The NSA: the impact of the wiretapping scandal on German-American relations. OSW Commentary No. 124, 14.01.2014

Edward Snowden revealed that America’s National Security Agency (NSA) had tapped Chancellor Angela Merkel’s mobile phone and had collected date en masse. This has caused the largest crisis of confidence in relations between Germany and the US since the Iraq war. Due to the technological advantage which American intelligence services have, Germany wishes to continue close co-operation with the US but is making efforts to change the legal basis of this co-operation dating back to Cold War times. Berlin would like to secure part of provisions similar to the Five Eyes alliance – agreements signed between the US, the UK, Canada, New Zealand and Australia in the second half of the 1940s, aimed at intelligence sharing and a ban mutual bugging. This could spell the end of the last (not including the military presence) relic of Germany’s dependence on the US which emerged following World War II and took shape in the shadow of the Cold War. The process of Germany’s emancipation in trans-Atlantic relations, which began after Germany’s reunification, would be complete. The US is however opposed to such far-reaching changes as it is interested in continued co-operation with Germany without limiting it. Were it not to sign agreements satisfactory for Berlin, this would lead to a protracted crisis of confidence in German-American relations.

Options for a Euro-area fiscal capacity. Bruegel Policy Brief 2013/01, January 2013

Europe has responded to the crisis with strengthened budgetary and macroeconomic surveillance, the creation of the European Stability Mechanism, liquidity provisioning by resilient economies and the European Central Bank and a process towards a banking union. However, a monetary union requires some form of budget for fiscal stabilisation in case of shocks, and as a backstop to the banking union. This paper compares four quantitatively different schemes of fiscal stabilisation and proposes a new scheme based on GDP-indexed bonds. The options considered are: (i) A federal budget with unemployment and corporate taxes shifted to euro-area level; (ii) a support scheme based on deviations from potential output;(iii) an insurance scheme via which governments would issue bonds indexed to GDP, and (iv) a scheme in which access to jointly guaranteed borrowing is combined with gradual withdrawal of fiscal sovereignty. Our comparison is based on strong assumptions. We carry out a preliminary, limited simulation of how the debt-to-GDP ratio would have developed between 2008-14 under the four schemes for Greece, Ireland, Portugal, Spain and an ‘average’ country.The schemes have varying implications in each case for debt sustainability