The long haul: managing exit from financial assistance. Bruegel Policy Contribution Issue 2014/03, 20 February 2014

Countries can make a clean exit from financial assistance, or enter a new programme or a precautionary programme, depending on the sustainability of their public debt and their vulnerability to shocks. Ireland made a clean exit in December 2013, supported by significant budgetary and current-account adjustment and signs of economic recovery. But Irish debt sustainability is not guaranteed and prudence will be needed to avoid future difficulties. A clean exit for Portugal is not recommended when its programme ends in May 2014, because compared to Ireland it faces higher interest rates, has poorer growth prospects and has probably less ability to generate a consistently high primary surplus. A precautionary arrangement would be advisable. In case debt sustainability proves difficult to achieve later, some form of debt restructuring may prove necessary. It is unlikely that Greece will be able to exit its programme in December 2014. A third programme should be put in place to take Greece out of the market until 2030, accompanied by enhanced budgetary and structural reform commitments by Greece, a European boost to economic growth in the euro-area periphery and willingness on the part of lenders to reduce loan charges below their borrowing costs, should public debt levels prove unsustainable despite Greece meeting the loan conditions. Even assuming all goes well, the three countries will be subject to enhanced post-pro-gramme surveillance for decades. Managing such long-term relationships will be a key challenge.

Next steps toward a final deal with Iran. CEPS Policy Brief No. 316, 14 February 2014

On January 20th, the International Atomic Energy Agency confirmed that Iran had been implementing its commitments as part of the Joint Plan of Action (JPA) agreed with the so-called ‘E3+3’ in Geneva (also known as P5+1) on 24 November 2013. The forging of this interim deal, the successful start to its implementation and the temporary sanctions relief represent resounding success for international diplomacy but they should not be allowed to conceal the underlying issues. Reaching agreement on the JPA was achieved at the cost of clarity over what is to follow and it was decided to eschew a structured agreement in favour of a two-step process. The stated aim of the negotiating parties remains that of starting the implementation of a comprehensive solution by November 2014. If agreement is not reached on a comprehensive solution by the expiry of the JPA by July 20th, the action plan can be renewed by mutual consent. The latter might well be the likeliest outcome of the forthcoming negotiations. Apart from the large gap between the E3+3 and Iranian positions on the substance of a final deal, several domestic policy constraints will likely define the parameters of what is achievable in the future. This CEPS Policy Brief argues that the best hope for success lies in continued engagement and consistent incremental progress in the negotiations, with structured concessions on both sides. This should occur, however, not in a two- but a three-step framework based on lengthening Iran’s ‘breakout’ period while re-engaging with the country both politically and economically. The EU is in a unique position to lead this process. Having greater flexibility than either the US or Iran, its main tasks will be that of maintaining the negotiating momentum and broadening dialogue with Iran.

The OTC derivatives markets after financial reforms. CEPS ECMI Commentary No. 36, May 2014

Over the past five years, over-the-counter (OTC) derivatives markets have received heightened regulatory attention, due to their opaqueness, size and interconnectedness, with a view to improving the robustness, safety and resilience of this market segment. There has been continued progress in the follow-up to the G-20 commitments, with the EU (EMIR, MIFID II, CRD/CRR IV, MAD) and the US (Swap Execution Facility or SEF, Title VII of Dodd-Frank Act, Basel III) leading in the implementation timelines and capturing approximately 80-90% of the overall market. Based on the data compiled for the yearly ECMI Statistical Package, this commentary provides a snapshot of the current status of the global OTC derivatives markets by: i) identifying general trends over the past decade, ii) looking at the changes in the market structure (instruments and participants), iii) estimating the uncollateralised derivatives exposure and iv) examining the relationship between OTC derivatives and exchange-traded derivatives (ETD).

The G20 financial reform agenda. Bruegel Policy Contribution Issue 2014/11, September 2014

Five years ago, the declarations of the G20 in landmark leaders’ summits in London and Pittsburgh listed specific commitments on financial regulatory reform. When measured against these declarations, as opposed to the surrounding rhetorical hype, most (though not all) commitments have been met to a substantial degree. However, the effectiveness of these reforms in making global finance more stable is not so far proven. This uncertainty on impact mirrors the absence of an analytical consensus on the 2007-08 financial crisis itself. In addition, unintended consequences of the reforms are appearing gradually, even as their initial implementation is still unfinished. At a broader level, the G20 has established neither an adequate institutional infrastructure nor a consistent policy vision for a globally integrated financial system. This shortcoming justifies increasing concerns about economically harmful market fragmentation. One key aim should be to make international regulatory bodies more representative of the rapidly-changing geography of global finance, not only in terms of their membership but also of their leadership and location.

The US-China Joint Announcement on Climate Change: Can the G2 make a difference? CEPS Commentary, 26 November 2014

This Commentary finds that the US-China joint declaration on climate change, issued following the Asia-Pacific Economic Cooperation (APEC) Summit in Beijing on November 12th, is undoubtedly an important announcement by the two global economic giants responsible for emitting over 30% of the world’s GHG emissions. As such, it needs to be seen as important and relevant – a very positive development towards a new global climate change agreement in Paris. It is a challenge to those that have announced their pledges and are seen as capable of doing more, as well as to those that have not yet announced their intentions. It shows the importance and success of the UN climate change conference in Warsaw last year, when the decision was made that all Parties should announce their commitments by the first quarter of 2015. It also represents a total breakdown of the Kyoto Protocol-style separation in climate change negotiations between countries into Annex 1 and non-Annex 1, with China signalling that it is taking on the leadership role that comes with being a great economic power. In broader terms, it shows that there is scope for cooperation between the two main economic actors, even in the face of competition in other spheres. It is also a challenge to the EU, which was a leader and needs to show that there is a benefit in maintaining its leadership. Finally, agreements are deemed historic only by history. This one is important, and a potential game-changer, on the face of it. But it needs to live up to its promise. There is sufficient uncertainty for us to withhold final judgement and see if its promise materialises through implementation. But, as sober a judgement as we must make on such important matters, this announcement certainly gives us great hope that it is possible to do what needs to be done, and we must wholeheartedly welcome and applaud it.

Abkhazia, South Ossetia, Nagorno-Karabakh: unfrozen conflicts between Russia and the West. OSW Special Report, 9 July 2008

The Southern Caucasus is the site of three armed conflicts with separatist backgrounds, which have remained unsolved for years: the conflicts in Georgia's Abkhazia and South Ossetia, and Azerbaijan's conflict over Nagorno-Karabakh (including the areas around Nagorno-Karabakh which were seized by Armenian separatists in the course of the war). Neither Georgia nor Azerbaijan have had any control over the disputed areas since the early 1990s. Both states are simultaneously in conflict with the separatists' informal patrons, respectively Russia and Armenia. After over a decade of relative peace during which the conflicts remained frozen, tension has recently risen considerably: in the case of Abkhazia and South Ossetia, large-scale fighting may break out in the coming months, whereas in the case of Nagorno-Karabakh and the Azeri-Armenian conflict, such a threat may materialise within the next five years. The current formula for politically resolving the conflicts is ineffective and close to exhaustion, and the prospect of any alternative peace plans being developed is rather distant. The conflicts in the Southern Caucasus are of increasing concern to the West, mainly because of the Western actors' constantly growing political and economic involvement in Georgia and Azerbaijan (including support for reforms and development of the gas and oil transmission infrastructures), as well as its less intensive commitments in Armenia. An outbreak of open fighting over the separatist regions would destabilise the Southern Caucasus, largely undoing the results of the actions which the EU, NATO and the USA have taken in the region in recent years. Moreover, the situation in the Southern Caucasus, especially the separatisms themselves, have in fact become an element in the wider geopolitical game between the West and Russia. For Russia, the stakes are maintaining its influence in the region, and for the West, demonstrating its ability to effectively promote democracy and economic modernisation in the countries bordering it.

Gazprom’s expansion in the EU: co-operation or domination? OSW Report, October 2009. Second edition, revised

Introduction. The energy sector, especially with regard to the gas trade, is one of the key areas of co-operation between the EU and Russia. However, the form this co-operation has taken has been giving rise to some concern, both in Brussels and in the EU member states. Questions arise as to whether the EU has not become excessively dependent on Russia for energy, and whether the presence of the Russian gas monopoly in the EU does not enable Russian interference with the development of EU energy policy. The objective of this series of OSW reports (for the previous edition,see Gazprom’s expansion in the EU: co-operation or domination? April 2008 – pdf 1.2 MB) is to provide facts which will permit an accurat answer to these questions to be formulated. Over the course of last year, two new factors strongly affected Gazprom’s capability to operate on the EU market. One was the ongoing global economic crisis, which has depressed demand for gas both in Russia and in Europe. Gazprom has cut both its own production and the quantities of gas it purchases from the Central Asian states, and the decrease in export revenues has forced the company to modify some of its current investment plans. Less demand for gas and the need to reduce production are also having a positive impact – the Russian company is likely to avoid the difficulties in meeting all of its export commitments which, only a year or so ago, it was expected to experience. The other factor affecting Gazprom’s expansion in Europe is the observed radicalisation of the rhetoric and actions of both the company itself and of the Russian authorities with regard to the gas sector as broadly understood. The gas crisis between Russia and Ukraine in January 2009, which resulted in a two-week interruption of gas supplies from Russia to Europe via Ukraine, was the most prominent example of this radicalisation. The hardening of rhetoric in the ongoing energy talks with the EU and other actors, and increased political and business activities designed to promote Russian gas interests in Europe, in particular the lobbying for the Nord Stream and South Stream projects, are further signs of this shift in tone. These issues raise the question of whether, and to what extent, the current condition of Gazprom’s finance will permit the company to implement the infrastructural projects it has been endorsing and its other investment plans in Europe. Another important question is whether the currently observed changes in how Gazprom operates will take on a more permanent character, and what consequences this will have for the European Union. The first part of this report discusses Gazprom’s production and export potential. The second comprehensively presents the scope and nature of Gazprom’s economic presence in the EU member states. Finally, the third part presents the Russian company’s methods of operation on foreign markets. The data presented in the report come mainly from the statistics of the International Energy Agency, the European Commission and Gazprom, as well as the Central Bank of Russia and the Russian Statistical Office. The figures presented here also include proprietary calculations by the OSW based on figures disclosed by energy companies and reports by professional press and news agencies.

Exporting the Internal Market – Panacea or Nemesis for the European Neighbourhood Policy? Lessons from the Energy Community. EU Diplomacy Paper No. 2, 2014

Over the last decades, a constant feature of the relations between the European Union (EU) and the countries in its neighbourhood has been the export of European law. Achieved through bilateral or multilateral agreements, the export of law has led to the ‘juridification’ of external policy. The energy sector is in the vanguard of this development. European energy law has been made applicable to third countries through the European Economic Area (EEA) and, most important for the European Neighbourhood Policy (ENP), the Energy Community. Bilateral agreements of relevance for energy include the (draft) Association Agreement with Ukraine which was rejected in November 2013 and came on the agenda again following a revolution in the country. Geopolitics has played and continues to play an eminent role in this respect. What does that mean for the export of European law to neighbouring countries? This paper argues that the export of European (energy) law does not only remain possible but is preferable to purely diplomatic relations between the EU and its neighbours if certain conditions are fulfilled. Based on the experience in the EEA and the Energy Community, multilateral integration agreements can be successful if they offer a well-designed institutional and procedural architecture based on mutual commitments, extend the benefits of the internal market to the participating third countries and create ‘win-win’ situations in satisfying also the participating third countries' vital interests in return for undergoing the hardship of economic reforms.

Agriculture, Food and the TTIP: Possibilities and Pitfalls. CEPS Special Report No. 99/December 2014. TTIP Series No. 3 and Paper No. 1 in the CEPS-CTR project “TTIP in the balance’’

Progress in agriculture and food issues in the TTIP talks will largely be determined by the level of ambition in the negotiations as a whole. If ambitions are modest, a low-level agreement could probably be reached that includes some limited commitments on agricultural market access and food regulations. These could include promises of mutual support in the area of opening up agricultural markets through the WTO and of further Transatlantic cooperation in trying to resolve conflicts over food regulations. Bolder ambitions would allow more scope for tackling the difficult problems, though at the cost of time. It would be unfortunate if the opportunity were not taken to make some significant progress in removing some longstanding irritants in the area of agricultural policy and food regulations: this is where the economic gains are likely to be significant and the spill-overs useful. This paper argues the case that it is worthwhile making the effort to secure a constructive and imaginative agreement on agriculture and food regulations in the TTIP. A fairly detailed suggestive list of potential sub-deals in agro-food, supported by the analysis in the paper, is the most concrete one of a series of policy conclusions

GATS and the Social Regulation of Services. IES WORKING PAPER 3/2010

Many service transactions are highly complex, and their quality is difficult to ascertain for consumers. In order to have properly functioning service markets, the services thus often require regulation. However, with the advent of the WTO, international trade in services has become increasingly rule-bound. GATS has considerable, intricate effects on social regulation due to the characteristics of services. The allocation of regulatory jurisdiction between home and host country, for example, is rendered difficult by the process-based nature of a lot of services. The WTO US – Gambling dispute settlement report is the first to address GATS disciplines on social regulation in a detailed manner. This working paper submits that the US - Gambling report has increased interference with domestic social regulation and created regulatory uncertainty for WTO members. However, it is also argued that the real impact of the GATS on social regulation can only be understood by looking beyond the text of the GATS. GATS disciplines may become amplified through their interaction with domestic and other international law. The GATS also contains some “political” counterbalancing mechanisms that allow members to renegotiate their commitments. It is argued that these political mechanisms strengthen subsidiarity in the GATS, and make WTO dispute settlement bodies accountable to WTO members.

Public Procurement in the Transatlantic Trade and Investment Partnership Negotiations. Paper No. 2 in the CEPS-CTR project "TTIP in the Balance" and CEPS Special Report No. 100/February 2015

For more than 20 years, the United States and the European Union have engaged in often-contentious negotiations over access to government procurement. The EU is dissatisfied with the level of procurement that the US has opened under the WTO Government Procurement Agreement and, as a consequence, it does not give the US its most comprehensive coverage. The US has been constrained in responding to the EU’s requests for greater access, especially to state procurement, by both its federal structure of government and by domestic purchasing requirements. At the current time, neither party has proposed a way to break the impasse. This paper reviews the current state of affairs between the US and the EU on government procurement, examining the procurement that they open to one another and the procurement that they withhold. It then proposes a strategy for the two sides to use the TTIP negotiations to move forward. This strategy includes both steps to expand their current commitments in the TTIP, as well as to develop a longer-term approach by making the TTIP a ‘living agreement’. This strategy suggests that the EU and the US could find a way to expand their access to government procurement contracts and at least partially defuse the issue.

This time it’s different: Turbo-charging regulatory cooperation in TTIP. Paper No. 7 in the CEPS-CTR project ‘TTIP in the Balance’ and CEPS Special Report No. 110/June 2015

Regulatory cooperation is both one of the most ambitious and contentious parts of the EU-US Transatlantic Trade and Investment Partnership (TTIP) negotiations. In this paper, having identified the many levels of international regulatory cooperation, we show that TTIP regulatory cooperation will be significant, but not ambitious, while political and legal limits on cooperation in both the EU and the US minimise the concerns. For transatlantic regulatory cooperation to work, it must accept these political and legal constraints, build trust and confidence among counterpart regulators so they see that their transatlantic partner can help them do their work better, and provide tools to help regulators on both sides make informed decisions while retaining their regulatory autonomy and accountability to their politicians and citizens. A TTIP that provides these tools – and some more detailed instruments to that effect – will be more ambitious than previous trade agreements, and should, over the longer term, provide both the economic and regulatory benefits that the two sides envisage. The paper incorporates comparisons with the relevant chapters of recent FTAs the US and the EU have concluded, so as to clarify the approaches and degrees of ambition in this area. This comparison suggests that the TTIP regulatory cooperation will probably be more ambitious in terms of commitments and have a wider scope than any of these FTAs.

Enhancing the Prospects of the EU’s Deep and Comprehensive Free Trade Areas in the Mediterranean: Lessons from the Eastern Partnership. CEPS Commentary, 24 June 2015

In their March 2015 Consultation paper on the review of the European Neighbourhood Policy (ENP), the European Commission and the High Representative raised the question whether the Deep and Comprehensive Free Trade Areas (DCFTAs) “are the right objective for all or should more tailor-made alternatives be developed, to reflect differing interests and ambitions of some partners?” Such ambitious but complex trade agreements have now finally been signed with Ukraine, Moldova and Georgia, but they are still on the table for several Mediterranean ENP countries. Although these Mediterranean partners have a completely different political, economic and legal relationship with the EU, some important lessons can be drawn from the ‘Eastern DCFTA experience’. In particular, the DCFTA negotiators should avoid overly ambitious and ill-defined legislative approximation commitments and develop a comprehensive implementation strategy.

Nord Stream II - yes or no? - Political decision of a political Commission. EPC Commentary, 14 June 2016

When the new European Commission started work in autumn 2014, the president of the Commission took great pride in calling it a ‘political Commission’, which will be big on big things and small on small. Whilst the EU is currently dealing with many crises, reality is that things do not come much bigger than Nord Stream II. Will this be a political Commission that stands by its principles, including respect for liberty, democracy, the rule of law and human rights? Will this Commission have the backbone to politically assess a project that threatens EU unity and its core values, undermines the Union’s commonly agreed commitment to building an Energy Union and facilitates Russia’s aggression against Ukraine? President Juncker’s controversial visit to Russia and meeting with President Putin on 16-17 June is a test-case: will this Commission be ready to defend its commitments and principles when discussing ‘economic issues’?

Ukraine, Russia and the EU. Breaking the deadlock in the Minsk process. CEPS Working Document No. 423 / June 2016

Although the Minsk process brought about a de-escalation of the conflict in Eastern Ukraine, not all of its 13 points have been implemented, including a ceasefire and withdrawal of heavy weaponry. In the absence of a military option, economic sanctions have become the core instrument of the EU and the US, to respond to Russia’s aggression. At the end of June 2016, when EU Heads of State and Government meet to discuss the extension of sanctions against Russia, they should bear in mind that Russia did not implement the commitments it took upon itself in the framework of the Minsk agreements. Given the persistent deadlock in the Ukraine crisis, the leaders of the EU ought to agree to prolong the sanctions against Russia, push for the renegotiation of the Minsk II agreement and widen the ‘Normandy format’ to include the US and bolster reforms in Ukraine.