The EU budget becomes politically more explosive. CEPS Commentary, 3 December 2012

H. Onno Ruding describes the negotiations on the EU budget, which will resume in 2013 following their collapse in late November, as “more awkward than usual”. In this new CEPS Commentary, he advises EU leaders to make the instrument more forward-looking in promoting economic growth in Europe and less focused on maintaining legacy entitlements of past years. In his view, this means more spending on research, innovation, education and infrastructure and also requires further reductions in the still-dominant agricultural subsidies as well as regional and structural funds.

A simple model of multiple equilibria and default. CEPS Working Document No. 366, 16 July 2012

This Working Document by Daniel Gros presents a simple model that incorporates two types of sovereign default cost: first, a lump-sum cost due to the fact that the country does not service its debt fully and is recognised as being in default status, by ratings agencies, for example. Second, a cost that increases with the size of the losses (or haircut) imposed on creditors whose resistance to a haircut increases with the proportional loss inflicted upon them. One immediate implication of the model is that under some circumstances the creditors have a (collective) interest to forgive some debt in order to induce the country not to default. The model exhibits a potential for multiple equilibria, given that a higher interest rate charged by investors increases the debt service burden and thus the temptation to default. Under very high debt levels credit rationing can set in as the feedback loop between higher interest rates and the higher incentive to default can become explosive. The introduction of uncertainty makes multiple equilibria less likely and reduces their range.

From Lockerbie to Umar Farouk AbdulMutallab (Assessing the Destruction of Civilian Aircrafts by Terrorism). Transatlantic Security Paper N.1–April 2010

Data published by the Federal Aviation Administration (F.A.A.) in its "Annual report on the criminal acts against civil aviation" indicates that in the year 1960, there have been fifteen attacks on board planes leaving 286 dead; 44 in the year 1970 with 650 dead (mostly hijackings); and 26 in the 1980s leaving 1207 dead. In the 1970s, the record is established by the year 1976 (168 dead).The three years - 1985 (390), 1988 (287), and 1989 (278) - were more deadly than the 1960s all together. These casualties were largely provoked by IEDs. Since the end of 1980 - the deadliest decade, with the exception of September 11, 2001 -, it is however a rare practice. The reasons for the decline in big and politically motivated hijackings were varied. One could have been the improvement of the effectiveness of the safety response by States, airports and companies. The improvised explosive device (I.E.D.) posed a serious threat to the civil aviation industry in the 1980s. Since the 1990s, the jihadi networks have regularly tried to target aircrafts using various types of IEDs.