New ICT sectors: platforms for European growth? Bruegel Policy Contribution 2012/14, August 2012

Europe's failure to specialise in new ICT sectors and firms is likely to hold back Europe’s post-crisis recovery. Europe lacks in particular leading platform providers, who are capturing most of the value in the new ICT ecosystem. • In-depth analysis of some specific new emerging ICT sectors shows that the problem in Europe appears not to be so much in the generation of new ideas, but rather in bringing ideas successfully to market. Among the barriers are the lack of a single digital market, fragmented intellectual property regimes, lack of an entrepreneurial culture, limited access to risk capital and an absence of ICT clusters. • The EU policy framework, particularly the Innovation Union and Digital Agenda EU 2020 Flagships, could better leverage the growth power for Europe of new ICT markets. The emphasis should move beyond providing support for infrastructure and research, to funding programmes for pre-commercial projects. But perhaps most important is dealing with the fragmentation in European digital markets.

Monetary policy and banking supervision: coordination instead of separation. CEPS Policy Brief No. 286, 12 December 2012

Introduction. Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be “independents” in order to reduce the tendency of supervisors to unduly delay the recognition of losses.

Strengthening the strategic choice offered to the EU’s southern Mediterranean neighbours. CEPS Commentary, 1 February 2013

Finding that the European Neighbourhood Policy (ENP) currently lacks a strategic vision that would offer states in the southern Mediterranean substantial returns in exchange for making tough reforms, this CEPS Commentary suggests that this weakness can be overcome through a concrete prospect of regional integration pro-actively driven forward by the European Union. Taking inspiration from current projects such as the Energy Community Treaty, the authors urge the EU to explicitly incorporate “legally binding sectoral multilateralism” into the ENP. This would provide the Union’s partners with a tangible prospect of reaping real long-term benefits from EU cooperation and reinvigorate the ENP for the next decade.

European antitrust control and standard setting. Bruegel Working Paper 2013/01, February 2012

Standards reduce production costs and increase products’ value to consumers. Standards however entail risks of anti-competitive abuse. After the adoption of a standard, the chosen technology normally lacks credible substitutes. The owner of the patented technology might thus have additional market power relative to locked-in licensees, and might exploit this power to charge higher access rates. In the economic literature this phenomenon is referred to as ‘hold-up’. To reduce the risk of hold-up, standard-setting organisations often require patent holders to disclose their standard-essential patents before the adoption of the standard and to commit to license on fair, reasonable and non-discriminatory (FRAND) terms. The European Commission normally investigates unfair pricing abuse in a standard-setting context if a patent holder who committed to FRAND ex-ante is suspected not to abide to it ex-post. However, this approach risks ignoring a number of potential abuses which are likely harmful for welfare. That can happen if, for example, ex-post a licensee is able to impose excessively low access rates (‘reverse hold-up’) or if a patent holder acquires additional market power thanks to the standard but its essential patents are not encumbered by FRAND commitments, for instance because the patent holder did not directly participate to the standard setting process and was therefore not required by the standard-setting organisations to commit to FRAND ex-ante. A consistent policy by the Commission capable of tackling all sources of harm should be enforced regardless of whether FRAND commitments are given. Antitrust enforcement should hinge on the identification of a distortion in the bargaining process around technology access prices, which is determined by the adoption of the standard and is not attributable to pro-competitive merits of any of the involved players.

Saving for Retirement and Investing for Growth. Report of the CEPS-RCMI Task Force on Long-term Investing and Retirement Savings. CEPS Task Force Report, September 2013

Europe is facing a double challenge: a significant need for long-term investments – crucial levers for economic growth – and a growing pension gap, both of which call for resolute action. Crucially, at a time when low interest rates and revised prudential standards strain the ability of life insurers and pension funds to offer guaranteed returns, Europe lacks a framework ensuring the quality and accessibility of long-term investment solutions for small retail investors and defined contribution pension plans. This report considers the potential to steer household financial wealth – accounting for over 60% of total financial wealth in Europe – towards long-term investing, which would achieve two goals at once: higher growth and higher pensions. It follows a holistic approach that considers both solution design – how to gear product structuring towards long-term investing – and market structure – how to engineer a competitive market setting that is able to deliver high-quality and cost-efficient solutions. The report also considers prudential rules for insurers and pension funds and the potential to build a single market for less-liquid funds, occupational and personal pensions, with improved investor protection. It urges policy-makers to act aggressively to deliver more inclusive, efficient and resilient retail investment markets that are better equipped and more committed to deliver value over the long-term for beneficiaries.

A Critique of Kosovo’s Internationalized Constitutional Court. EDAP 2014/02

The quality and the sustainability of the democratic institutions established in post-independence Kosovo under the guidance of the international community depend to a large extent on the performance of its constitutional court. The considerable international investment in that court reflects this assessment. One of the reasons why Kosovo’s international supervision has recently been terminated is that such court has been deemed to be functioning well. But its performance has not yet adequately been scrutinized. This essay reviews its most significant judgments, including decisions that deposed a president, annulled a presidential election, prevented a general election, and abolished the inviolability of parliament. The analysis of the reasons and effects of such rulings leads to the conclusion that the court gravely lacks independence and is subject to heavy political interference, which also the international judges do not seem immune from. The performance of the court is both a manifestation and a cause of Kosovo’s acute governance problems, which its international supervision has failed to remedy. The international community’s approach towards the court is also an illustration of the reasons why statebuilding in Kosovo led to unsatisfactory results, despite unprecedented investment.

Russian gas industry - current condition and prospects; New regional 'in-security' system in Central Asia; Caspian oil and gas: the facts at the end of the year 2000. OSW Study 1/2001

Russian gas industry: The current condition of the gas industry is one of the most crucial factors influencing the Russian state·s functioning, internal situation and international position. Not only is gas the principal energy resource in Russia, it also subsidises other sectors of the economy. Status of the main European gas exporter strengthens also Russia's importance in the international arena. New regional in-security: Ten years have passed since the Central Asian states declared their independence, but their relationship with Russia still remains close, and the latter treats them as its exclusive zone of influence. A crucial reason for keeping Central Asia within the orbit of Moscow·s influence is the fact that Russia exercises control over the most important transport routes out of the region of raw materials for the power industry, on which the economic development of Asia depends on. But this is the only manifestation of Central Asia·s economic dependence on Russia. Moscow lacks solid economic instruments (i.e. investment input or power industry dependence) to shape the situation in the region. Caspian oil and gas: Caspian stocks of energy resources are not, and most probably will not be, of any great significance on the world scale. Nevertheless it is the Caspian region which will have the opportunity to become an oil exporter which will reduce the dependence of the European countries on Arabian oil, and which will guarantee Russia the quantities of gas which are indispensable both for meeting its internal demands and for maintaining its current level of export. For Azerbaijan, Kazakhstan and Turkmenistan, the confirmation of the existence of successive oil strata is not only an opportunity to increase income, but also an additional bargaining chip in the game for the future of the whole region. The stake in this game is the opportunity to limit the economic, and by extension the political influences of Russia in the region.

Is Independence Possible in an Interdependent World? Scotland vs. the UK's Participation in the European Economy. Bruges European Economic Policy (BEEP) Briefing 30/2013

Many commentators have criticised the strategy used to finance regional governments such as the Scottish Parliament – both the block grant system and the limited amount of fiscal autonomy devised in the Scotland Act of 2012. This lecture sets out to identify what level of autonomy or independence would best suit a regional economy in a currency union, and also the institutional changes needed to sustain those arrangements. Our argument is developed along three lines. First, we set out the advantages of a fiscal federalism framework and the institutions needed to support it, but which the Euro-zone currently lacks. The second is to elaborate a model of fiscal federalism where comprehensive powers of taxation and spending are devolved (an independent Scotland and the UK remain constituent members of the EU and European economy). Third, we evaluate the main arguments for the breakup of nations or economic unions with Scotland and the UK as leading examples. We note that greater autonomy may not result in increases in long run economic growth rate, but it does imply that enhancing the fiscal competence and responsibility of regional governments would result in productivity gains and hence higher levels of GDP per head. That means the population is permanently richer than before, even if ultimately their incomes continue to grow at the same rate. It turns out that these improvements can be achieved through devolved tax powers, but not through devolved spending powers or shared taxes.

EU Policies and Cluster Developments of Hydrogen Communities. Bruges European Economic Research (BEER) Papers 14/December 2008

This study takes on the issue of political and socio-economic conditions for the hydrogen economy as part of a future low carbon society in Europe. It is subdivided into two parts. A first part reviews the current EU policy framework in view of its impact on hydrogen and fuel cell development. In the second part an analysis of the regional dynamics and possible hydrogen and fuel cell clusters is carried out. The current EU policy framework does not hinder hydrogen development. Yet it does not constitute a strong push factor either. EU energy policies have the strongest impact on hydrogen and fuel cell development even though their potential is still underexploited. Regulatory policies have a weak but positive impact on hydrogen. EU spending policies show some inconsistencies. Regions with a high activity level in HFC also are generally innovative regions. Moreover, the article points out certain industrial clusters that favours some regions' conditions for taking part in the HFC development. However, existing hydrogen infrastructure seems to play a minor role for region's engagement. An overall well-functioning regional innovation system is important in the formative phase of an HFC innovation system, but that further research is needed before qualified policy implications can be drawn. Looking ahead the current policy framework at EU level does not set clear long term signals and lacks incentives that are strong enough to facilitate high investment in and deployment of sustainable energy technologies. The likely overall effect thus seems to be too weak to enable the EU hydrogen and fuel cell deployment strategy. According to our analysis an enhanced EU policy framework pushing for sustainability in general and the development of hydrogen and fuel cells in particular requires the following: 1) A strong EU energy policy with credible long term targets; 2) better coordination of EU policies: Europe needs a common understanding of key taxation concepts (green taxation, internalisation of externalities) and a common approach for the market introduction of new energy technologies; 3) an EU cluster policy as an attempt to better coordinate and support of European regions in their efforts to further develop HFC and to set up the respective infrastructure.

Afghan Opium and the EU: Fighting the War Economy through Development Cooperation. EU Diplomacy Paper No. 4, 2014

Opium is at the heart of the war economy in Afghanistan, involving a broad range of actors. It generates a sustainable violence cycle and, while international troops withdraw from the country, threatens the Afghan government’s reconstruction efforts. The European Union (EU) plays an important part in the debate on how to deal with this issue. Several counter-narcotics policies have been implemented since 2001 and have mostly failed. This paper looks at these failures and questions the European Union’s ability to help tackle the problem of opium in Afghanistan. It argues that a comprehensive development response, backed by counter-narcotics incentives, could unfasten the spiral of the war economy. It also argues that the EU has developed relevant policies based on poverty alleviation and a structural approach to the opium issue but still lacks the means for action and for donor coordination in order to significantly influence the situation.

Answering the Call of the European Court of Justice in Eurofoods a Proposed Package of Due Process Rights with a View Toward the 2012 Revision of the European Insolvency Regulation. IES WORKING PAPER 3/2011

This paper anticipates the 2012 revision of the European Insolvency Regulation, which is the sole Union legislation on the subject of cross border insolvency proceedings. The paper first describes the historical background of the Regulation. The salient point of the historical discussion is that the Regulation is the product of forty years of negotiation and arises from a historical context that is no longer applicable to current economic realities, i.e. it provides for liquidation, not reorganization, it doesn’t deal with cross border groups of companies, and it lacks an effective mechanism for transparency and creditor participation. The paper then reviews the unique hybrid jurisdictional system of concurrent universal and territorial proceedings that the Regulation imposes. It looks at this scheme from a practical viewpoint, i.e. what issues arise with concurrent proceedings in two states, involving the same assets, the same creditors, and the same company. The paper then focuses on a significant issue raised by the European Court of Justice in the Eurofoods case, i.e. the need to comply with fundamental due process principles that, while not articulated in the Regulation, lie at the core of Union law. Specifically, the paper considers the ramifications of the Court’s holding that “a Member State may refuse to recognize insolvency proceedings opened in another Member State where the decision to open the proceedings was taken in flagrant breach of the fundamental right to be heard.” In response to the Court’s direction, this paper proposes a package of due process rights, consisting principally of an accessible, efficient and useful insolvency database, the infrastructure of which already exists, but the content and use of which has not yet been developed. As part of a cohesive three part due process package, the paper also proposes the formation of cross border creditors' committees and the establishment of a European Insolvency Administrator. Finally, on the institutional level, this paper proposes that the revision of the Regulation and the development of the insolvency database not only need to be coordinated, but need to be conceptualized, managed and undertaken, not as the separate efforts of diverse institutions, but as a single, unified endeavor.

Energy efficiency: the ever neglected priority of the European energy strategy. Egmont Paper No. 66, June 2014

Summary. Energy saving has been a stated policy objective of the EU since the 1970s. Presently, the 2020 target is a 20% reduction of EU energy consumption in comparison with current projections for 2020. This is one of the headline targets of the European Energy Strategy 2020 but efforts to achieve it remain slow and insufficient. The aim of this paper is to understand why this is happening. Firstly, this paper examines the reasons why public measures promoting energy efficiency are needed and what form these measures should optimally take (§ 1). Fortunately, over the last 20 years, much research has been done into the famous ‘energy efficiency gap’ (or ‘the energy efficiency paradox’), even if more remains to be done. Multiple explanations have been given: market failures, modelling flaws and behavioural obstacles. Each encompasses many complex aspects. Several types of instruments can be adopted to encourage energy efficiency: measures guaranteeing the correct pricing of energy are preferred, followed by taxes or tradable white certificates which in turn are preferred to standards or subsidies. Information programmes are also necessary. Secondly, the paper analyzes the evolution of the different programmes from 2000 onwards (§ 2). This reveals the extreme complexity of the subject. It deals with quite diverse topics: buildings, appliances, public sector, industry and transport. The market for energy efficiency is as diffuse as energy consumption patterns themselves. It is composed of many market actors who demand more efficient provision of energy services, and that suppliers of the necessary goods and know-how deliver this greater efficiency. Consumers in this market include individuals, businesses and governments, and market activities cover all energy-consuming sectors of the economy. Additionally, energy efficiency is the perfect example of a shared competence between the EU and the Member States. Lastly, the legal framework has steadily increased in complexity, and despite the successive energy efficiency programmes used to build this framework, it has become clear that the gap between the target and the results remains. The paper then examines whether the 2012/27/EU Directive adopted to improve the situation could bring better results. It briefly describes the content of this framework Directive, which accompanies and implements the latest energy efficiency programme (§ 3). Although the Directive is technically complex and maintains nonbinding energy efficiency targets, it certainly represents an improvement in several aspects. However, it is also saddled with a multiplicity of exemption clauses and interpretative documents (with no binding value) which weaken its provisions. Furthermore, alone, it will allow the achievement of only about 17.7% of final energy savings by 2020. The implementation process, which is essential, also remains fairly weak. The paper also gives a glimpse of the various EU instruments for financing energy efficiency projects (§ 4). Though useful, they do not indicate a strong priority. Fourthly, the paper tries to analyze the EU’s limited progress so far and gather a few suggestions for improvement. One thing seems to remain useful: targets which can be defined in various ways (§ 5). Basically, all this indicates that the EU energy efficiency strategy has so far failed to reach its targets, lacks coherence and remains ambiguous. In the new Commission’s proposals of 22 January 2014 – intended to define a new climate/energy package in the period from 2020 to 2030 – the approach to energy efficiency remains unclear. This is regrettable. Energy efficiency is the only instrument which allows the EU to reach simultaneously its three targets: sustainability, competitiveness and security. The final conclusion appears thus paradoxical. On the one hand, all existing studies indicate that the decarbonization of the EU economy will be absolutely impossible without some very serious improvements in energy efficiency. On the other hand, in reality energy efficiency has always been treated as a second zone priority. It is imperative to eliminate this contradiction.

Modell Deutschland as an Interdenominational Compromise, CES Germany & Europe Working Papers, No. 00.3, 2000

Usually, Germany’s social market economy is understood to embody a compromise between a liberal market order and a corporatist welfare state. While this reading of the German case is certainly not entirely wrong, this paper argues that only if we account for the close intellectual correspondence between lutheran Protestantism and economic liberalism on the one hand and between Catholicism and welfare corporatism on the other, can we fully comprehend the nature of the German post-war compromise. In particular, this perspective allows to better explain the anti-liberal undercurrents of Germany’s soziale Marktwirtschaft. It was especially the role which Protestant Ordoliberals ascribed to the state in upholding economic order and market discipline which accounts for the major difference between ‘classic’ and ‘German-style’ economic liberalism. Yet, the postwar economic order did not represent a deliberately struck compromise between the two major Christian denominations. Rather, Germany’s social market economy was the result of the failure of German Protestant Ordoliberals to prevent the reconstruction of the catholic Bismarckian welfare state after the authoritarian solution, which Ordoliberals had endorsed so strongly up until 1936 and from which they had hoped the re-inauguration of Protestant hegemony, had so utterly failed. Since the ordoliberal doctrine up to the present day lacks a clear understanding of the role of the corporatist welfare state within the German political economy, its insights into the functioning logic of German capitalism have remained limit. The paper also claims that accounting for the denominational roots of the postwar compromise allows us to better understand the relationship between consociationalism and corporatism in ‘Modell Deutschland’.

Greater TTIP Ambition in Chemicals: Why and how. CEPS Special Report, 28 July 2015. Paper No. 10 in the CEPS-CTR project ‘TTIP in the Balance’ and CEPS Special Report No. 114/July 2015.

To date, the negotiations over chemicals in the Translatlantic Trade and Investment Partnership (TTIP) have not shown sufficient ambition. The talks have focused too much on the differences in the two ‘systems’, rather than on the actual levels of health and environmental protection for substances regulated by both the US and the EU. Given the accomplishments within the OECD and the UN Globally Harmonised System of Classification and Labelling of Chemicals (GHS), the question is whether TTIP can be any more ambitious in the area of chemicals? We find that there is no detailed or systematic knowledge about how the two levels of protection in chemicals compare, although caricatures and stereotypes abound. This is partly due to an obsessive focus on a single US federal law, the Toxic Subtances Control Act (TSCA), whereas in practice US protection depends on many statutes and regulations, as well as on voluntary withdrawals (under pressure from the Environmental Protection Agency) and severe common law liability. This paper makes the economic case for firmly addressing the regulatory barriers, discusses the EU’s proposals, finds that the European Parliament’s Resolution on TTIP of July 2015 lacks a rationale (for chemicals), argues that both TSCA and REACH ought to be improved (based on ‘better regulation’), discusses the link with a global regime, advocates significant improvement of market access where equivalence of health and environmental objectives is agreed and, finally, proposes to lower the costs for companies selling in both markets by allowing them to opt into the other party’s more stringent rules, thereby avoiding duplication while racing-to-the-top. The ‘living agreement’ on chemicals ought to be led by a new TTIP institution authorised to establish the level of health and environmental protection on both sides of the Atlantic for substances regulated on both sides. These findings will lay the foundation for a highly beneficial lowering of trading costs without in any way affecting the level of protection. Indeed, this is exactly what TTIP is, or should be, all about.This paper is the 10th in a series produced in the context of the “TTIP in the Balance” project, jointly organised by CEPS and the Center for Transatlantic Relations (CTR) in Washington, D.C. It is published simultaneously on the CEPS (www.ceps.eu) and CTR websites (http://transatlantic.sais-jhu.edu).

Light and shadows in Europe’s new Action Plan for Capital Markets Union. ECMI Commentary No. 40/5 October 2015

The European Commission’s Action Plan consists, in a nutshell, of a short list of technical proposals and a longer one of (rather general) potential actions. Overall, the plan indeed proposes to achieve some short-term objectives, such as a reduction of listing costs for SMEs, but it lacks long-term vision. The plan bundles actions under rather generic objectives of long-term finance or cross-border investing. Improving the informational infrastructure (e.g. accounting standards, company data) and cross-border enforcement of rules is left to vaguely defined future actions, but these constitute the core of the capital markets infrastructure. Without a well-defined set of measurable objectives, the whole plan may lose political momentum and become an opportunity for interested parties to cherry pick their pet provisions. Building a single market, i.e. removing cross-border obstacles to capital circulation, is too challenging a task to simply appear as one of many items on a long list of general objectives, which incidentally do not include institutional reform. The ultimate risk is that the Commission may just miss a unique opportunity to revamp and improve the financial integration process in Europe after almost a decade of harmful financial retrenchment.