The long road towards the European single market. Bruegel Working Paper 2015/01, March 2015

The single market is often perceived as the panacea for Europe’s economic troubles. It is believed that completing the single market would boost welfare, stimulate growth and increase European competitiveness. • However, identifying and quantifying the channels through which market integration is expected to engender growth is methodologically complex. Although the overwhelming prediction from the literature is for single market integration to generate positive and significant aggregate effects, we conclude that the impact so far has fallen short of initial expectations, because: (1) Barriers continue to prevail in the EU, preventing the exploitation of the potential benefits of full market integration (2) ‘Complementary policies’ to support the single market were not, or were insufficiently, put in place (3) The single market project has not sufficiently been framed as a key part of the process of creative destruction that Europe needs to embrace to successfully modernise its economy. • That single market integration generates positive and significant aggregate effects does not imply that its effects are positive and significant for every sector. There is therefore an important role for European Union and national distributional policies to ensure that losers are sufficiently compensated by the winners, and to overcome political resistance to completing the single market.

Antitrust, Regulation and the Neutrality Trap: A plea for a smart, evidence-based internet policy. CEPS Special Report No. 104/April 2015

When they look at Internet policy, EU policymakers seem mesmerised, if not bewitched, by the word ‘neutrality’. Originally confined to the infrastructure layer, today the neutrality rhetoric is being expanded to multi-sided platforms such as search engines and more generally online intermediaries. Policies for search neutrality and platform neutrality are invoked to pursue a variety of policy objectives, encompassing competition, consumer protection, privacy and media pluralism. This paper analyses this emerging debate and comes to a number of conclusions. First, mandating net neutrality at the infrastructure layer might have some merit, but it certainly would not make the Internet neutral. Second, since most of the objectives initially associated with network neutrality cannot be realistically achieved by such a rule, the case for network neutrality legislation would have to stand on different grounds. Third, the fact that the Internet is not neutral is mostly a good thing for end users, who benefit from intermediaries that provide them with a selection of the over-abundant information available on the Web. Fourth, search neutrality and platform neutrality are fundamentally flawed principles that contradict the economics of the Internet. Fifth, neutrality is a very poor and ineffective recipe for media pluralism, and as such should not be invoked as the basis of future media policy. All these conclusions have important consequences for the debate on the future EU policy for the Digital Single Market.

Banking Union as a Shock Absorber: Lessons for the eurozone from the US. CEPS Paperback, December 2015

This book illustrates how the structure of the US banking market and the existence of federal institutions allowed regional financial shocks to be absorbed at the federal level in the US, thus avoiding local financial crisis. The authors argue that the experience of the US shows the importance of a ‘banking union’ to avoid severe regional (national) financial dislocation in the wake of regional boom and bust cycles. They also discuss the extent to which the institutions of the partial banking union, now in the process of being created for the euro area, should be able to increase its capacity to deal with future regional boom and bust cycles, thereby stabilising the single currency.

Pre-empting technical barriers in the Single Market. CEPS Policy Brief No. 277, 11 July 2012

Effective enforcement and compliance with EU law is not just a legal necessity, it is also of economic interest since the potential of the Single Market will be fully exploited. Enforcement barriers generate unjustified costs and hindrances or uncertainty for cross-border business and might deprive consumers from receiving the full benefit of greater choice and/or cheaper offers. The EU has developed several types of enforcement efforts (preventive initiatives, pre-infringement initiatives and formal infringement procedures). More recently, the emphasis has been placed on effective prevention. This CEPS Policy Brief analyses the functioning of one preventive mechanism (the 98/34 Directive) and assesses its potential to detect and prevent technical or other barriers in the course of the last 25 years. Based on an empirical approach, it shows that this amazing mechanism has successfully prevented thousands of new technical barriers from arising in the internal goods market.

Europe's single supervisory mechanism and the long journey towards banking union. Bruegel Policy Contribution 2012/16, 4 October 2012

Problems in the banking system are at the core of the current crisis. The establishment of a banking union is a necessary (though not sufficient) condition for eventual crisis resolution that respects the integrity of the euro. The European Commission’s proposal for the establishment of a Single Supervisory Mechanism and related reform of the European Banking Authority (EBA) do not and cannot create a fully-fledged banking union, but represent a broadly adequate step on the basis of the leaders’ declaration of 29 June 2012 and of the decision to use Article 127(6) of the treaty as legal basis. The proposal rightly endows the European Central Bank (ECB) with broad authority over banks within the supervisory mechanism’s geographical perimeter; however, the status of non-euro area member states willing to participate in this mechanism, and the governance and decision-making processes of the ECB in this respect, call for further elaboration. Further adjustments are also desirable in the proposed reform of the EBA, even though they must probably retain a stopgap character pending the more substantial review planned in 2014.

Should non-euro area countries join the single supervisory mechanism? Bruegel Policy Contribution 2013/06, 13 March 2013

Irrespective of the euro crisis, a European banking union makes sense, including for non-euro area countries, because of the extent of European Union financial integration. The Single Supervisory Mechanism (SSM) is the first element of the banking union. From the point of view of non-euro countries, the draft SSM regulation as amended by the EU Council includes strong safeguards relating to decision-making, accountability, attention to financial stability in small countries and the applicability of national macro-prudential measures. Non-euro countries will also have the right to leave the SSM and thereby exempt themselves from a supervisory decision. The SSM by itself cannot bring the full benefits of the banking union, but would foster financial integration, improve the supervision of cross-border banks, ensure greater consistency of supervisory practices, increase the quality of supervision,avoid competitive distortions and provide ample supervisory information. While the decision to join the SSM is made difficult by the uncertainty about other elements of the banking union, including the possible burden sharing, we conclude that non-euro EU members should stand ready to join the SSM and be prepared for the negotiations of the other elements of the banking union.

Bank bonus compromise bodes ill for the Single Supervisory Mechanism. CEPS Commentary, 8 March 2013

The European Parliament has probably won a Pyrrhic victory with its position on bank bonuses, argues CEPS CEO Karel Lannoo in this new Commentary. In return, EU member states got what they wanted with the new Capital Requirements Directive (CRD IV): no binding leverage ratio; mortgage risk weightings and capital add-ons to be determined by member states; and no obligatory consolidated capital position for bank-insurance companies. In other words, Banking Union will start out with capital rules that are more like Emmental cheese than a single rulebook. This is a huge encumbrance for a well-functioning Single Supervisory Mechanism (SSM), and makes a single resolution mechanism impossible.