What scenarios for the Euro-Mediterranean in 2030 in the wake of the Arab spring? MEDPRO Policy Paper No. 2, October 2011 (Updated 25 February 2013)

In the wake of the Arab Spring, the Southern Mediterranean region has reached a turning point in its history, presenting many opportunities and challenges for the EU. In this MEDPRO Policy Paper, Rym Ayadi and Carlo Sessa explore various possible scenarios that could play out in EU-Mediterranean relations over the next two decades but find, lamentably, that the EU has set itself on a ‘business as usual’ course, leaving the region open to further polarisation and the involvement of other external players.

A New Euro-Mediterranean Energy Roadmap for a Sustainable Energy Transition in the Region. MEDPRO Policy Paper No. 3, February 2013

This paper addresses the urgent need for a sustainable energy transition in the southern and eastern Mediterranean region. It analyses the unsustainable burden of universal energy subsidies and calls for new development paths unlocking the huge potential for low-cost energy efficiency and demand-side management as well as for renewable energy. It argues that a new structure of regional and interconnected energy markets is needed. It then proposes some original approaches regarding the financing of this sustainable energy transition and finally calls for an ambitious, Euro-Mediterranean Energy Roadmap, which should contribute not only to the economic and environmental development of the region, but also to its social and political stability.

Scenarios for the Agricultural Sector in the Southern and Eastern Mediterranean. MEDPRO Report No. 4, March 2013

The paper builds predictive scenarios for the agricultural sector of eleven southern and eastern Mediterranean countries (SEMCs), namely Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestine, Syria, Tunisia and Turkey. First, it assesses the performance trends of the SEMCs’ agricultural sector, with a focus on production, consumption and trade patterns, incentives, trade protection policies and trade relations with the EU, productivity dynamics and their determinants. Second, it presents four scenarios based on the main value chains of the SEMCs’ agriculture sector: animal products, fruit and vegetables, sugar and edible oils, cereals, fish and other sea products. The four scenarios are: business as usual, Mediterranean – one global player, the EU-Mediterranean area under threat and the EU and SEMCs as regional players on the global stage.

Macroeconomic Scenarios for the Euro-Mediterranean Area Quantification based on the GEM-E3 Model. MEDPRO Report No. 7, July 2013

Four alternative macroeconomic scenarios for southern Mediterranean countries are quantified in this study with the use of GEM-E3, a general equilibrium model. These are i) the continuation of current policies (business-as-usual scenario), ii) southern Mediterranean–EU cooperation (Euro-Mediterranean Union scenario), iii) a global opening of the southern Mediterranean countries and cooperation with the rest of the Middle East and other developing countries like China (Euro-Mediterranean alliance scenario), and iv) a deterioration in the regional political climate and a failure of cooperation (Euro-Mediterranean under threat scenario). Explicit assumptions on trade integration, infrastructure upgrade, population and governance developments are adopted in each scenario. The simulation results indicate that an infrastructure upgrade and governance improvements in the context of southern Mediterranean–EU cooperation could benefit most of the countries under consideration. The analysis remains important in light of ongoing regional developments and the need to design the best policies to pursue in the aftermath of the Arab spring.

Benchmarking the Financial Sector in the Southern and Eastern Mediterranean Countries and Projecting 2030 Financial Sector Scenarios. MEDPRO Technical Report No. 31/March 2013

This paper aims at devising scenarios for the development of the financial system in the southern and eastern Mediterranean countries (SEMCs), for the 2030 horizon. The results of our simulations indicate that bank credit to the private sector, meta-efficiency and stock market turnover could reach at best 108%, 78% and 121%, respectively, if the SEMCs adopt the best practices in Europe. These scenarios are much higher than those of the present levels in the region but still lower than the best performers in Europe. More specifically, we find that improving the quality of institutions, increasing per capita GDP, opening further capital account and lowering inflation are needed to enable the financial system in the region to converge with those of Europe.

The Relationship between Energy and Socio-Economic Development in the Southern and Eastern Mediterranean. MEDPRO Technical Report No. 27/February 2013

This report aims to identify, explain and detail the links and interactions in southern and eastern Mediterranean countries (SEMCs) between energy supply and demand and socio-economic development, as well as the potential role of energy supply and demand policies on both. Another related aim is to identify and analyse, in a quantitative and qualitative way, the changing role of energy (both demand and supply) in southern Mediterranean economies, focusing on its positive and negative impact on socio-economic development. This report investigates in particular: o The most important channels through which resource wealth can contribute to or hamper economic and social development in the analysed region; o Mechanisms and channels of relations between energy supply and demand policies and economic and social development. The burdens of energy subsidies and ‘oil syndrome’ are of particular relevance for the region. An integrated socio-economic development and energy policy scenario approach showing the potential benefits and synergies within countries and the region is developed in the final part of the report.

Energy Efficiency: Trends and Perspectives in the Southern Mediterranean. MEDPRO Technical Report No. 21/December 2012

This paper has two objectives. First, it attempts to establish the potential of policies on energy efficiency and energy demand-side management in the southern Mediterranean region. Second, by examining past trends in energy intensity and trends up to 2030, it analyses the prospects and costs of such policies, compared with expected developments in the price of energy resources. Based on both analyses (MEDPRO WP4) and on prospects for growth (MEDPRO WP8), it seems that energy intensity in the Mediterranean should fall perceptibly by approximately 13% in the next 20 years. But given the programmed energy mix, this will not limit emissions of CO2, which are likely to increase by more than 90%. The paper first presents the rationale for demand-side management (DSM) policies. After a general discussion of concepts, it tackles the question of instruments and measures for implementing such policies, before posing the question of the cost-efficiency approach for monitoring the measures the authorities introduce. Secondly, the paper assesses energy consumption and energy efficiency in the countries of the southern Mediterranean and the ways in which their main economic sectors have changed in recent decades. The third section outlines the demand management measures introduced and, taking Tunisia and Egypt as examples, estimates the cost of such policies. The fourth and last section offers a forecast analysis of energy consumption in the Mediterranean up to 2030, highlighting probable trends in terms of final consumption, energy intensity, energy mix and emissions of CO2. The section concludes with estimates in terms of cost, comparing objectives for lower intensity, results in terms of resource savings and the types of costs this approach represents.

Prospects for Energy Supply and Demand in the Southern Mediterranean: Scenarios for 2010-30. MEDPRO Technical Report No. 22/December 2012

The aim of this technical report is to quantify alternative energy demand and supply scenarios for ten southern and eastern Mediterranean countries up to 2030. The report presents the model-based results of four alternative scenarios that are broadly in line with the MEDPRO scenario specifications on regional integration and cooperation with the EU. The report analyses the main implications of the scenarios in the following areas: • final energy demand by sector (industry, households, services, agriculture and transport); • the evolution of the power generation mix, the development of renewable energy sources and electricity exports to the EU; • primary energy production and the balance of trade for hydrocarbons; • energy-related CO2 emissions; and • power generation costs.

Inequality in the Southern Mediterranean: A survey of selected countries. MEDPRO Technical Report No. 23/December 2012

This paper addresses the issues of current levels of inequality: their trends, determinants and future scenarios, demonstrating that welfare levels are measured by per capita consumption. Location, educational attainment and employment status have been identified as the key factors affecting levels of welfare and its distribution. A benefit incidence analysis was performed to investigate benefits of different deciles of per capita expenditure from education and health services. The inequality patterns in countries under investigation present significant variations; countries such as Turkey, Morocco and Tunisia show relatively high inequality while others, such as Egypt or Syria, show moderate to low inequality. Inequality in human development was addressed using the inequality-adjusted human development index (IHDI), introduced by Global HDR 2010. The average loss in the HDI due to inequality in all Arab countries under investigation is about 20%. Two reference scenarios (optimistic and pessimistic) were used to project future paths up to 2020 and 2030. The impact of positive growth is increasing inequality and a shrinking middle class. Results show that the rich benefit most from this growth path. The opposite trend is observed for the pessimistic scenario.

Measuring Returns to Education and Human Capital in the Southern Mediterranean. MEDPRO Technical Report No. 17/September 2012

Measuring human capital has been a significant challenge for economists because the main variable of interest is intangible and not directly observable. In the Middle Eastern and Northern African region the task is further complicated by the general scarcity of comparable and reliable data. This study overcomes these challenges by relying on a unique international survey that covers most of the region and by deriving a market-based measure that uses returns to education and various labour market factors as guidance. The results show that private returns to schooling are relatively low in most southern Mediterranean countries (SMC). Israel and Turkey are clear outliers, surpassing even the EU-MED averages. In Algeria and Jordan, the returns are almost flat, implying that earnings do not respond significantly to education levels. Despite high attainment levels, Greece, Spain and Portugal also perform badly; only marginally surpassing some of the bottom-ranked SMC, providing evidence of problems in absorption capacity. The baseline scenarios for 2030 show substantial sensitivity to current estimates on returns to education. In particular, improving attainment levels can produce measurable gains in the future only when the returns to education are already high. Such is the case for Egypt, Morocco and Turkey, which substantially improve their human capital stocks under the baseline scenarios, surpassing several EU-MED countries with little or no room for improvement.

EU Migration Policy in the wake of the Arab Spring. What prospects for EU-Southern Mediterranean Relations? MEDPRO Technical Report No. 15/August 2012

The outbreak of the Arab Spring and the unrest, revolution and war that followed during the course of 2011 have forced the EU to acknowledge the need to radically re-think its policy approach towards the Southern Mediterranean, including in the domain of migration. Migration and mobility now feature as key components of High Representative Catherine Ashton’s new framework for cooperation with the region (Partnership for Democracy and Shared Prosperity), while the EU has declared its intention to strengthen its external migration policy by setting up “mutually beneficial” partnerships with third countries – so-called ‘Dialogues for Migration, Mobility and Security’ – now placed at the centre of the EU’s renewed Global Approach to Migration and Mobility (GAMM). However, the success of this approach and its potential to establish genuine cooperative partnerships that will support smooth economic and political transformation in North Africa hinge on the working arrangements and institutional configurations shaping the renewed GAMM at EU level which has long been marked by internal fragmentation, a lack of transparency and a predominance of home affairs and security actors. This paper investigates the development of the Dialogues for Migration, Mobility and Security with the Southern Mediterranean in a post-Lisbon Treaty institutional setting. It asks to what extent has the application of the Lisbon Treaty and the creation of an “EU Foreign Minister” in High Representative Ashton, supported by a European External Action Service (EEAS), remedied or re-invigorated the ideological and institutional struggles around the implementation of the Global Approach? Who are the principal agents shaping and driving the Dialogues for Migration, Mobility and Security? Who goes abroad to speak on the behalf of the EU in these Dialogues and what impact does this have on the effectiveness, legitimacy and accountability of the Dialogues under the renewed GAMM as well as the wider prospects for the Southern Mediterranean?

Le role des politiques monétaires et la convergence macroeconomique sur le développement des systèmes financiers dans les pays du sud de la Méditerranée. = The role of monetary policies and macroeconomic convergence in the development of financial systems in south Mediterranean countries. MEDPRO Technical Report No. 12/April 2012

This MEDPRO Technical Report shows that the monetary and exchange rate policies conducted by central banks in the South Mediterranean region display apparent homogeneity in their operational frameworks, albeit with some specificities and differing degrees of advancement. While central banks state that price stability is their ultimate objective, failures to control interest rates as operational objectives of monetary policy result in monetary authorities resorting to quantitative approaches to monetary policy, meaning that monetary aggregates and credit targets are being used as intermediate targets of monetary policy. An econometric exercise limited to Maghreb countries (Algeria, Morocco, and Tunisia) has been conducted to analyse the potential scenarios of convergence and monetary policy coordination. Given the high structural heterogeneity and the slow pace of real convergence due to weak commercial integration in the Maghreb, results nevertheless show alternative dynamics in the integration of effective nominal exchange rates, as well as a complete convergence dynamic in exchange rate policies. Partial convergence of monetary policies regarding the stabilisation of inflation rates remains an open option for a transitional phase where financial integration is low.

Shallow vs. Deep Integration in the Southern Mediterranean: Scenarios for the region up to 2030. MEDPRO Technical Report No. 13/March 2012

This research develops a quantitative analysis aimed at simulating the trade effects of various integration scenarios between the EU and its Mediterranean Partners (MPs). Results for shallow integration show that the completion of tariff removal is expected to produce limited gains, except in Algeria. However, further steps toward deep integration would lead to much more significant gains. In this regard, the elimination of non-tariff barriers is expected to increase EU exports to MPs up to 60%. In addition, MPs’ imports and exports to the EU could also considerably increase due to an improvement of logistics performance in these countries.

Les enjeux de la libéralisation des comptes de capital dans les pays du sud de la Méditerranée. = Challenges arising from Capital Account Liberalisation in the Countries of the South Mediterranean Region. MEDPRO Technical Report No. 11/March 2012

This MEDPRO Technical Report confirms the importance of commercial openness and macroeconomic performance (i.e. the control of inflation and stability of current account balance and exchange rate) on growth dynamics in the south Mediterranean countries. In particular, the positive impact of capital account liberalisation is conditioned by the imperative reinforcement of institutional quality, country risk reduction, and government stability. An examination of the Tunisian case shows that only sectors subject to tariff dismantlement within the framework of the Association Agreement with the EU appear to benefit from capital account liberalisation. Furthermore, the report shows that a scenario of capital account liberalisation requires the anticipation of monetary policy reaction functions. It follows that the mechanisms for interest rate adjustment, or inter alia, the interest rates’ reaction to price fluctuations, are weakly volatile. In turn, the analysis shows that an active control of inflation mismatches occurs essentially through exchange rate corrections, thus highlighting the greater interest central banks have in exchange rate stability over real stability. A capital account liberalisation scenario would hence impose a tightening of monetary policy.

Energy in the Eastern Mediterranean: promise or peril? Egmont Paper No. 65, May 2014

From the Introduction. In order to address the different challenges and opportunities on energy cooperation in the Eastern Mediterranean Region and Levant Basin, EGMONT – The Royal Institute for International Relations of Belgium – together with the Atlantic Council, and supported by H. E. Belgian Minister for Foreign Affairs Didier Reynders, opened an expert dialogue in 2013 in order to look at how the management of the new energy resources could act as a vector of cooperation instead of conflict between the concerned countries. The activities have targeted finding new possibilities for cooperation on political and security challenges, energy infrastructure development, the regulatory and legal framework, environmental concerns, and bilateral and regional structures, in a manner that enhances stability and security in the region, increases European energy security, contributes to rather than hinders a comprehensive Cyprus settlement, and promotes wider regional cooperation.