Communication as a policy tool: Important lessons from Cyprus. CEPS Commentary, 28 March 2013

After a week in which Cypriot politicians reassured people that their deposits were safe, followed by the announcement of a bank levy on savings, then a rush to withdraw cash amid general confusion and anxiety, Cypriot Senior Researcher Leonor Coutinho argues that in the case of a banking crisis it is vital for policy-makers to treat communication as an important component of the policy toolkit.

The macroeconomic imbalance procedure and Germany: when is a current account surplus an 'imbalance'? CEPS Policy Brief No. 301, 13 November 2013

In this new Policy Brief, CEPS Director Daniel Gros argues that the 13 November announcement of the European Commission that Germany is running an excessive current account surplus appears to be much ado about little. All the Commission can, and will, do is to start an ‘in depth analysis’. This might lead to strong political reactions and an enormous echo in the media. But nothing of concrete substance is likely to follow.

ECB Policy and Eurozone Fragility: Was De Grauwe Right? CEPS Working Document No. 397, June 2014

Paul De Grauwe’s fragility hypothesis states that member countries of a monetary union such as the eurozone are highly vulnerable to a self-fulfilling mechanism by which the efforts of investors to avoid losses from default can end up triggering the very default they fear. The authors test this hypothesis by applying an eclectic methodology to a time window around Mario Draghi’s “whatever it takes” (to keep the eurozone on firm footing) pledge on 26 July 2012. This pledge was soon followed by the announcement of the Outright Monetary Transactions (OMT) programme (the prospective and conditional purchase by the European Central Bank of sovereign bonds of eurozone countries having difficulty issuing debt). The principal components of eurozone credit default swap spreads validate this choice of time frame. An event study reveals significant pre announcement contagion emanating from Spain to Italy, Belgium, France and Austria. Furthermore, time-series regression confirms frequent clusters of large shocks affecting the credit default swap spreads of the four eurozone countries but solely during the pre-announcement period. The findings of this report support the fragility hypothesis for the eurozone and endorse the Outright Monetary Transactions programme.

The US-China Joint Announcement on Climate Change: Can the G2 make a difference? CEPS Commentary, 26 November 2014

This Commentary finds that the US-China joint declaration on climate change, issued following the Asia-Pacific Economic Cooperation (APEC) Summit in Beijing on November 12th, is undoubtedly an important announcement by the two global economic giants responsible for emitting over 30% of the world’s GHG emissions. As such, it needs to be seen as important and relevant – a very positive development towards a new global climate change agreement in Paris. It is a challenge to those that have announced their pledges and are seen as capable of doing more, as well as to those that have not yet announced their intentions. It shows the importance and success of the UN climate change conference in Warsaw last year, when the decision was made that all Parties should announce their commitments by the first quarter of 2015. It also represents a total breakdown of the Kyoto Protocol-style separation in climate change negotiations between countries into Annex 1 and non-Annex 1, with China signalling that it is taking on the leadership role that comes with being a great economic power. In broader terms, it shows that there is scope for cooperation between the two main economic actors, even in the face of competition in other spheres. It is also a challenge to the EU, which was a leader and needs to show that there is a benefit in maintaining its leadership. Finally, agreements are deemed historic only by history. This one is important, and a potential game-changer, on the face of it. But it needs to live up to its promise. There is sufficient uncertainty for us to withhold final judgement and see if its promise materialises through implementation. But, as sober a judgement as we must make on such important matters, this announcement certainly gives us great hope that it is possible to do what needs to be done, and we must wholeheartedly welcome and applaud it.

Turkish Stream and its implications for the EU. European Policy Brief No. 34, March 2015

“A first assessment is that this would not work”, EC Vice-President in charge of Energy Union Mr. Maros Sefcovic said in an interview with The Wall Street Journal at the World Economic Forum in Davos on the 22nd of January. He was commenting on the recent announcement by President Vladimir Putin and Gazprom’s Alexei Miller. Indeed, the Russian gas giant’s CEO announced that South Stream would be replaced by a new project, Turkish Stream, linking Russia to the European part of Turkey and this in addition to the existing 16 billion cubic meters (bcm) Blue stream. This policy brief looks at the various implications this new reality could have for Europe’s energy security.