Gazprom’s evolving strategy in a new commercial and political context: how should the EU react? EPC Policy Brief, 27 April 2015

After years of unchallenged commercial domination of a sizeable portion of the EU's gas market, Gazprom is confronted with a statement of objections issued on 22 April by the EU Commission for abusing its dominant market position. The company was already prevented from going ahead with its South Stream project aimed at consolidating Gazprom's grip on Southeast Europe's markets by bypassing Ukraine – due to alleged non-compliance of intergovernmental agreements with the EU regulatory framework. Furthermore, it walked away from negotiations that could have allowed it to access more than 50% of the OPAL pipeline – an onshore branch of the offshore Russian German Nord Stream pipeline –, whilst its attempts to go downstream through the acquisition of European distribution and transmission operators, such as Wingas and DESFA, failed due to current political tensions and the risk of a negative Commission ruling on the operation. Does this mean that the Russian gas behemoth – so often portrayed as the energy arm of the Kremlin – is not so powerful after all? This Policy Brief aims to frame the erosion of Gazprom's power in a wider perspective, analysing its peculiar position at a time of transition, with the global gas business going from a sellers' to a buyers' market, and providing recommendations on how Europe should deal with it. It will be argued that Gazprom – despite still being affected by the Kremlin's political priorities – is moving towards more commercially sound behavior. The EU should profit from this evolution without being tempted by mercantilist options, and rather use the political momentum provided by the energy union to remove barriers to solidarity and to increase competition on the trading platforms.

The UK's EU Vote: The 1975 Precedent and Today's Negotiations. Bruegel Policy Contribution Issue 2015/08, June 2015

Highlights • The United Kingdom's European Union Referendum Bill, introduced in the House of Commons on 28 May 2015, legislates for the holding of a referendum before 31 December 2017 on the UK’s continued EU membership. UK prime minister David Cameron is opening negotiations with other EU member states to try to obtain an EU reform deal that better suits UK interests. Both the negotiations and the outcome of the referendum pose major challenges for the UK and the EU. • It will not be the first time that a UK government has staged a referendum following a renegotiation of its terms of EU membership. The first such referendum took place on 5 June 1975 after nearly a year of renegotiations, and the ‘yes’ won with 67.2 percent of the vote. Notwithstanding obvious differences, the conduct of today’s renegotiations should bear in mind this precedent, and in particular consider (a) how much the UK government can get out of the negotiations, in particular with respect to potential Treaty changes; (b) why political marketing is central to the referendum’s outcome; (c) how the UK administration’s internal divisions risk derailing the negotiations; and (d) why the negotiations risk antagonising even the UK’s best allies.

Completing the Banking Union: Deposit Insurance. CEPS Policy Brief No. 335, 3 December 2015

It is generally agreed that a Banking Union should have common or ‘single’ institutions responsible for carrying out three basic functions: supervision, resolution and deposit insurance. So far, however, agreement has been reached in the EU on only the first two of these functions. The Commission has now presented its proposal on how to complete the Banking Union with a European Deposit Insurance Scheme (EDIS). It is an innovative and courageous proposal. It is courageous because it will clearly be very controversial in a number of member states (especially Germany) and it is innovative because it proposes a three-stage process, starting with re-insurance, then switching to co-insurance and finally to full direct insurance of deposits via a ‘single’ Deposit Insurance Fund (DIF). This final stage should be reached in 2024, which is also the date at which the Single Resolution Fund (SRF) will become the only source of financing for bank resolution. The Commission’s proposal calls for integrating the decision-making for EDIS into the decision-making entity for the SRF, namely the existing Single Resolution Board (SRB). This makes sense if one views resolution and deposit insurance as two highly interlinked dimensions of dealing with banks in trouble. In this view the two dimensions should be bundled into one institution – and one suspects that over time the two funds (the SRF and the DIF) could be merged into one. This Policy Brief argues that re-insurance should not be considered as a transitory phase, but could also provide a solution for the long run. ‘Experience rating’ could be used to ensure a proper pricing of risk and to protect the interests of the depositors in countries with safer banking systems. Moreover, EDIS should have a decision-making structure separate from and independent of the SRM, since it has mainly a macroeconomic function.

The European Central Bank’s quantitative easing programme: limits and risks. Bruegel Policy Contribution Issue 2016/04, February 2016

The European Central Bank (ECB) has made a number of significant changes to the original guidelines of its quantitative easing (QE) programme since the programme started in January 2015. These changes are welcome because the original guidelines would have rapidly constrained the programme’s implementation. The changes announced expand the universe of purchasable assets and give some flexibility to the ECB in the execution of its programme. However, this might not be enough to sustain QE throughout 2017, or if the ECB wishes to increase the monthly amount of purchases in order to provide the necessary monetary stimulus to the euro area to bring inflation back to 2 percent. To increase the programme’s flexibility, the ECB could further alter the composition of its purchases. The extension of the QE programme also raises some legitimate questions about its potential adverse consequences. However, the benefits of this policy still outweigh its possible negative implications for financial stability or for inequality. The fear that the ECB’s credibility will be undermined because of its QE programme also seems to be largely unfounded. On the contrary, the primary risk to the ECB’s credibility is the risk of not reaching its 2 percent inflation target, which could lead to expectations becoming disanchored.

A stable Libya would close the door to Daesh. CEPS Policy Brief No. 340, March 2016

Since the fall of the Gaddafi regime in 2011, everything has seemed to conspire against the transition process in Libya. The idea of a stabilisation force has met political resistance in most European countries, because there is little appetite for long-term interventions that carry a high risk of casualties. This author argues that, among other initiatives, ground forces are nevertheless a necessary component of stabilisation in this fragile country. He makes four recommendations to guide the engagement of external actors.

The Importance of Being Earnest: The green economy and sustainable development in China. Asia Policy Brief 2012/02, November 2012

China's past economic development model has not been sustainable, at least in environmental terms. In recent years, the Chinese government has dedicated considerable time, planning energy, policy and rhetoric to "green" issues. However, there is a risk that this trend will be stalled by struggles related to pending economic problems and the upcoming leadership transition. Consequently, the international community should acknowledge China’s achievements in terms of environmental policy and cooperation as one way of serving the global public interest.

Financial risks and opportunities in the time of climate change. Bruegel Policy Brief ISSUE 2016/02 APRIL 2016

Real economic imbalances can lead to financial crisis. The current unsustainable use of our environment is such an imbalance. Financial shocks can be triggered by either intensified environmental policies, cleantech breakthroughs (both resulting in the stranding of unsustainable assets), or the economic costs of crossing ecological boundaries (eg floods and droughts due to climate change). Financial supervisors and risk managers have so far paid little attention to this ecological dimension, allowing systemic financial imbalances resulting from ecological pressures to build up. Inattention also leads to missed economic and financial opportunities from the sustainability transition.