Banking Union: A Federal Model for the European Union with Prompt Corrective Action. CEPS Policy Brief No. 282, 18 September 2012

The European Commission has published its proposals for the transfer of supervisory responsibilities to the European Central Bank (ECB),1 under Article 127(6) of the TFEU, providing a comprehensive and courageous ‘first step’ towards a European banking Union, the other steps being European deposit insurance and resolution procedures. However, on a number of issues the Commission’s chosen path raises questions that should be brought out in the open and fully recognized before final deliberation by the Council.

The Asset Quality Review and Capital Needs: Why re-capitalise banks with public money? CEPS Policy Brief No. 311, 19 December 2013

It is generally assumed that any capital needs discovered by the Asset Quality Review the ECB is scheduled to finish by the end of 2014 should be filled by public funding (= fiscal backstop). This assumption is wrong, however. Banks that do not have enough capital should be asked to obtain it from the market; or be restructured using the procedures and rules recently agreed. The Directorate-General for Competition at the European Commission should be particularly vigilant to ensure that no further state aid flows to an already oversized European banking system. The case for a public backstop was strong when the entire euro area banking system was under stress, but this is no longer the case. Banks with a viable business model can find capital; those without should be closed because any public-sector re-capitalisation would likely mean throwing good money after bad.

One year after the Youth Guarantee: Policy fatigue or signs of action? EPC Policy Brief, 27 May 2015

In April 2013, the EU Council called on EU member states to establish Youth Guarantee (YG) schemes, ensuring that “all young people under the age of 25 years receive a good-quality offer of employment, continued education, apprenticeship or traineeship within a period of four months of becoming unemployed or leaving formal education”. Implementation was meant to start more than a year ago, but political interest seems to have waned a bit. Is a ‘policy fatigue’ contaminating youth employment policies across the EU? Have some timid signs of economic recovery led to youth unemployment being less urgent or are we witnessing the usual policy developments whereby grand EU statements are worn down by political realities and resistance on the ground? In this Policy Brief, Claire Dhéret and Martina Morosi assess the implementation of the Youth Guarantee and provide suggestions on how to renew a sense of enthusiasm for such an ambitious tool across Europe.

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

The UK-Canada Agreement on mutual support of missions abroad: loyalty compromised? CEPS Commentary, 18 October 2012

The UK and Canada recently signed a Memorandum of Understanding aimed at allowing the two countries to optimise their respective diplomatic resources by sharing embassy and consulate sites, the joint acquisition, supply and use of services, as well as collaboration on crisis response, consular services, security, diplomatic mail, information management and IT. This CEPS Commentary argues that the MoU on Mutual Support of Missions Abroad runs counter to the spirit of loyal cooperation, in particular in the realm of EU foreign policy. It also raises challenges to coherence, consistency and effectiveness of EU action in policy areas concerning visas, trade and consular protection. Moreover, the agreement may throw a spanner in the works of EU solidarity and the creation of a stronger EU identity, both internally and externally

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.

The Future of the Clean Development Mechanism. Note on the report “A Call to Action��� of the High-Level Panel on CDM Policy Dialogue. CEPS Special Report No. 71, 20 November 2012

The clean development mechanism (CDM) has been through a long and complex growing process since it was approved as part of the Kyoto Protocol. It was designed within the framework of the UNFCCC and the Kyoto Protocol, and reflected the political and economic realities of that time. To ensure its continued effectiveness in contributing to future global climate action and to reflect on how best to position the CDM to respond to future challenges, a high-level panel (HLP) was formed at the Durban climate change conference in 2011. Following extensive consultations, the panel published its report in September 2012. Through this Special Report, the CEPS Carbon Market Forum offers its reflections on findings and recommendations of the HLP, as well as, by extension, its own views on the future of the CDM. In the context of the latter, it explores the following questions: Is there a need for an instrument such as the CDM in the future? What ‘demand’ can it fill? In the roles identified under the first question, what can be done to adapt it and also continue to increase its efficacy?