EEAS 2.0. A legal commentary on Council Decision 2010/427/EU establishing the organisation and functioning of the European External Action Service. EIPA Working Paper, 2013

From the Preface. Pursuant to Article 13(3) of Council Decision 2010/427/EU of 26 July 2010 establishing the organisation and functioning of the European External Action Service, the High Representative is held to provide a review of the organisation and functioning of the EEAS by mid-­‐2013. This review will cover, inter alia, the implementation of Article 6(6), (8) and (11), so as to ensure an adequate geographical and gender balance and a meaningful presence of nationals from all member states in the EEAS. If necessary, the review will be accompanied by appropriate proposals for the revision of the 2010 Council Decision (e.g., suggestions for additional specific measures to correct possible imbalances of staffing). In that case, the Council will, in accordance with Article 27(3) TEU, revise the Decision in light of the review by the beginning of 2014. This short and user-­‐friendly legal commentary on the 2010 Council Decision is the first of its kind and is intended to inform those involved in the review process and to serve as a reference document for practitioners and analysts dealing with the EEAS. This commentary is not an elaborate doctrinal piece, but rather a textual and contextual analysis of each article, that takes account of i) other relevant legal provisions (primary, secondary, international), ii) the process leading to the adoption of the 2010 Council Decision (i.e. travauxpréparatoires), iii) the preamble of the Council Decision, and iv) insofar as it is possible at this stage, early implementation. Wherever relevant, cross-­‐references to other provisions of the EEAS Council Decision have been made so as to tie in the different commentaries and ensure overall consistency.

Towards ‘EuroNest 2.0’: What should the next European Parliament learn from its predecessor? CEPS Policy Brief No. 300, 1 October 2013

The development and functioning of the EU-Eastern Partnership Parliamentary Assembly (EuroNest PA) is the focus of this Policy Brief, in which the authors argue that despite organising a number of meetings and adopting several resolutions in the past two years, the Assembly is failing to reach its objectives of promoting economic and political integration between the EU and the Eastern Partners. Three main problems are considered in this paper: i) the criticism of the European Parliament for being inconsistent about the conditions under which countries can send delegates ii) the fact that the parliamentary meetings are too short and infrequent, and iii) the observation that the Eastern Partners focus too much on national and bilateral issues, thus failing to engage in multilateral dialogue. A number of recommendations are put forward to enhance the effectiveness of the Assembly.

Ending uncertainty: recapitalisation under European Central Bank supervision. Bruegel Policy Contribution 2013/18, 17 December 2013

Estimates of the recapitalisation needs of the euro-area banking system vary between €50 and €600 billion. The range shows the considerable uncertainty about the quality of banks’ balance sheets and about the parameters of the forthcoming European Central Bank stress tests, including the treatment of sovereign debt and systemic risk. Uncertainty also prevails about the rules and discretion that will applyto bank recapitalisation, bank restructuring and bank resolution in 2014 and beyond. The ECB should communicate the relevant parameters of its exercise early and in detail to give time to the private sector to find solutions. The ECB should establish itself as a tough supervisor and force non-viable banks into restructuring. This could lead to short-term financial volatility, but it should be weighed against the cost of a durably weak banking system and the credibility risk to the ECB. The ECB may need to provide large amounts of liquidity to the financial system. Governments should support the ECB, accept cross-border bank mergers and substantial creditor involvement under clear bail-in rules and should be prepared to recapitalise banks. Governments should agree on the eventual creation of a single resolution mechanism with efficient and fast decision-making procedures, and which can exercise discretion where necessary. A resolution fund, even when fully built-up, needs to have a common fiscal backstop to be credible.

The Single Supervisory Mechanism: A Sound First Step in Europe’s Banking Union? Egmont European Affairs Paper, March 2013

The financial and economic crisis has hit Europe in its core. While the crisis may not have originated in the European Union, it has laid bare structural weaknesses in the EU’s policy framework. Both public finances and the banking sector have been heavily affected. For a long time, the EU failed to take into account sufficiently the perverse link that existed between the two. Negative evolutions in one field of the crisis often dragged along the other in its downward spiral. In June 2012, in the early hours of a yet another EU Summit, the leaders of the eurozone finally decided to address the link between the banking and sovereign debt crises. Faced with soaring public borrowing costs in Spain and Italy, they decided to allow for the direct European recapitalisation of banks when the Member State itself would no longer be in a position to do so. In exchange, supervision of the banking sector would be lifted to the European level by means of a Single Supervisory Mechanism. The Single Supervisory Mechanism, or SSM in the EU jargon, is a first step in the broader revision of policies towards banks in Europe. The eventual goal is the creation of a Banking Union, which is to carry out effective surveillance and – if needed – crisis management of the banking sector. The SSM is to rely on national supervisors and the ECB, with the ECB having final authority on the matter. The involvement of the latter made it clear that the SSM would be centred on the eurozone – while it is to remain open to other Member States willing to join. Due to the ongoing problems and the link between the creation of the SSM and the recapitalisation of banks, the SSM became one of the key legislative priorities of the EU. In December 2012, Member States reached an agreement on the design of the SSM. After discussions with the European Parliament (which were still ongoing at the time of writing), the process towards making the SSM operational can be initiated. The goal is to have the SSM fully up and running in the first half of 2014. The decisions that were taken in June 2012 are likely to have had a bigger impact than the eurozone’s Heads of State and Government could have realised at the time for two important reasons. On the one hand, creating the SSM necessitates a full Banking Union and therefore shared risk. On the other hand, the decisions improved the ECB’s perception of the willingness of governments to take far-reaching measures. This undoubtedly played a significant role in the creation of the Outright Monetary Transactions programme by the ECB, which has led to a substantial easing of the crisis in the short-term. 1 These short-term gains should now be matched with a stable long-term framework for bank supervision and crisis management. The agreement on the SSM should be the first step in the direction of this goal. This paper provides an analysis of the SSM and its role in the creation of a Banking Union. The paper starts with a reminder of why the EU decided to put in place the SSM (§1) and the state of play of the ongoing negotiations on the SSM (§2). Subsequently, the supervisory responsibilities of the SSM are detailed, including its scope and the division of labour between the national supervisors and the ECB (§3). The internal functioning of the SSM (§4) and its relation to the other supervisors are discussed afterwards (§5). As mentioned earlier, the SSM is part of a wider move towards a Banking Union. Therefore, this paper sheds light on the other building blocks of this ambitious project (§6). The transition towards the Banking Union is important and will prove to be a bumpy ride. Before formulating a number of conclusions, this Working Paper therefore provides an overview of the planned road ahead (§7).

EEAS 2.0: A legal commentary on Council Decision 2010/427/EU establishing the organisation and functioning of the European External Action Service. CEPS Paperbacks. February 2013

This short and user-friendly legal commentary on the 2010 Council Decision establishing the organisation and functioning of the EEAS is the first of its kind. It is intended to inform those involved in the review process and to serve as a reference document for practitioners and analysts dealing with the EEAS. Rather than an elaborate doctrinal piece, this legal commentary is a textual and contextual analysis of each article that takes account of i) other relevant legal provisions (primary, secondary, international); ii) the process leading to the adoption of the 2010 Council Decision; iii) the preamble of the Council Decision and iv) insofar as it is possible at this stage, early implementation. Wherever relevant, cross-references to other provisions of the Council Decision have been made so as to tie in the different commentaries and ensure overall consistency.

Changing trade patterns, unchanging European and global governance. Bruegel Working Paper 2014/02, February 2014

The world economy is going through its biggest transformation in a relatively short space time. There have been many explanations for this phenomenon but the unprecedented scale and pace of this change and, most crucially, its implications, still seems little understood. In turn, there has been little preparation for, or adjustment to, this changing world, though if the change continues at this pace, the effectiveness of many global institutions in their current form will be threatened. We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation. If our projections to 2020 are broadly right, then many established frameworks for the running of the world economy and its governance are not going to be fit for purpose, and will need to change. The global monetary system itself, and global organisations such as the IMF, G7, and G20 are going to have to adapt considerably if they want to remain legitimate representatives of the world order. The alternative is their relegation to irrelevance.

Policy recommendations for the new European Commission: priorities for stabilising EMU. EPC Discussion Paper, 30 September 2014

The euro area crisis exposed substantial structural flaws in the currency area’s architecture. Addressing these flaws this discussion paper explores the ways in which the European Institutions can re-evaluate and overcome challenges for a more positive European future. To do this, Janis A. Emmanouilidis, Jan David Schneider, and Fabian Zuleeg recommend that the coming European Commission should develop a new framework to assess the real returns to growth of public and social investment, which could open the path for more flexibility on deficits in future. In close coordination with the European Parliament, the Commission should also review the Country Specific Recommendations with a stronger focus on a smaller number of key priorities for each country. The construction of a fiscal capacity should be made a priority in the new political cycle to resolve the absence of a mechanism to provide effective ex ante fiscal risk sharing in the Eurozone. Furthermore, to boost growth, there is a need to encourage private, public and social investment through a European Investment Programme (EIP) in the short term. Finally, the Commission should ensure that the implementation of an EIP is compatible with the long term goals of a fiscal capacity.

Building up European leadership - an assessment of the recent process. CHALLENGE EUROPE Issue 22 - Challenges and new beginnings: Priorities for the EU's new leadership, September 2014.

Europe is in need of a new leadership capacity able to recreate stronger European unity in the external and internal fronts. Otherwise, anti-European forces will increase their influence and presence in European governments and EU institutions with large implications for the direction of European integration. This will be the central concern in making a first short assessment of the recent process of building European leadership capacity for the next five years to come. This assessment will particularly focus on the choice of the President of the European Commission, of the President of the European Council and, finally of the members of the European Commission.

Designing a Genuine EMU: Which "Unions" for EU and Eurozone? Bruges European Economic Policy (BEEP) Briefing 34/2014

The initial ‘framing’ (in the summer of 2012) of the ‘genuine EMU’ for the wider public suggested to design an entire series of ‘unions’. So many ‘unions’ are neither necessary nor desirable – only some are and their design matters. The paper critically discusses first the negative fall-out of the crisis for EMU, and subsequently assesses the fiscal and the banking unions as accomplished so far, without going into highly specific technical details. The assessment is moderately positive, although there is ample scope for further improvement and a risk for short-term turbulence once the ECB has finished its tests and reviews. What about the parade of other ’unions’ such as economic union, social union and political union? The macro-economic imbalances procedure (MIP) and possibly the ESRB have overcome the pre-crisis disregard of macro competitiveness. The three components of ‘economic union’ (single market, economic policy coordination and budgetary disciplines) have all been strengthened. The last two ‘unions’, on the other hand, would imply a fundamental change in the conferral of powers to the EU/ Eurozone, with drastic and possibly very serious long-run implications, including a break-up of the Union, if such proposals would be pushed through. The cure is worse than the disease. Whereas social union is perhaps easier to dismiss as a ‘misfit’ in the EU, the recent popularity of suggesting a ‘political union’ is seen as worrisome. Probably, nobody knows what a ‘political union’ is, or, at best, it is a highly elastic notion: it might be thought necessary for reasons of domestic economic reforms in EU countries, for a larger common budget, for some EU tax power, for (greater) risk pooling, for ‘symmetric’ macro-economic adjustment and for some ultimate control of the ECB in times of crisis. Taking each one of these arguments separately, a range of more typical EU solutions might be found without suggesting a ‘political union’. Just as ‘fiscal capacity’ was long an all-or-nothing taboo for shifting bank resolution to the EU level, now solved with a modest common Fund and carefully confined but centralised powers, the author suggests that other carefully targeted responses can be designed for the various aspects where seen as indispensable, including the political say of a lender-of-last-resort function of the ECB. Hence, neither a social nor a political union worthy of the name ought to be pursued. Yet, political legitimacy matters, both with national parliaments and the grassroots. National parliaments will have to play a larger role.

EU Enlargement: external economic implications. Bruges European Economic Policy (BEEP) Briefing 4/2003

Unlike some previous EU enlargements (e.g. with the UK and with Spain/Portugal) the present EU enlargement to Central Europe has not prompted much, let alone a fierce, debate about the external dimension. This BEEP briefing discusses the main economic aspects of the external dimension, in particular whether there is a threat of (how much) trade diversion. Attention is paid to the three main topics of interest for third countries: industrial trade effects, impact on FDI and agricultural trade effects. Agriculture is arguably the most sensitive of the three, given the very high CAP border protection, and although large-scale trade diversion may eventually occur under certain scenarios (such as an unreformed CAP), these fears are greatly exaggerated in the short to medium term (5-7 years): the time frame considered is therefore all-important. This conclusion becomes less surprising if one takes a closer look at the current sorry state of agriculture in the CEECs. Separate sections treat the somewhat sensitive subject of U.S.-CEEC Bilateral Investment Treaties, as well as the longterm development perspective, which addresses the prospects for catch-up growth by the accession countries. In the end, non-European stakeholders in the accession process will greatly benefit from sustained catch-up growth by the CEECs, which are locking-in deep reforms due to EU accession.

Testing for Subsidiarity. Bruges European Economic Policy (BEEP) Briefing 13/2006

In the EU circuit (especially the European Parliament, the Council and Coreper) as well as in national parliaments of the EU Member States, one observes a powerful tendency to regard 'subsidiarity' as a 'political' issue. Moreover, subsidiarity is frequently seen as a one-way street : powers going 'back to' Member States. Both interpretations are at least partly flawed and less than helpful when looking for practical ways to deal with subsidiarity at both EU and Member states' levels. The present paper shows that subsidiarity as a principle is profoundly 'functional' in nature and, hence, is and must be a two-way principle. A functional subsidiarity test is developed and its application is illustrated for a range of policy issues in the internal market in its widest sense, for equity and for macro-economic stabilisation questions in European integration. Misapplications of 'subsidiarity' are also demonstrated. For a good understanding, subsidiarity being a functional, two-way principle neither means that elected politicians should not have the final (political!) say (for which they are accountable), nor that subsidiarity tests, even if properly conducted, cannot and will not be politicised once the results enter the policy debate. Such politicisation forms a natural run-up to the decision-making by those elected for it. But the quality and reasoning of the test as well as structuring the information in a logical sequence ( in accordance with the current protocol and with the one in the constitutional treaty) is likely to be directly helpful for decisionmakers, confronted with complicated and often specialised proposals. EU debates and decision-making is therefore best served by separating the functional subsidiarity test (prepared by independent professionals) from the final political decision itself. If the test were accepted Union-wide, it would also assist national parliaments in conducting comparable tests in a relatively short period, as the basis for possible joint action (as suggested by the constitutional treaty). The core of the paper explains how the test is formulated and applied. A functional approach to subsidiarity in the framework of European representative democracy seeks to find the optimal assignment of regulatory or policy competences to the various tiers of government. In the final analysis, this is about structures facilitating the highest possible welfare in the Union, in the fundamental sense that preferences and needs are best satisfied. What is required for such an analysis is no less than a systematic cost/benefit framework to assess the (de)merits of (de)centralisation in the EU.

Coltan from Central Africa, International Trade and Implications for Any Certification. Bruges European Economic Policy (BEEP) 23/2012

The exploitation of coltan in Central Africa can be considered a case of conflict minerals due to its nature. Many international organizations and bodies, national governments and private sector organizations seek to address this conflict, in particular via transparency, certification and accountability along the material supply chain. This paper analyses the international trade dimension of coltan and gives evidence on the dimension of illicit trade of coltan. The authors start from the hypothesis that illicit trade of coltan sooner or later will enter the market and will be reflected in the statistics. The paper is structured in the following manner: first, a short section gives a profile of coltan production and markets; second, an overview of the mining situation in the Democratic Republic of Congo (DRC) and related actors. The third section addresses mechanisms, actors and measurement issues involved in the international trade of coltan. The final part draws lessons for certification and conflict analysis and offers some guidance for future research. The paper identifies two main possible gateways to trace illegal trade in coltan: the neighbouring countries, especially Rwanda, and the importing countries for downstream production, in particular China. Our estimation is that the value of such illicit trade comes close to $ 27 million annually (2009), roughly one fifth of the world market volume for tantalum production. With regard to any certification the paper concludes that this will become challenging for business and policy: (a) Central Africa currently is the largest supplier of coltan on the world market, many actors profit from the current situation and possess abilities to hide responsibility; (b) China will need to accept more responsibility, a first step would be the acceptance of the OECD guidelines on due diligence; (c) better regional governance in Central Africa comprises of resource taxation, a resource fund and fiscal coordination. An international task force may provide more robust data, however more research will also be needed.

Mutual Recognition: economic and regulatory logic in goods and services. Bruges European Economic Research (BEER) Papers 24/June 2012

Mutual recognition is one of the most appreciated innovations of the EU. The idea is that one can pursue market integration, indeed "deep' market integration, while respecting 'diversity' amongst the participating countries. Put differently, in pursuing 'free movement' for goods, mutual recognition facilitates free movement by disciplining the nature and scope of 'regulatory barriers', whilst allowing some degree of regulatory discretion for EU Member States. This BEER paper attempts to explain the rationale and logic of mutual recognition in the EU internal goods market, its working in actual practice for about three decades now, culminating in a qualitative cost/benefit analysis and its recent improvement in terms of 'governance' in the so-called New Legislative Framework (first denoted as the 2008 Goods package) thereby ameliorating the benefits/costs ratio. For new (in contrast to existing) national regulation, the intrusive EU procedure to impose mutual recognition is presented as well, with basic data so as to show its critical importance to keep the internal goods market free. All this is complemented by a short summary of the scant economic literature on mutual recognition. Subsequently, the analysis is extended to the internal market for services. This is done in two steps, first by reminding the debate on the origin principle (which goes further than mutual recognition EU-style) and how mutual recognition works under the horizontal services directive. This is followed by a short section on how mutual recognition works in vertical (i.e. sectoral) services markets.

The Budget of the European Union. IES WORKING PAPER 4/2010

This paper first provides a short history of the European budget, focusing on the development of the EU’s “own resources”. It then elaborates on the fundamental changes to the financial system and the budgetary procedure that the Treaty of Lisbon introduced. It is posited that with the amendments the budgetary process has lost clarity. Whilst the multiannual framework may provide for long-term stability, it stands in contradiction to a central principle of parliamentary democracy: annual budgets. The EU’s search for a fair and transparent budgetary system has not yet come to full fruition. Europe needs a fairer and more transparent system. Since the Luxembourg agreement of 1970, the Union has not done anything with the VAT as own resources. The VAT is related to the welfare standards and developments in the Member States. A fixed share of this indirect tax could form the base of a long term financing plan for the general EU budget.