The declared end of South Stream and why nobody seems to care. CEPS Commentary, 5 December 2014

More than seven years after the South Stream pipeline project was first announced in June 2007, it finally seems to have been dropped by Russia’s President Vladimir Putin on his visit to Turkey this week. This CEPS Commentary looks at the ostensible reasons for President Putin’s decision as well as on what’s potentially behind them. It concludes that the EU may actually benefit from this decision in being able to secure more gas with less political interference from Russia.

Designing a Genuine EMU: Which "Unions" for EU and Eurozone? Bruges European Economic Policy (BEEP) Briefing 34/2014

The initial ‘framing’ (in the summer of 2012) of the ‘genuine EMU’ for the wider public suggested to design an entire series of ‘unions’. So many ‘unions’ are neither necessary nor desirable – only some are and their design matters. The paper critically discusses first the negative fall-out of the crisis for EMU, and subsequently assesses the fiscal and the banking unions as accomplished so far, without going into highly specific technical details. The assessment is moderately positive, although there is ample scope for further improvement and a risk for short-term turbulence once the ECB has finished its tests and reviews. What about the parade of other ’unions’ such as economic union, social union and political union? The macro-economic imbalances procedure (MIP) and possibly the ESRB have overcome the pre-crisis disregard of macro competitiveness. The three components of ‘economic union’ (single market, economic policy coordination and budgetary disciplines) have all been strengthened. The last two ‘unions’, on the other hand, would imply a fundamental change in the conferral of powers to the EU/ Eurozone, with drastic and possibly very serious long-run implications, including a break-up of the Union, if such proposals would be pushed through. The cure is worse than the disease. Whereas social union is perhaps easier to dismiss as a ‘misfit’ in the EU, the recent popularity of suggesting a ‘political union’ is seen as worrisome. Probably, nobody knows what a ‘political union’ is, or, at best, it is a highly elastic notion: it might be thought necessary for reasons of domestic economic reforms in EU countries, for a larger common budget, for some EU tax power, for (greater) risk pooling, for ‘symmetric’ macro-economic adjustment and for some ultimate control of the ECB in times of crisis. Taking each one of these arguments separately, a range of more typical EU solutions might be found without suggesting a ‘political union’. Just as ‘fiscal capacity’ was long an all-or-nothing taboo for shifting bank resolution to the EU level, now solved with a modest common Fund and carefully confined but centralised powers, the author suggests that other carefully targeted responses can be designed for the various aspects where seen as indispensable, including the political say of a lender-of-last-resort function of the ECB. Hence, neither a social nor a political union worthy of the name ought to be pursued. Yet, political legitimacy matters, both with national parliaments and the grassroots. National parliaments will have to play a larger role.

Grexit 2015: A primer. CEPS Commentary, 22 January 2015

In the run-up to the Greek elections on January 25th and the subsequent renegotiation of the country's economic adjustment programme with the troika, Daniel Gros writes in this Commentary that "nobody officially wants Grexit": not Syriza, which wants Greece to stay in the euro. It is ‘only’ asking for a reduction in Greece’s official debt and an end to austerity. The German government also does not favour Grexit because European unification remains the central project for German policy-makers across all mainstream parties. Only some protest parties and vocal economists think Greece (and Germany) would better off with a new Drachma. In his view, the substantive issues are thus the demands for a reduction of the official debt of Greece and an end to austerity, both of which he describes as eminently fudgeable. In any event, change in policy will be minor if a Syriza government is as successful in fulfilling its promise to spend as the previous government was in promising not to spend.