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.

Autonomy in the global era: Euro-regionalism and new policy spaces in education. ACES Working Papers, August 2010

Framed by a critical discussion of methodological nationalism, this paper explores the intersection of new and evolving regional, central state, and supranational education policy spaces through examples drawn from post-Franco Spain. This work is situated within the broader literature on the development of a European Education Policy Space, which aims to understand changing governance structures in European education (cf. Grek et al., 2009; Lawn & Lingard,2002; N6voa & Lawn, 2002). Using policy documents since 2000 and interview data, the paper first examines Spanish and regional (Catalan) education policy related to devolution, namely Catalonia's recently revised Statute of Autonomy. The paper then places devolution in Spain and Catalonia in a broader context of Euro-regionalism, which has deepened and legitimized regional autonomy. Together these shifts in educational governance and the development of new education policy spaces have promoted a concept of the multi-scalar, European "ideal citizen" (Engel & Ortloff, 2009). The last section presents an overview of the recent influx of immigrants into Catalonia and Spain, exploring whether and to what extent recent education policy promoting the "ideal citizen" has taken non-European immigrants into account.

Case sequence segments for EMU, ECB and Eurozone: A Eurozone country profile and related Euro matters. ACES Working Papers, August 2010

No European country employs a U.S.-style electoral college in presidential elections. Presidents with largely ceremonial functions are elected in some countries by the national parliament or a special assembly (Germany, Italy, Estonia, Turkey and others) or by the people in other countries (Greece, Poland, Slovakia and others). The presidents of Cyprus, Finland, France, Russia and Ukraine -- who have real decision-making power -- are elected directly by the voters. Keep in mind that no two countries are exactly alike in their institutional and electoral arrangements; all of these institutions and electoral systems are capable of being modified and adapted to suit national peculiarities and preferences.

The Euro blame game and its implications for policy and financial markets. ACES Cases No. 2012.2

The recent financial crisis in some of the eurozone member countries has received a great deal of attention by investors, policy makers and commentators alike. Often these events are interpreted as a failure of the euro and the sustainability of the eurozone is called into question. This paper shows that this analysis and its emphasis are flawed. Fiscal imbalances and financial market imperfections are at the core of the problem, and they need to be addressed directly to prevent future crises.

British business and the Euro. ACES Cases No. 2008.2

During the Maastricht Treaty negotiations, the United Kingdom obtained an opt-out option on Economic and Monetary Union (EMU). When Tony Blair came to power, he promised there would be a referendum on the euro if the government decided it was in the national interest to join. Many believed Tony Blair intended to call and try to win a referendum on the euro. Therefore, in the late 1990s, the debate over the euro raged in Britain, filling the pages of the tabloids and the minds of many Britons. In this paper based on empirical research conducted in London in 2005-06, I investigate whether the business sector had a clear preference on the issue of British membership in the EMU and tried to influence the government‟s decision. I use Jeffry Frieden's model of interest group preferences regarding exchange-rate policies to develop hypotheses regarding the position of the business sector on the euro. Research findings reveal that the business sector was divided on the issue of euro membership exactly as Frieden's model predicts. However, the intensity of business preferences decreased overtime. By the end of Tony Blair's second term, the business sector had become neutral on the issue of the euro.

Does All Fit One Size? An evaluation of the ECB policy response to changing economic conditions in the Euro area member states. ACES Cases No. 2008.1

This paper empirically investigates the extent to which the European Central Bank has responded to evolving economic conditions in its member states as opposed to the euro area as a whole. Based on a forward-looking Taylor rule-type policy reaction function, we conduct counterfactual exercises that compare the monetary policy behavior of the ECB with two alternative hypothetical scenarios: (1) were the euro member states to make individual policy decisions, and (2) were the ECB to respond to the economic conditions of individual members. The results reflect the extent of heterogeneity among the national economies in the monetary union and indicate that the ECB's monetary policy rates have been particularly close to the "counterfactual" interest rates of its largest euro members, as well as of countries with similar economic conditions, which includes Germany, Austria, Belgium and France.

The EU-Turkey Customs Union: A model for Future Euro-Med Integration. MEDPRO Technical Report No. 9/March 2012

This paper studying the 1995 EU-Turkey Customs Union (CU) reveals that the CU has been a major instrument of integration of the Turkish economy into the EU and global markets, offering powerful tools to reform the Turkish economy. Turkish producers of industrial goods are protected by tariffs from external competition to exactly the same extent as EU producers, and they face competition from duty-free imports of industrial goods from world-class pan-European firms. In return, Turkish industrial producers have duty-free market access to the European Economic Area, which was recently extended to certain Mediterranean countries. Trade liberalisation achieved through the CU has thus successfully moved the Turkish economy from a government-controlled regime to a market-based one, and Turkish producers of industrial goods have performed remarkably well. The paper further shows that market access conditions for Turkish producers are determined, in addition to tariffs, by standards, conformity assessment procedures, competition policy, industrial property rights and contingent protectionism measures. The CU also offered Turkey the opportunity to establish new institutions, and modernise and upgrade rules and disciplines required for the elimination of technical barriers to trade, and for the implementation of the EU’s competition, industrial property rights, and contingent protectionism policies.

A weak link? Germany in the Euro-Atlantic security system. OSW Point of View Number 47, January 2015

The political, military and economic parameters of German power influence the vision of the international order that Berlin favours. Politically, Germany is a regional power in the EU with considerable diplomatic potential. Economically, it is the world's third largest power with growing global trade and investment links. At the same time, Germany's military potential is limited and the German strategic culture makes the country sceptical about the use of military instruments. Berlin is thus essentially interested in maintaining peace and stability, both in Europe and globally, and in developing diplomatic mechanisms to manage regional and global crises and conflicts. The German preference for dialogue and compromise in conflict situations in the regional and global dimensions may increasingly pose a risk to maintaining the cohesion and credibility of NATO – both from the perspective of the USA and Germany’s allies from Central-Eastern and Northern Europe.

Preventing another Euro Area Crisis: EU Economic Governance ‘Six Pack’ – a case of too little, too late? Paper from the Colloquium: The Politics and Economics of the Euro Crisis, Institute for European Studies, University of Malta, 2 December 2011

Summary: The ‘Six Pack’ forms part of the economic governance reforms which are being implemented in order to prevent a repeat of the current sovereign debt crisis in the Euro Area. This legislative package involves strengthening the Stability and Growth Pact, with stronger financial sanctions and more focus on debt; a new directive on national budgetary frameworks and a new framework to monitor and correct macroeconomic imbalances. Furthermore, the implementation of the ‘Six Pack’ also involves procedural reforms, in particular reverse majority voting, as well as more oversight by the European Parliament. Inter-institutional negotiations on the ‘Six Pack’ took over a year. In the meantime, the sovereign debt crisis had deepened and broadened, implying that the ‘Six Pack’ may have come ‘too late’. The ‘Six Pack’ has also proved to be ‘too little’ to address the crisis and by the time it entered into force, further measures and proposals to strengthen economic governance had to be made. Nevertheless, the ‘Six Pack’ comprises some positive developments. In particular, recognising that fiscal policy is a matter of national sovereignty, it sets a new approach which relies on institutional reforms at national level. As such, it constitutes a first, small step to improve economic governance in the Euro Area.

The Euro: A Crisis of the Currency or a Failure of Politics? Paper from the Colloquium: The Politics and Economics of the Euro Crisis, Institute for European Studies, University of Malta, 2 December 2011

Summary: Overall the monetary pillar of the EMU project has worked well so that it is incorrect to speak of a 'euro' crisis though it is at the epicentre of the present crisis. The origins of the problems it is facing have more to do with the economic component, particularly because of the breach of budgetary rules which points to a failure of politics. Hence the solution must be political, namely a strong commitment by governments to achieve balanced budgets and implement structural reforms so as to lay the basis for improved competitiveness, job creation and sustainable growth.

Euro-area governance: what to reform and how to do it. Bruegel Policy Brief 2015/01 February 2015

The Issue Reform of the governance of the euro area is being held back by disagreement on what is at the root of the euro area’s woes. Pre-crisis, the euro area suffered from the built-up of financial imbalances, price and wage divergence and an insufficient focus on debt sustainability. During the crisis, the main problems were slow resolution of banking problems, an inadequate fiscal policy stance in 2011-13 for the area as a whole, insufficient domestic demand in surplus countries and slow progress with structural reforms to overcome past divergences. Policy Challenge Euro-area governance needs to move beyond the improvements brought about by banking union and should establish institutions to prevent divergences of wages from productivity. We propose the creation of a European Competitiveness Council composed of national competitiveness councils, and the creation of a Eurosystem of Fiscal Policy (EFP) with two goals: fiscal debt sustainability and an adequate area-wide fiscal position. The EFP should have the right in exceptional circumstances to declare national deficits unlawful and to be able to force parliaments to borrow more so that the euro-area fiscal stance is appropriate. A euro-area chamber of the European Parliament would have to approve such decisions. No additional risk-sharing would be introduced. In the short term, domestic demand needs to be increased in surplus countries, while in deficit countries, structural reform needs to reduce past divergences.

A macro-financial analysis of the euro area sovereign bond market. National Bank of Belgium Working Paper No. 259, June 2014

We estimate the 'fundamental' component of euro area sovereign bond yield spreads, i.e. the part of bond spreads that can be justified by country-specific economic factors, euro area economic fundamentals, and international influences. The yield spread decomposition is achieved using a multi-market, no-arbitrage affine term structure model with a unique pricing kernel. More specifically, we use the canonical representation proposed by Joslin, Singleton, and Zhu (2011) and introduce next to standard spanned factors a set of unspanned macro factors, as in Joslin, Priebsch, and Singleton (2013). The model is applied to yield curve data from Belgium, France, Germany, Italy, and Spain over the period 2005-2013. Overall, our results show that economic fundamentals are the dominant drivers behind sovereign bond spreads. Nevertheless, shocks unrelated to the fundamental component of the spread have played an important role in the dynamics of bond spreads since the intensification of the sovereign debt crisis in the summer of 2011