Tough love for sinners in the eurozone banking union. CEPS Commentary, 1 July 2013

The ministers of finance and the economy of the eurozone have now agreed on the main features of a new ESM instrument for the direct recapitalisation of euro area banks (Eurogroup, 2013) and on a framework for the recovery and resolution of credit institutions (Council of the European Union, 2013). However, as Stefano Micossi explains in this Commentary, the text that has come out of the frantic late-night negotiations in the Ecofin Council seems to leave unwelcome uncertainty as to the real scope of the new rules in the different national jurisdictions, while the lack of depositor preference in the bail-in pecking order may result in destabilisation. The proposed system appears not only highly intrusive but it also places a considerable burden of aid to the failing institution on the member state, raising doubts about its ability to “break the vicious circle between banks and sovereigns”.

Mutual Recognition: economic and regulatory logic in goods and services. Bruges European Economic Research (BEER) Papers 24/June 2012

Mutual recognition is one of the most appreciated innovations of the EU. The idea is that one can pursue market integration, indeed "deep' market integration, while respecting 'diversity' amongst the participating countries. Put differently, in pursuing 'free movement' for goods, mutual recognition facilitates free movement by disciplining the nature and scope of 'regulatory barriers', whilst allowing some degree of regulatory discretion for EU Member States. This BEER paper attempts to explain the rationale and logic of mutual recognition in the EU internal goods market, its working in actual practice for about three decades now, culminating in a qualitative cost/benefit analysis and its recent improvement in terms of 'governance' in the so-called New Legislative Framework (first denoted as the 2008 Goods package) thereby ameliorating the benefits/costs ratio. For new (in contrast to existing) national regulation, the intrusive EU procedure to impose mutual recognition is presented as well, with basic data so as to show its critical importance to keep the internal goods market free. All this is complemented by a short summary of the scant economic literature on mutual recognition. Subsequently, the analysis is extended to the internal market for services. This is done in two steps, first by reminding the debate on the origin principle (which goes further than mutual recognition EU-style) and how mutual recognition works under the horizontal services directive. This is followed by a short section on how mutual recognition works in vertical (i.e. sectoral) services markets.