Series:CEPS Policy Briefs

A Renewed Political Deal for Sustainable Growth within the Eurozone and the EU

An open letter to the President of the European Council

Author(s): Richard E. Baldwin,Giuliano Amato,Stefano Micossi,Daniel Gros,Pier Carlo Padoan / Language(s): English / Publication Year: 2010

Under current policies, the European Union will only be able to pull itself out of low growth and high unemployment very slowly – too slowly to exclude dangerous economic and political assaults on the Union’s continuing cohesion and viability. What is needed is a substantial increase in the EU output growth rate, which has been persistently low for too long a time. With low growth, sovereign debt sustainability in a number of member states will remain uncertain, possibly leading to renewed strains in financial markets and rising spreads that will aggravate the costs of budgetary consolidation.

How to deal with quasi-loss of nationality situations?

Learning from promising practices

Author(s): René de Groot,Patrick Wautelet / Language(s): English / Publication Year: 2014

This policy brief – prepared in the context of the ILEC-project (Involuntary Loss of European Citizenship: Exchanging Knowledge and Identifying Guidelines for Europe) is concerned with situations in which a person who assumed to possess the nationality of a country is confronted with the discovery that (s)he never acquired the nationality of the country involved. Even though the authorities may argue that the person concerned never did acquire this nationality, this person will experience this as loss of nationality.

No. 217. The European Council Summit and the Political Economics of the EMU Crisis

Author(s): Cezary Wójcik,Christian Fahrholz / Language(s): English / Publication Year: 2010

Roger Ailes, a former advisor to Ronald Reagan ,recalls in his book an intriguing practice of the ancient Romans: when they finished building a bridge or an arch, they enforced accountability by placing the engineer in charge beneath the construction when the scaffolding was removed. If the edifice did not hold, he was the first to know. We do not follow such drastic practices these days in Europe, but with some European economies shaking and the Greek sovereign debt crisis still not over, the architecture of the euro area has been certainly come under severe stress. Unfortunately, the 28-29 October2010 European Council Summit has not made this architecture much safer.

No. 218. Unearthing China’s Rare Earths Strategy

Author(s): Roderick Kefferpütz / Language(s): English / Publication Year: 2010

Relations between China and the West have been difficult at best in recent months. Frustrations on both sides have increased palpably. Besides long-standing disagreements over Beijing’s policy on the renminbi, the stalled climate change negotiations and human rights, new challenges have also (re)emerged. These include, amongst others, rising concerns over China’s role in the South China Sea and the conflict over the Japanese-controlled Senkaku or Diaoyu Islands in the East China Sea. Recently, however, one issue inparticular has made the headlines: rare earths.

No. 219. The Bosnian Hiatus: A Story of Misinterpretations

Author(s): Goran Tirak / Language(s): English / Publication Year: 2010

After seven years of debate, the decision to close the office of the High Representative in Bosnia and Herzegovina (OHR), an international body overseeing the peace implementation in Bosnia, has not yet been implemented. Bosnia is a potential EU candidate, but the majority of member states do not consider Bosnia capable of negotiating membership with the Union while the OHR remains the supreme authority governing the country. However, there was never enough political will on the part of any of the actors to bring about closure of the OHR.

No. 220. Europe’s Gas Supply Security: Rating Source Country Risk

Author(s): Henry François-Loïc / Language(s): Bosnian / Publication Year: 2010

Europe is surrounded by abundant natural gas resources; physical availability is not in question. Beyond each EU country’s own supply vulnerability issues, the actual availability of supply in source countries might be hindered by their production policies, transit issues, or domestic or international conflicts. Geopolitical risks to future gas supplies from source countries to the EU exist both in theory and inreality, but basically two major types of risks need to be taken into account: source risks and transit risks.

No. 221. Geopolitical Threats to Oil and the Functioning of the International Oil Market

Author(s): Giacomo Luciani / Language(s): English / Publication Year: 2010

There is no easy and immediate connection between resource nationalism or political instability and global supply of oil and gas. This is emphatically not because political developments are irrelevant for influence is highly variable and unpredictable.

No. 222. Security of Europe's Gas Supply: EU Vulnerability

Author(s): Andrew Macintosh / Language(s): English / Publication Year: 2010

Clearly the natural gas market is experiencing considerable change: a second Ukraine-Russia gas crisis, a collapse in the price of natural gas, a new European natural gas security of supply regulation and the mass production of natural gas from unconventional sources in the US as a result of technological advancements, which could yet have and an impact on the EU.

No. 223. Europe's Coal Supply Security: Obstacles to Carbon Capture, Transport and Storage

Author(s): Christian von Hirschhausen,Clemens Haftendorn,Johannes Herold,Franziska Holz,Anne Neumann,Sophia Rüster / Language(s): English / Publication Year: 2010

Europe faces a paradox with respect to coal supply security. On the one hand, coal is reliable fossil fuel, with ample reserves available from a large number of producers.

No. 224. Europe's Electricity Supply Security: Strengthening the Chain

Author(s): Michele Benini / Language(s): English / Publication Year: 2010

Efficient development of electricity transmission infrastructure is crucial to achieving EU targets for a secure, competitive and sustainable electricity supply. However, many uncertainties, such as future load demand, generation supply, electricity prices and increasing time requirements for the realisation of transmission infrastructures in member states, increase the risk that these targets will not be reached.

No. 225. Consumer Valuation of Energy Supply Security: An Analysis of Survey Results in Three EU Countries

Author(s): Wan-Jung Chou,Alistair Hunt,Anil Markandya,Andrea Bigano,Roberta Pierfederici,Stephane La Branche / Language(s): English / Publication Year: 2010

This study investigates consumer valuation of the security of various types of energy supply, namely electricity, natural gas and transport fuels (oil). Research for the paper was carried out in the context of the SECURE project (Security of Energy Considering its Uncertainties, Risks and Economic Implications), funded by the European Commission under the Seventh Framework Programme. The project develops appropriate tools for evaluating the vulnerability of the EU to the different energy supply risks, and for promoting the optimisation of EU energy insecurity mitigation strategies, including investment, demand side management and dialogue with producing countries.

No. 226. National Commitments, Compliance and the Future of the Kyoto Protocol

Author(s): Noriko Fujiwara,Diarmuid Torney / Language(s): English / Publication Year: 2010

Among the many unresolved issues on the agenda of the forthcoming UN climate change negotiations in Cancún is the issue of what will happen to the Kyoto Protocol, since at present, there will be no targets for green house (GHG) emissions from developed countries under the Protocol beyond 2012. To illuminate this aspect of the Protocol, this Policy Brief looks closer at the nature of the commitments and the compliance regime under the Kyoto Protocol. We argue that the compliance regime of the Protocol is not as robust as many of the Protocol’s supporters might think.

No. 228. The Transformational Impact of EMU and the Global Financial Crisis

Author(s): Francesco Paolo Mongelli / Language(s): English / Publication Year: 2010

The headwinds facing the euro area are many and substantial: there is no pretence of denial. While most attention is correctly devoted to the size of rescue packages for some countries and the terms of crisis management and resolution mechanisms, we argue that these challenges must also be met from within the euro area. We are aided by a simple framework illustrating how the benefits the euro can generate depend on the degree of openness, flexibility and income correlation among euro area countries. Sharing the euro has steadily transformed euro area economies that are now deeply interconnected. This is generating largely benign effects that represent the intrinsic value of the euro area: it is a sharedas set. Yet, such integration has provided the ground for the transmission of the sovereign crisis: through financial exposure, trade linkages and cross-country asset ownership.

No. 229. The EU should not shy away from setting CO2-related targets for transport

Author(s): Christian Egenhofer / Language(s): English / Publication Year: 2011

Transport is the only sector in the EU where green house gas emissions continue to rise. Unless thistrend can be reversed, the EU will have little chance of reaching its objectives in the context of global obligations on industrialised countries to reduce their emissions between 80% and 95% by 2050 compared to 1990. Many different solutions exist, including, for example, new technology such as electrification of road transport, modal shift, optimising existing technologies and policy measures and more radical measures such as binding GHG emissions targets. While there is some merit to all of these approaches, this Policy Brief argues that current EU policy thinking is not (yet) bold enough to credibly tackle the GHG emissions challenge from transport.

No. 230. A less punishing, more forgiving approach to the debt crisis in the eurozone

Author(s): Paul De Grauwe / Language(s): English / Publication Year: 2011

The debt crisis that hit the eurozone last year forced European leaders to develop new solutions to deal with the crisis. These solutions have been dominated by the idea that sanctions should be imposed everywhere in the system. Thus, European leaders are tightening up the Stability and Growth Pact (SGP) and are imposing stiffer sanctions on governments that do not obey the rules. Bond holders who have the temerity to buy government bonds will face sanctions in the form of haircuts when governments get into payment difficulties. The financial rescue mechanism aimed at providing liquidity to distressed governments carries punitive interest rates.

No. 231. Single eComms market? No such thing…

Author(s): Andrea Renda,Jacques Pelkmans / Language(s): English / Publication Year: 2011

Not withstanding the undeniable success of telecoms liberalisation in terms of price reduction, new services and technologies as well as consumer satisfaction, EU telecoms policy is at least a half failure. This might seem hard to believe, but we show in this Policy Brief that there is no such thing as an EU telecoms (or eComms) single market. We provide ample empirical economic and regulatory evidence of profound and lingering fragmentation as well as a brief assessment of the flaws of the third eComms package of 2009, now in force. Overcoming the fragmentation cannot but yield a considerable welfare improvement for the Union, which is exactly what a single market should be expected to deliver. Doing away with the flaws in the EU system requires a better institutional design. We wonder whether the regulatory (and competition policy) approach is really suitable for the Union and whether the fundamental conflict between the EU constitutional doctrine and the building of the single market (just as much a constitutional duty!) should not be resolved in novel ways.

No. 232. How to assess a rotating presidency of the Council under new Lisbon rules

The case of Hungary

Author(s): Piotr Maciej Kaczyński / Language(s): English / Publication Year: 2011

On 1 January 2011, Hungary, the third member of the European Union to join the club in 2004, took overthe presidency of the Council of the European Union. This represents the first presidency of a newer member state under Lisbon Treaty rules. After the new treaty entered into force on 1 December 2009, all rotating presidencies are, in a sense, first time presidencies. Their relative success now depends more on administrative ability than political leadership.

No. 233. Debt reduction without default?

Author(s): Thomas Mayer,Daniel Gros / Language(s): English / Publication Year: 2011

This paper proposes a two-step, market-based approach to debt reduction: Step 1. The European Financial Stability Facility (EFSF) would offer holders of debt of the countries with an EFSF programme (probably Greece, Ireland and Portugal = GIP) an exchange into EFSF paper at the market price prior to their entry into an EFSF-funded programme. The offer would be valid for 90 days. Banks would be forced in the context of the ongoing stress tests to write down even their banking book and thus would have an incentive to accept the offer. Step 2. Once the EFSF had acquired most of the GIP debt, it would assess debt sustainability country by country. a) If the market price discount at which it acquired the bonds is enough to ensure sustainability, the EFSF will write down the nominal value of its claims to this amount, provided the country agrees to additional adjustment efforts (and, in some cases, asset sales).b) If under a central scenario this discount is not enough to ensure sustainability, the EFSF might agree on a lower interest rate, but with GDP warrants to participate in the upside.

No. 234. The Case for ‘more Single Market’

Author(s): Jacques Pelkmans / Language(s): English / Publication Year: 2011

With the Commission’s consultation period on the Single Market Act (European Commission, 2010) nearing its end, it is high time for the EU to get its act together. Priority should immediately be restored to theissue of the Single Market, and EU powers to deepen and widen the internal market, where economically justifiable, ought to be utilized to the full. This CEPS Policy Brief explains why.

No. 235. On the Tasks of the European Stability Mechanism

Author(s): Fabrizia Peirce,Jacopo Carmassi,Stefano Micossi / Language(s): English / Publication Year: 2011

In recent weeks pressures on the euro and eurozone sovereign debtors have subsided. Buoyant growth in the global economy, increasingly benefiting also the European economy, has of course played an important role in calming financial markets. But even more important has been the perception that France and Germany are again working constructively for a strong economic Europe. More broadly, the acute turbulence in financial markets since the spring of 2010 may have finally convinced our political leaders, notably including the German political establishment, that the benefits of a stable currency far outweigh the costs that may have to be borne to make it work properly.