The known unknowns and the unknown unknowns of the EMU. Bruegel Policy Contribution 2012/18, October 2012

Extensive prior research on the economics of European monetary union highlighted some potential risks (the known unknowns) but overlooked others (the unknown unknowns). Asymmetries among participating countries, the potentially destabilising character of a one-size-fits all monetary policy, the weakness of adjustment mechanisms, the lack of incentives for fiscal discipline, the possibility of sovereign solvency crises and their adverse consequences were all known and understood. But policymakers often relied on a complacent reading of the evidence. • The potential for financial disruption was vastly underestimated. Economists generally did not consider, or underestimated, the possibility of balance of payment crises such as those experienced by southern European countries, or the risk of a feedback loop between banks and sovereigns. • Remedying EMU’s systemic deficiencies is on the policy agenda. Banking union would go a long way towards addressing the fault lines. The urgent question for economists is if it is going to be enough and, if not, what else should complement the ‘bare-bones’ EMU of Maastricht.

British Balance of Competence Reviews, Part I: ‘Competences about right, so far’. EPIN Working Paper No. 35, October 2013

The first in a series for a CEPS-EPIN project entitled “The British Question and the Search for a Fresh European Narrative” this paper is pegged on an ambitious ongoing exercise by the British government to review all the competences of the European Union. The intention is that this should provide a basis for informed debate before the referendum on the UK remaining in the EU or not, which is scheduled for 2017. This paper summarises the first six reviews, each of which runs to around 80 pages, covering foreign policy, development policy, taxation, the single market, food safety, and public health. The present authors then add their own assessments of these materials. While understandably giving due place to British interests, they are of general European relevance. The substantive conclusions of this first set of reviews are that the competences of the EU are judged by respondents to be ‘about right’ on the whole, which came as a surprise to eurosceptic MPs and the tabloid media. Our own view is that the reviews are objective and impressively researched, and these populist complaints are illustrating the huge gap between the views of informed stakeholders and general public opinion, and therefore also the hazard of subjecting the ‘in or out’ choice for decision by referendum. If the referendum is to endorse the UK’s continuing membership there will have to emerge some fresh popular narratives about the EU. The paper therefore concludes with some thoughts along these lines, both for the UK and the EU as a whole.