Social Rights in Post-Revolutionary Tunisia: Is a Consensus-driven Policy Still on The table? EUSpring Policy Brief/Citizenship Review No. 17, June 2016

The immolation of street vendor Mohamed Bouazizi and the demonstrations that followed in December 2010 triggered the Tunisian revolution. But there were more deep-seated issues at stake: unemployment, poverty and exclusion, coupled with a deep sense of injustice, humiliation and helplessness of the peripheries to influence the political centre. Five years after the revolution, the social and economic problems are still persistent and arguably worse. Many people believe Tunisians are facing a distorted revolution; political progress has not coincided with reforms leading to welfare.

ICT for growth: a targeted approach. Bruegel Policy Contribution 2012/10, June 2012

This Policy Contribution assesses the broad obstacles hampering ICT-led growth in Europe and identifies the main areas in which policy could unlock the greatest value. We review estimates of the value that could be generated through take-up of various technologies and carry out a broad matching with policy areas. According to the literature survey and the collected estimates, the areas in which the right policies could unlock the greatest ICT-led growth are product and labour market regulations and the European Single Market. These areas should be reformed to make European markets more flexible and competitive. This would promote wider adoption of modern data-driven organisational and management practices thereby helping to close the productivity gap between the United States and the European Union. Gains could also be made in the areas of privacy, data security, intellectual property and liability pertaining to the digital economy, especially cloud computing, and next generation network infrastructure investment. Standardisation and spectrum allocation issues are found to be important, though to a lesser degree. Strong complementarities between the analysed technologies suggest, however, that policymakers need to deal with all of the identified obstacles in order to fully realise the potential of ICT to spur long-term growth beyond the partial gains that we report.

Compositional effects on productivity, labour cost and export adjustments. Bruegel Policy Contribution 2012/11, June 2012

Sectoral shifts, such as shrinkage of low labour productivity and the low-wage construction sector, can lead to apparent increased aggregate average labour productivity and average wages, especially when capital intensity differs across sectors. For 11 main sectors and 13 manufacturing sub-sectors, we quantify the compositional effects on productivity, wages and unit labour costs (ULCs) based and real effective exchange rates (REER), for 24 EU countries. Compositional effects are greatest in Ireland, where the pharmaceutical sector drives the growth of output and productivity, but other sectors have suffered greatly and have not yet recovered. Our new ULC-REER measurements, which are free from compositional effects, correlate well with export performance. Among the countries facing the most severe external adjustment challenges, Lithuania, Portugal and Ireland have been the most successful based on five indicators, and Latvia, Estonia and Greece the least successful. There is evidence of downward wage flexibility in some countries, but wage cuts have corrected just a small fraction of pre-crisis wage rises and came with massive reductions in employment even in the business sector excluding construction and real estate, highlighting the difficulty of adjusting wages downward.

What kind of European Banking Union? Bruegel Policy Contribution [2012/12?]June 25, 2012

This paper discusses the creation of a European Banking Union. First, we discuss questions of design. We highlight seven fundamental choices that decision makers will need to make: Which EU countries should participate in the banking union? To which categories of banks should it apply? Which institution should be tasked with supervision? Which one should deal with resolution? How centralised should the deposit insurance system be? What kind of fiscal backing would be required? What governance framework and political institutions would be needed? In terms of geographical scope, we see the coverage of the banking union of the euro area as necessary and of additional countries as desirable, even though this would entail important additional economic difficulties. The system should ideally cover all banks within the countries included, in order to prevent major competitive and distributional distortions. Supervisory authority should be granted either to both the ECB and a new agency, or to a new agency alone. National supervisors, acting under the authority of the European supervisor, would be tasked with the supervision of smaller banks in accordance with the subsidiarity principle. A European resolution authority should be established, with the possibility of drawing on ESM resources. A fully centralized deposit insurance system would eventually be desirable, but a system of partial reinsurance may also be envisaged at least in a first phase. A banking union would require at least implicit European fiscal backing, with significant political authority and legitimacy. Thus, banking union cannot be considered entirely separately from fiscal union and political union. The most difficult challenge of creating a European banking union lies with the short-term steps towards its eventual implementation. Many banks in the euro area, and especially in the crisis countries, are currently under stress and the move towards banking union almost certainly has significant distributional implications. Yet it is precisely because banks are under such stress that early and concrete action is needed. An overarching principle for such action is to minimize the cost to the tax payers. The first step should be to create a European supervisor that will anchor the development of the future banking union. In parallel, a capability to quickly assess the true capital position of the system’s most important banks should be created, for which we suggest establishing a temporary European Banking Sector Task Force working together with the European supervisor and other authorities. Ideally, problems identified by this process should be resolved by national authorities; in case fiscal capacities would prove insufficient, the European level would take over in the country concerned with some national financial participation, or in an even less likely adverse scenario, in all participating countries at once. This approach would require the passing of emergency legislation in the concerned countries that would give the Task Force the required access to information and, if necessary, further intervention rights. Thus, the principle of fiscal responsibility of respective member states for legacy costs would be preserved to the maximum extent possible, and at the same time, market participants and the public would be reassured that adequate tools are in place to address any eventuality.

Banking Union in the Eurozone and the European Union. CEPS Commentary, 12 June 2012

In this new CEPS Commentary, Jacopo Carmassi, Carmine Di Noia and Stefano Micossi present a rationale and detailed outline for the creation of a banking union in Europe. They argue that it is essential to clearly distinguish between what is needed to address a ‘systemic’ confidence crisis hitting the banking system – which is mainly or solely a eurozone problem – and ‘fair weather’ arrangements to prevent individual bank crises and, when they occur, to manage them in an orderly fashion so as to minimise systemic spillovers and the cost to taxpayers, which is of concern for the entire European Union.

Banking Union in three steps. CEPS Commentary, 12 June 2012

As the banking crisis in the eurozone becomes even more acute, CEPS Chief Executive Karel Lannoo exhorts the EU to not lose further precious time in creating a fully functional bank union, which would entail three main steps: creating a single supervisory authority, a common deposit protection and a harmonised bank resolution and liquidation system.

Countercyclical regulation in Solvency II: merits and flaws. CEPS Commentary, 25 June 2012

October 2011 saw the latest draft of Solvency II, the European Union’s code for regulation of the insurance industry. This commentary, a collective effort by a group of academics specializing in financial, banking and insurance institutions, argues that the latest proposals need to be drafted again, urgently.

Self-Fulfilling Crises in the Eurozone: An Empirical Test. CEPS Working Document No. 366, 22 June 2012

This paper tests the hypothesis that government bond markets in the eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios and fiscal space variables, and was the result of negative self-fulfilling market sentiments that became very strong since the end of 2010. We argue that this can drive member countries of the eurozone into bad equilibria. We also find evidence that after years of neglecting high government debt, investors became increasingly worried about this in the eurozone, and reacted by raising the spreads. No such worries developed in stand-alone countries despite the fact that debt-to-GDP ratios and fiscal space variables were equally high and increasing in these countries.

Germany as viewed by other Member States. EPIN Working Paper No. 33, 21 June 2012

Germany’s problem is not so much that it is generally right about the need for fiscal discipline but that it has to learn how to be right: this is the most difficult issue to manage from a political standpoint. This EPIN (European Policy Institutes Network) paper brings together contributions from a cross-section of EU member states and the Gallup World Poll survey on the question of how Germany is being viewed at this time of economic and political crisis. The conclusions, subtitled: The Narcissism of Small Differences is a refreshingly candid and insightful analysis of current European relations, noting that Germany’s current weight reflects only the conjuncture of extraordinary domestic and international economic factors. How Germany and the other member states behave towards one another now will have implications for all long after this moment has passed.

An agenda for the European Council: feasible steps to bring the eurozone back from the precipice. CEPS Policy Brief No. 274, 20 June 2012

In the run-up to the emergency European Council meeting at the end of June, Stefano Micossi outlines in this Policy Brief the main elements of a realistic and yet incisive policy package, capable of reassuring financial markets and a bewildered public opinion. It is more than Germany has been willing to accept so far but much less than many of the demands it will confront at the Council meeting. More importantly, it only requires a minimum of additional disbursements by the member states, while strengthening risk-sharing for sovereign and banking risks.

Moving the EU from a Laggard to a Leader in Democracy Assistance: The Potential Role of the European Endowment for Democracy. CEPS Policy Brief No. 273, 15 June 2012

In their assessment of the proposed European Endowment for Democracy (EED), Hrant Kostanyan and Magdalena Nasieniak conclude that an instrument along the lines currently envisaged could and should take on the challenge to make the EU a truly committed, pro-active and effective leader of democracy assistance. A flexible and fast-track path of assessing needs and granting funds could become the most visible results of the EU’s assistance in this area, delivering almost immediate tangible results. They argue that the EED therefore needs to become an instrument free of nationally-driven decisions, European ‘turf wars’ and cumbersome bureaucracy.