Preventing the rise of sovereign borrowing costs in the Eurozone: what can the ESM and the ECB achieve? Egmont Paper No. 56, November 2012

This paper focuses on the possible instruments for ‘ex-ante’/’preventive’/’precautionary’ interventions which can be deployed by the ESM and the ECB in order to prevent a debt crisis in a eurozone country. The potential of Eurobonds will also be discussed in this crisis management perspective. The first part of this paper traces the underlying trends of the evolution of interest rates in eurozone countries over the last decades. The second part discusses the principles of a preventive intervention in sovereign bond markets for the purpose of lowering borrowing costs of countries facing refinancing constraints; the limits and main issues of an ex-ante intervention will be underlined. In the third part, the properties of the ESM’s precautionary financial assistance and secondary market support facility will be discussed in details. The ECB preemptive intervention policies and, in particular, the OMT will be analyzed in the fourth part of the paper. The most likely course of action – a combined intervention by the ESM and the ECB – will be discussed in the fifth part. Finally, I will point out the core challenges of introducing Eurobonds as additional instruments to mitigate the rise of borrowing costs in the short term.

Money for structural reforms in the eurozone: making sense of contractual arrangements. Egmont Paper 57, May 2013

Executive Summary. Both the Commission’s proposal for a ‘Competitiveness and Convergence Instrument’ and the ‘contractual arrangement’ presented by President Van Rompuy share a common concept: associating EU money with national structural reforms under a binding arrangement. The targeted ‘structural reforms’ are the labour market reforms and product and services market reforms in eurozone ‘peripheral’ countries facing the most severe external imbalances. Their implementation would speed up and facilitate the ‘internal devaluation’ process of these countries. In the worst case scenario, failure to adopt the necessary reforms and to adjust wages and prices downwards may lead the most vulnerable countries to leave the eurozone under social and political pressure. Contracts seek to reduce this risk by increasing compliance with the country-specific recommendations for structural reforms issued by the EU institutions within the European Semester, and in particular with the Macroeconomic Imbalance Procedure (MIP). As for the financial support, it follows two different, albeit overlapping rationales. First, the perspective of obtaining EU funding would incentivize the governments of vulnerable countries to adopt reforms that would bear a high political and social cost in the short term. That is, without some form of incentive, it is unlikely that the necessary reforms would be undertaken and this could have significant negative consequences for the EMU as a whole. The second rationale amounts to outright solidarity: EU support is needed to cushion the inevitable socio-economic costs implied not only by the structural reform, but also by the internal devaluation taking place. To make sense of contractual arrangements, some points should be considered in future discussions: 1. Contracts on a voluntary basis only: Contracts cannot be mandatory unlike initially suggested in the Van Rompuy report. This stems not only from the inherent definition of a ‘contract’ – where mutual consent is key – but also from the non-binding nature of the preventive arm of the MIP. Making the country-specific recommendations issued by the EU institutions systematically binding would imply transfers of sovereignty from the national to the EU level that go well beyond the present discussion. Instead, contracts would introduce the possibility of making the preventive arm binding for some countries where corrections are most needed and urgent for the EMU as a whole.

The Economic Basis of Attitudes towards the European Community: Familiarity Breeds Content. Institute for Advanced Studies Political Science Series, 12 April 1994

The purpose of this paper is to analyse the economic basis of mass support for, and opposition to the European Community. In other words the main question is: to what extent, and in what ways, is popular support or opposition to the EC dependent upon economic circumstances and considerations? Behind this research question lies the matter of the legitimacy of the EC in the eyes of citizens across Europe. In some respects the results of this study are frustrating and inconclusive. In other respects, however, the results suggest some clear generalizations and conclusions. First, we have found rather little evidence that the EC or European unification are evaluated in primarily economic terms. Secondly, support seems to be associated more strongly with social and attitudinal variables of a non-economic kind. Thirdly, the figures suggest that diffuse and somewhat idealistic reasons for supporting unification and EC membership tend to outweigh more specific reasons. Fourthly, a solid foundation of inertia, custom, and national tradition seem to maintain support and make it grow.

Quelles solidarités pour surmonter la crise de la zone Euro? = What solidarity to overcome the crisis in the Euro zone? Egmont European Affairs Paper, April 2013

None.

An election too far ? Four scenarios for Greece after the elections. European Policy Brief No. 9, June 2012

The results of the Greek elections on 17 June are of crucial importance for both the country itself and the eurozone. This Policy Brief outlines the possible post-election scenarios. It argues that an intelligent modification of the current adjustment programme is the best course of action. Other policy choices would likely have a worse outcome, as they would either underestimate the resentment of the current programme among Greeks or risk leading to the

A briefing on Eurobonds. European Policy Brief No. 10, June 2012

The recurrent debate on Eurobonds is often clouded by misconceptions. This Policy Brief clarifies their aims and possible forms, before discussing the key challenges for their introduction. It argues that, by ensuring market access to vulnerable Member States, Eurobonds can constitute a valuable tool to alleviate the eurozone crisis. To make use of their short-term potential, a condi-tional and progressive introduction of Eurobonds, starting with a limited scheme, seems the best achievable approach.

A case for adjusting fiscal consolidation in the eurozone. European Policy Brief No. 14, January 2013

Fiscal consolidation is essential to ensure the sustainability of eurozone countries’ public debt. However, as a principle, consolidation should not be pursued at a pace unnecessarily undermining growth in the short term. Repeated downward revisions of growth call for the use of the flexibility foreseen in the EU fiscal framework. The Commission should adapt the deadlines for fiscal correction to prevent excessive, pro-cyclical adjustment in 2013. In turn, adequate surveillance and coordination must ensure structural adjustments constitute the core of fiscal consolidation plans.

Contractual arrangements: the overlooked step towards a fiscal union. European Policy Brief No. 18, December 2013

‘Contractual arrangements’ were proposed as an initial step towards a fiscal union that would consolidate the EMU. At this stage, the debate should be centred on the cornerstone of these contracts: the solidarity mechanism. The form of the financial support should not be limited to loans, and include the possibility for grants. Only the countries with the greatest adjustment needs should benefit from the financial support of other countries. This solidarity could be justified in principle by the intensity of the ‘shocks’ they experienced. In this way, contractual arrangement would facilitate the completion of the necessary adjustment in the current crisis – thanks both to more structural reforms and more mutual support within the eurozone.

Is the EMU ready for future shocks? An overview of available backstops. European Policy Brief No. 20, March 2014

In recent years much has been accomplished to make the EMU more resilient to banking crises, sovereign-debt crises or balance-of-payment crises. Several ‘backstops’ or financial safety nets were progressively put in place to absorb the shocks that could have otherwise broken the EMU as a system. These substantial advances reflected a gradual, trial-and-error approach rather than a grand design that would have completely overhauled the EMU architecture. While flexibility and realism have advantages, complacency is a clear risk. With no roadmap to follow, efforts to complete the architecture of the EMU may fade with time. Maintaining a sense of direction is crucial while potential vulnerabilities remain.

What Future for the Eurozone? Combining Discipline, Solidarity and Institutional Reforms. European Policy Brief No. 27, March 2014

This Policy Brief discusses the challenges that await policymakers in reforming the EMU. A balance between discipline and solidarity will have to be found, while institutional reforms should improve the eurozone’s legitimacy and efficiency. The key decisions on EMU reforms will have to be made during the 2014-2019 parliamentary term, as the window of opportunity for major reforms is likely to be closed afterwards.

The Belgian parliaments and EU affairs: the reasons behind their limited involvement. European Policy Brief No. 28, March 2014

Given their limited involvement in EU affairs, the Belgian parliaments at the different levels of the Belgian federation barely contribute to the legitimation process of the EU’s actions. In order to strengthen their role, not only should governmental communication towards parliaments be improved but parliamentary activities should also adapt to the confederal features of Belgium. The latter poses a unique challenge in Europe.

The European Semester in Belgium: A state of play. European Policy Brief No. 32, October 2014

After four rounds of the European Semester process of EU economic coordination, Belgium has done relatively little to comply with EU recommendations. This brief substantiates and confirms this claim after clarifying the meaning of these recommendations. While the challenges underlined by the European Commission still lie ahead, Belgium’s ownership of the recommendations for reforms has been low. Not only do coordination processes remain bureaucratic and technocratic, but many of the recommendations’ concerns – external competitiveness, social security reforms, market reforms – are not traditionally defended by the political left in Belgium. The controversy surrounding the recommendations for national structural reforms owes much to their supply-side orientation, which contrasts with the inability of the EU to pursue demand-side policies. But despite this disequilibrium, the recommendations highlight relevant issues that ought to be addressed, and indicate where scope for national debate exists.

Industrial policy in the EU: A guide to an elusive concept. Egmont Paper No. 69, September 2014

Despite renewed interest in an EU industrial policy, the concept remains particularly elusive because it has no universal definition. This paper relies on a broad and inclusive definition of industrial policy proposed by Warwick (in an OECD working paper) to provide a clearer picture of what the concept encompasses when applied to the EU. It therefore includes an original visual taxonomy of the EU policies that constitute industrial policy. It can serve as a guiding framework for reflecting on industrial policy in the EU. The proposed framework holds a key lesson: coherence of action across different policy fields and across different levels of governance is essential at EU, national and regional levels. The framework provided in this paper constitutes a high-level reminder of the range of policies and associated instruments that should ideally be streamlined throughout the EU for maximum impact when any industrial sector, technology or task is promoted by the EU.

Le Parlement européen et les actes délégués: De la conquête d’un pouvoir à son exercice = The European Parliament and the delegated acts: From the conquest of power to its exercise. Brugges Political Research Paper No. 34, February 2014

Résumé. Le traité de Lisbonne a procédé à une importante réforme de la comitologie, en établissant deux catégories d’instruments: les actes d’exécution et les actes délégués. Pour ces derniers, le Parlement européen a obtenu des pouvoirs importants et est pour la première fois sur un strict pied d’égalité avec le Conseil dans le système exécutif. En vertu d’une approche institutionnaliste rationnelle, cet article analyse comment le Parlement, à l’origine exclu du système, est parvenu à acquérir les pouvoirs qui sont formellement les siens aujourd’hui. Ensuite, l’action du Parlement face à ses nouveaux pouvoirs dans le cadre des actes délégués est abordée. Il s’agit d’étudier comment le Parlement défend ses prérogatives dans les relations interinstitutionnelles et agit après l’acquisition de nouvelles prérogatives. Cette analyse permet plus globalement d’aborder des aspects essentiels du fonctionnement du Parlement européen, de l’Union européenne ainsi que ses dynamiques (inter)institutionnelles.