The euro crisis: ten roots, but fewer solutions. Bruegel Policy Contribution 2012/17, October 2012

Many factors have contributed to the euro crisis. Some have been addressed by policymakers, even if belatedly, and European Union member states have been willing to improve the functioning of the euro area by agreeing to relinquish national sovereignty in some important areas. However, the most pressing issue threatening the integrity, even the existence, of the euro, has not been addressed: the deepening economic contraction in southern euro-area member states. The common interest lies in preserving the integrity of the euro area and in offering these countries improved prospects. Domestic structural reform and appropriate fiscal consolidation, wage increases and slower fiscal consolidation in economically stronger euro-area countries, a weaker euro exchange rate, debt restructuring and an investment programme should be part of the arsenal. In the medium term, more institutional change will be necessary to complement the planned overhaul of the euro area institutional framework. This will include the deployment of a euro-area economic stabilising tool, managing the overall fiscal stance of the euro area, some form of Eurobonds and measures to make euro-area level decision making bodies more effective and democratically legitimate.

Reflections on the institutional balance, the Community Method and the interplay between jurisdictions after Lisbon. Research Papers in Law, 04/2012

[Introduction.] Over the last two years, not only inside but also outside the framework of the EU treaties, far reaching measures have been taken at the highest political level in order to address the financial and economic crisis in Europe and in particular the sovereign debt crisis in the Euro area. This has triggered debates forecasting the “renationalisation of European politics.” Herman Van Rompuy, the President of the European Council, countered the prediction that Europe is doomed because of such a renationalisation: “If national politics have a prominent place in our Union, why would this not strengthen it?” He took the view that not a renationalisation of European politics was at stake, but an Europeanization of national politics emphasising that post war Europe was never developed in contradiction with nation states.1 Indeed, the European project is based on a mobilisation of bundled, national forces which are of vital importance to a democratically structured and robust Union that is capable of acting in a globalised world. To that end, the Treaty of Lisbon created a legal basis. The new legal framework redefines the balance between the Union institutions and confirms the central role of the Community method in the EU legislative and judiciary process. This contribution critically discusses the development of the EU's institutional balance after the entry into force of the Treaty of Lisbon, with a particular emphasis on the use of the Community Method and the current interplay between national constitutional courts and the Court of Justice. This interplay has to date been characterised by suspicion and mistrust, rather than by a genuine dialogue between the pertinent judicial actors.

Why EU promotion is at odds with successful crisis management: public relations, news coverage, and the Aceh Monitoring Mission. EU Centre in Singapore Working Paper No. 10, September 2012

The EU’s Common Foreign and Security Policy (CFSP) and its accompanying Common Security and Defence Policy (CSDP) missions can be tools used to increase the international profile of the European Union. Nevertheless, CSDP missions garner little news coverage. This article argues that the very nature of the missions themselves makes them poor vehicles for EU promotion for political, institutional, and logistical reasons. By definition, they are conducted in the middle of crises, making news coverage politically sensitive. The very act of reporting could undermine the mission. Institutionally, all CSDP missions are intergovernmental, making press statements slow, overly bureaucratic, and of little interest to journalists. Logistically, the missions are often located in remote, undeveloped parts of the world, making it difficult and expensive for European and international journalists to cover. Moreover, these regions in crisis seldom have a thriving, local free press. Using the Aceh Monitoring Mission (AMM) as a case study, the author concludes that although a mission may do good, CSDP missions cannot fulfil the political function of raising the profile of the EU.

EU Policy on Climate Change Mitigation since Copenhagen and the Economic Crisis. CEPS Working Document No. 380, 5 March 2013

The EU has long assumed leadership in advancing domestic and international climate change policy. While pushing its partners in international negotiations, it has led the way in implementing a host of domestic measures, including a unilateral and legally binding target, an ambitious policy on renewable energy and a strategy for low-carbon technology deployment. The centrepiece of EU policy, however, has been the EU Emissions Trading System (ETS), a cap-and-trade programme launched in 2005. The ETS has been seen as a tool to ensure least-cost abatement, drive EU decarbonisation and develop a global carbon market. After an initial review and revision of the ETS, to come into force in 2013, there was a belief that the new ETS was ‘future-proof’, meaning able to cope with the temporary lack of a global agreement on climate change and individual countries’ emission ceilings. This confidence has been shattered by the simultaneous ‘failure’ of Copenhagen to deliver a clear prospect of a global (top-down) agreement and the economic crisis. The lack of prospects for national caps at the international level has led to a situation whereby many member states hesitate to pursue ambitious climate change policies. In the midst of this, the EU is assessing its options anew. A number of promising areas for international cooperation exist, all centred on the need to ‘raise the ambition level’ of GHG emission reductions, notably in aviation and maritime, short-lived climate pollutions, deforestation, industrial competitiveness and green growth. Public policy issues in the field of technology and its transfer will require more work to identify real areas for cooperation.

What Does the Lisbon Treaty Change Regarding Subsidiarity within the EU Institutional Framework?

he principle of subsidiarity refers in general to the choice of the most suitable and efficient level for taking policy action. The European Union associates subsidiarity with the way of taking decisions ‘as closely as possible to the citizen’, as it is referred to in the EU treaties. Thus, ensuring the respect of subsidiarity within the EU legislative framework ensures that any EU action is justified when proposing draft legislative acts. The Lisbon Treaty establishes new mechanisms reinforcing subsidiarity control, both ex ante and ex post the EU legislative process, and by doing so, enhances mainly the role of the national parliaments (and to a lesser extent the regional parliaments) and the Committee of the Regions. But in the end, this is a way of ensuring legitimacy of the EU action as it is quite often questioned, especially in times of crisis. Years of practice will tell whether the words will join reality.

After the Euro Crisis: The President of Europe, A new paradigm for increasing legitimacy and effectiveness in the EU. EuropEos Commentary No. 12, 1 June 2012

The crisis in the eurozone– which became worse in Europe at the same time that the Lisbon Treaty entered in force at the end of 2009 – has presented the first test of the crisis management capabilities of the intergovernmental approach. As provided under the Lisbon Treaty, the European Council has been the true decision-making centre for the policies adopted in response to the financial crisis, with the Commission playing a technical role. This commentary finds, however, that this institutional set-up has been unsatisfactory and unable to overcome the three fundamental dilemmas of the integration process: the dilemma of veto power, the dilemma of enforcement of the agreements and the dilemma of decision-making legitimacy. While it remains to be seen whether the election of François Hollande as President of France signals the beginning of a new political cycle characterised by new ideas on the institutional future of the EU, if that were to materialise, this paper aims to contribute to the debate on those new ideas.

The Eurozone crisis and the erosion of democratic legitimacy: Lessons from the gold standard. ACES Cases No. 2013.3

This paper makes four propositions. First, it argues that the euro’s institutional design makes it function like the interwar gold exchange standard during periods of stress. Just like the gold exchange standard during the 1930s, the euro created a ‘core’ of surplus countries and a ‘periphery’ of deficit countries. The latter have to sacrifice their internal domestic economic equilibrium in order to restore their external equilibrium, and therefore have no choice but to respond to balance of payments crises by a series of deflationary spending, price and wage cuts. The paper’s second claim is that the euro’s institutional design and the EU’s response to its ‘sovereign debt crisis’ during 2010-13 deepened the recession in the Eurozone periphery, as EMU leaders focused almost exclusively on austerity measures and structural reforms and paid only lip service to the need to rebalance growth between North and South. As Barry Eichengreen argued in Golden Fetters, the rigidity of the gold standard contributed to the length and depth of the Great Depression during the 1930s, but also underscored the incompatibility of the system with legitimate national democratic government in places like Italy, Germany, and Spain, which is the basis for the paper’s third proposition: the euro crisis instigated a crisis of democratic government in Southern Europe underlining that democratic legitimacy still mainly resides within the borders of nation states. By adopting the euro, EMU member states gave up their ability to control major economic policy decisions, thereby damaging their domestic political legitimacy, which in turn dogged attempts to enact structural reforms. Evidence of the erosion of national democracy in the Eurozone periphery can be seen in the rise of anti-establishment parties, and the inability of traditional center-left and center-right parties to form stable governments and implement reforms. The paper’s fourth proposition is that the euro’s original design and the Eurozone sovereign debt crisis further widened the existing democratic deficit in the European Union, as manifested in rising anti-EU and anti-euro sentiment, as well as openly Eurosceptic political movements, not just in the euro periphery, but also increasingly in the euro core.

THE KYOTO PROTOCOL AND THE WTO: INSTITUTIONAL EVOLUTION AND ADAPTATION. CEPS Policy Brief No. 28/December

Overview. Questions about the interface between the multilateral climate regime embodied in the Kyoto Protocol and the multilateral trade regime embodied in the World Trade Organisation (WTO) have become especially timely since the fall of 2001. At that time, ministerial-level meetings in Marrakech and Doha agreed to advance the agendas, respectively, for the implementation of the Kyoto Protocol and for negotiations on further agreements at the WTO. There have been concerns that each of these multilateral arrangements could constrain the effectiveness of the other, and these concerns will become more salient with the entry into force of the Kyoto Protocol. There are questions about whether and how the rights and obligations of the members of the WTO and the parties to the Protocol may conflict. Of particular concern is whether provisions in the Protocol, as well as government policies and business activities undertaken in keeping with those provisions, may conflict with the WTO non-discrimination principles of national treatment and most-favoured nation treatment. The WTO agreements that are potentially relevant to climate change issues include many of the individual Uruguay Round agreements and subsequent agreements as well. The principal elements of the Kyoto Protocol that are particularly relevant are its provisions concerning emissions trading, the Clean Development Mechanism, Joint Implementation, enforcement, and parties’ policies and measures. In combination, therefore, there are numerous potential points of intersection between the elements of the Kyoto Protocol and the WTO agreements. Previous studies have clarified many issues, as they have focused on particular aspects of the regimes’ relationships. Yet, some analyses suggest that the two regimes are largely compatible and even mutually reinforcing, while others suggest that there are significant conflicts between them. Those and other studies are referenced in the ‘suggestions for further reading’ section at the end of the paper.1 The present paper seeks to expand on those studies by providing additional breadth and depth to understanding of the issues. The analysis gives special attention to key issues on the agenda – i.e. issues that are particularly problematic because of the likelihood of occurrence of specific conflicts and the significance of their economic and/or political consequences. The paper adopts a modified ‘triage’ approach, which classifies points of intersection as (a) highly problematic and clearly in need of further attention, (b) perhaps problematic but less urgent, and (c) apparently not problematic, at least at this point in time. The principal conclusions are that: · The missions and objectives of the two regimes are largely compatible, and their operations are potentially mutually reinforcing in several respects. · Some provisions of the multilateral agreements that may superficially seem at odds are not likely to become particularly problematic in practice. · ‘Domestic policies and measures’ that governments may undertake in the context of the Protocol could pose difficult issues in the context of WTO dispute cases. · Recent WTO agreements and dispute cases acknowledge the legitimacy of the ‘precautionary principle’ and are thus consistent with the environmental protection objectives of the Protocol. · The relative newness of the climate regime creates opportunities for institutional adaptation, as compared with the constraints of tradition in the trade-investment regime. · The prospect of largely independent evolutionary paths for the two regimes poses a series of issues about future international regime design and management, which may require new institutional arrangements. In sum, the present paper thus finds that although there are some areas of interaction that are problematic, the two regimes may nevertheless co-exist in relative harmony in other respects –more like ‘neighbours’ than either ‘friends’ or ‘foes’, as Krist (2001) has suggested.

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.

Environmental Degradation, Climate Change and Migration: from Research to Policy-Making. IES Policy Brief Issue 2013/08/September 2013

Summary. In recent months, the migratory impacts of environmental degradation and climate change have gained increased worldwide attention. In response to the publication of the EC Staff Working Document on Climate Change, Environmental Degradation and Migration, this policy brief critically outlines current themes and issues that surround this global phenomenon, specifically the findings of current international research which frame the discussions on terminology and current legal, political and institutional conceptual debates. Several proposals were put forward during a Policy Forum in January 2013. Firstly, there is a need for tailored and actionable research outputs that take into account political pressures and realities on the ground. Secondly, migration and climate policies would be clearly boosted through the elaboration of a common policy-oriented research agenda of which elements were put forward at the event. Finally, efficient communication tools and channels could be developed to transfer research findings to policy-makers.

It’s not just Russia: Currency crisis in the Commonwealth of independent states. Bruegel Policy Contribution 2015/01, February 2015

The currency crisis that started in Russia and Ukraine during 2014 has spread to neighbouring countries in the Commonwealth of Independent States (CIS). The collapse of the Russian ruble, expected recession in Russia, the stronger US dollar and lower commodity prices have negatively affected the entire region, with the consequence that the European Union's entire eastern neighbourhood faces serious economic, social and political challenges because of weaker currencies, higher inflation, decreasing export revenues and labour remittances, net capital outflows and stagnating or declining GDP. •The crisis requires a proper policy response from CIS governments, the International Monetary Fund and the EU. The Russian-Ukrainian conflict in Donbass requires rapid resolution, as the first step to return Russia to the mainstream of global economic and political cooperation. Beyond that, both Russia and Ukraine need deep structural and institutional reforms. The EU should deepen economic ties with those CIS countries that are interested in a closer relationship with Europe. The IMF should provide additional assistance to those CIS countries that have become victims of a new regional contagion, while preparing for the possibility of more emerging-market crises arising from slower growth, the stronger dollar and lower commodity prices.

Eurozone Crisis and Social Models: What We Can Learn from Italy and Spain. CES Papers - Open Forum #20, 2013-2014

This paper considers the role of social model features in the economic performance of Italy and Spain during the run-up to the Eurozone crisis, as well as the consequences of that crisis, in turn, for the two countries social models. It takes issue with the prevailing view - what I refer to as the “competitiveness thesis” - which attributes the debtor status of the two countries to a lack of competitive capacity rooted in social model features. This competitiveness thesis has been key in justifying the “liberalization plus austerity” measures that European institutions have demanded in return for financial support for Italy and Spain at critical points during the crisis. The paper challenges this prevailing wisdom. First, it reviews the characteristics of the Italian and Spanish social models and their evolution in the period prior to the crisis, revealing a far more complex, dynamic and differentiated picture than is given in the political economy literature. Second, the paper considers various ways in which social model characteristics are said to have contributed to the Eurozone crisis, finding such explanations wanting. Italy and Spain ́s debtor status was primarily the result of much broader dynamics in the Euro- zone, including capital flows from richer to poorer countries that affected economic demand, with social model features playing, at most, an ancillary role. More aggressive reforms responding to EU demands in Spain may have increased the long term social and economic costs of the crisis, whereas the political stalemate that slowed such reforms in Italy may have paradoxically mitigated these costs. The comparison of the two countries thus suggests that, in the absence of broader macro-institutional reform of the Eurozone, compliance with EU dictates may have had perverse effects.

State Transformation and the European Integration Project. Lessons from the financial crisis and the Greek paradigm. CEPS Special Report No. 130/February 2016

The financial crisis that erupted in the eurozone not only affected the EU’s financial governance mechanisms, but also the very nature of state sovereignty and balances in the relations of member states; thus, the actual inequalities between the member states hidden behind their institutional equality have deteriorated. This transformation is recorded in the case law of the Court of Justice of the European Union and the member states’ constitutional courts, particularly in those at the heart of the crisis, with Greece as the most prominent example. It is the issue of public debt (sovereign debt) of the EU member states that particularly reflects the influence of the crisis on state sovereignty as well as the intensely transnational (intergovernmental) character of European integration, which under these circumstances takes the form of a continuous, tough negotiation. The historical connection between public debt (sovereign debt) and state sovereignty has re-emerged because of the financial crisis. This development has affected not only the European institutions, but also, at the member state level, the actual institutional content of the rule of law (especially judicial review) and the welfare state in its essence, as the great social and political acquis of 20th century Europe. From this perspective, the way that the Greek courts have dealt with the gradual waves of fiscal austerity measures and structural reforms from 2010 to 2015 is characteristic. The effect of the financial crisis on the sovereignty of the member states and on the pace of European integration also has an impact on European foreign and security policy, and the correlations between the political forces at both the national and European level, thus producing even more intense pressures on European social democracy. In light of the experience of the financial crisis, the final question is whether the nation state (given the large real inequalities among the EU member states) currently functions as a brake or as an engine for future European integration.