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.

Who decides? Resolving failed banks in a European framework. Bruegel Policy Contribution 2013/16, 29 November 2013

As the basis for a European regime for resolving failing and failed banks, the European Commission has proposed the Bank Resolution and Recovery Directive (BRRD) and a regulation establishing a European Single Resolution Mechanism (SRM) and a Single Bank Resolution Fund (SBRF). There is a debate about which parts of the proposed SRM-SBRF to add to the BRRD. The BRRD sets out a resolution toolkit that can be used by national resolution authorities. The SRM would involve European institutions more at the expense of national resolution authorities. This change could affect resolution outcomes. Domestic resolution authorities might be more generous than supranational authorities in providing assistance to banks. A supranational approach might be more effective in minimising costs for taxpayers. But regardless of the final design, more attention is needed to ensure that resolution authorities are politically independent from governments. When public support is provided to failed institutions it should come from a bankfunded resolution fund. This would reduce taxpayers’ direct costs, and would make banks less likely to take risks and advocate for bailouts.

The new European framework for managing bank crises. CEPS Policy Brief No. 304, 21 November 2013

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.