/December 2014

The Common European Asylum System (CEAS) is an EU policy area that is particularly evocative of the ‘politics of numbers’. The European Union has at its disposal a wide array of sources providing detailed information about the capacities and pressures of its member states’ asylum systems. This paper discusses the content of asylum data and the evolving interaction between its different sources, ranging from the United Nations High Commissioner for Refugees to the European Commission’s EUROSTAT and DG HOME, the European Asylum Support Office, FRONTEX, the European Migration Network (EMN) and national databases. However, the way in which such data are often misused, or even omitted, in political debate affects the soundness of policy decisions in the CEAS. Drawing on debates over the contested phenomenon of ‘asylum shopping’ and the exemption of victims of torture and unaccompanied minors from accelerated and border procedures in the recast asylum procedures Directive, this briefing paper argues that solid data-based evidence is often absent from political negotiations on CEAS measures affecting refugees and asylum-seekers.

An Unemployment Insurance Scheme for the Euro Area: A simulation exercise of two options. CEPS Special Report No. 98/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. 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.

Strengthening the euro area. CHALLENGE EUROPE Issue 22. Challenges and new beginnings: Priorities for the EU's new leadership, September 2014

Since 2007, a series of acute crises have threatened the very existence of the euro area. The financial crisis which spilled into the currency union in 2007 was followed by an unexpectedly strong downturn of the real economy. As of 2010, the euro area was confronted with a severe sovereign debt and banking crisis. Despite these troublesome developments, the euro area has proven to have a considerable degree of resilience. In each phase, governance weaknesses were revealed – and national governments together with the EU institutions have designed an impressive series of policy responses in crisis management and institutional innovation. The euro area today is completed by a banking union with a Single Supervisory and a Single Resolution Mechanism. National budgetary and economic policies are more closely overseen and coordinated. With the European Stability Mechanism, the euro area now has a permanent tool in place to manage sovereign liquidity crises and instabilities in the banking sector. Most importantly, the euro area's only true federal institution, the European Central Bank (ECB), has become its most effective crisis manager: with the announcement of its Outright Monetary Transactions (OMT) programme, the ECB finally managed to calm the self fulfilling crisis in 2012. Meanwhile, the announcement of credit easing and quasi-quantitative easing in September 2014 is a move towards reducing financial fragmentation and countering deflation. The euro area in 2014 is hence a lot different from the one in 2007. And yet, further challenges need to be overcome. Prevailing stagnation, fragmentation and problems of legitimacy require a rethink of policies and further governance reform.

Education, migration, and job satisfaction: The regional returns of human capital in the EU. Bruges European Economic Research (BEER) Papers 1/November 2004

The paper looks at the link between human capital and regional economic performance in the EU. Using indicators of educational stock, the matching of educational supply and labour demand, and migration extracted from the European Community Household Panel (ECHP), it identifies that the economic performance of European regions over the last few years is generally associated with differences in human capital endowment. However, and in contrast to previous studies, the results highlight that factors such as the matching of educational supply and local labour needs, job satisfaction, and migration may have a stronger connection to economic performance than the traditional measures of educational stock.

Agricultural Credit Market Institutions: A Comparison of Selected European Countries. Factor Markets Working Paper No. 33, January 2013

This paper describes and compares the institutional framework of the agricultural credit markets in selected European countries. The institutions can be both formal (rules, regulations, authorities and actors) and informal (norms, values and relations). They also interact and in situations where the formal institutions are weak, the informal ones increase in importance. The study is based on a questionnaire sent to agricultural financial experts in selected countries. The case studies show that credit regulations are typically general, with no specific regulations for the agricultural credit market. On the other hand, several countries support agricultural credit in various forms, implying that the governments do not perceive the general credit market to function in the case of agricultural firms. In a risk assessment, the most frequent reasons for rejecting a loan application are all linked to economic performance and the situation of the farmer. Personal characteristics, such as educational level or lack of experience, were generally perceived as less influential. Another interesting point when it comes to risk assessment is that in some countries the importance of asset-based lending compared with cash flow-based lending seems to differ when concerning a first-time applicant and when there is an application to extend a loan. To get an idea of the availability of credit, the loan-to-value (LTV) ratio was calculated, and it showed remarkably low values for Poland and Slovakia. For all the countries, the calculated value was lower than what the financial experts would have expected. This might imply credit rationing in agriculture in some of the countries studied. The financial experts all judged the possibility of an agricultural firm obtaining a loan as higher than that for other small rural firms, implying that the latter are also credit-rationed.

Family Types and the Persistence of Regional Disparities in Europe. Bruges European Economic Research (BEER) Papers 10/March 2007

This paper examines the association between one of the most basic institutional forms, the family, and a series of demographic, educational, social, and economic indicators across regions in Europe. Using Emmanuel Todd’s classification of medieval European family systems, we identify potential links between family types and regional disparities in household size, educational attainment, social capital, labour participation, sectoral structure, wealth, and inequality. The results indicate that medieval family structures seem to have influenced European regional disparities in virtually every indicator considered. That these links remain, despite the influence of the modern state and population migration, suggests that either such structures are extremely resilient or else they have in the past been internalised within other social and economic institutions as they developed.

Regional Business Cycle Synchronization in Europe? Bruges European Economic Research (BEER) Papers 11/June 2007

We analyse regional business cycle synchronization in the Euro Area, using Gross Value Added in 53 NUTS 1 regions for a period of thirty years (1975-2005), detrended by Hodrick-Prescott and the Christiano-Fitzgerald filters. We conclude that, on average, synchronization has increased for the period considered with exceptions during the eighties and the beginning of the nineties. Still, the correlation of the business cycle in some regions with the benchmark remained low or even decreased. Our findings also support the hypothesis of the existence of a ‘national border’ effect.

One money with several cycles? Evaluation of European business cycles using cluster analysis. ACES Cases No. 2009.3

Optimal currency area theory suggests that business cycle comovement is a sufficient condition for monetary union, particularly if there are low levels of labour mobility between potential members of the monetary union. Previous studies of co-movement of business cycle variables (mainly authored by Artis and Zhang in the late 1990s) found that there was a core of member states in the EU that could be grouped together as having similar business cycle comovements, but these studies always used Germany as the country against which to compare. In this study, the analysis of Artis and Zhang is extended and updated but correlating against both German and euro area macroeconomic aggregates and using more recent techniques in cluster analysis, namely model-based clustering techniques.

Does All Fit One Size? An evaluation of the ECB policy response to changing economic conditions in the Euro area member states. ACES Cases No. 2008.1

This paper empirically investigates the extent to which the European Central Bank has responded to evolving economic conditions in its member states as opposed to the euro area as a whole. Based on a forward-looking Taylor rule-type policy reaction function, we conduct counterfactual exercises that compare the monetary policy behavior of the ECB with two alternative hypothetical scenarios: (1) were the euro member states to make individual policy decisions, and (2) were the ECB to respond to the economic conditions of individual members. The results reflect the extent of heterogeneity among the national economies in the monetary union and indicate that the ECB's monetary policy rates have been particularly close to the "counterfactual" interest rates of its largest euro members, as well as of countries with similar economic conditions, which includes Germany, Austria, Belgium and France.

The end of an overlooked European currency war. CEPS Commentary, 21 January 2015

On January 15th the Swiss National Bank (SNB) abandoned the efforts it had taken since September 2011 to ensure that the Swiss franc/euro exchange rate would not fall below 1.2 Swiss francs per euro. The Swiss franc appreciated immediately by almost 20% (after a temporary overshot of an even larger amount).The justification was that speculative capital flows induced by the euro crisis were driving the Swiss franc above its equilibrium value. Daniel Gros draws some important general lessons in this Commentary from the Swiss case and finds that the move by the SNB to stop its interventions will have an important impact on the euro-area economy.