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341. Falling short of expectations? Stress-testing the European banking system

Author:
Viral V. Acharya and Sascha Steffen
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The eurozone is mired in a recession. In 2013, the GDP of all 17 eurozone countries fell by 0.5% and the outlook for 2014 shows considerable risks across the region. To stabilise the common currency area and its (partly insolvent) financial system, a eurozone banking union is being established. An important part of the banking union is the Single Supervisory Mechanism (SSM), which will transfer the oversight of Europe's largest banks to the European Central Bank (ECB). Before the ECB takes over this responsibility, it plans to conduct an Asset Quality Review (AQR) in 2014, which will identify the capital shortfalls of these banks.
Topic:
Economics, International Trade and Finance, Regional Cooperation, and Monetary Policy
Political Geography:
Europe

342. Framing Banking Union in the Euro Area: Some empirical evidence

Author:
Diego Valiante
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Evidence shows that financial integration in the euro area is retrenching at a quicker pace than outside the union. Home bias persists: Governments compete on funding costs by supporting 'their' banks with massive state aids, which distorts the playing field and feeds the risk-aversion loop. This situation intensifies friction in credit markets, thus hampering the transmission of monetary policies and, potentially, economic growth. This paper discusses the theoretical foundations of a banking union in a common currency area and the legal and economic aspects of EU responses. As a result, two remedies are proposed to deal with moral hazard in a common currency area: a common (unlimited) financial backstop to a privately funded recapitalisation/resolution fund and a blanket prohibition on state aids.
Topic:
Economics, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

343. Future of Skills in Europe: Convergence or polarisation?

Author:
Miroslav Beblavý and Marcela Veselkova
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
In this Working Paper, based on nearly 20 papers produced by the Centre for European Policy Studies, Slovak Governance Institute and the Conference Board Europe, we examine whether the current trends in the areas of education and skills are pushing the European Union, towards convergence or polarisation. We cover a wide range of questions related to this main issue. No easy answers, but several cross-cutting messages emerged from the research. We demonstrated that there is increasing complexity in what a 'low-skilled' person is and how well (or poorly) s/he fares in the labour market. There are undoubtedly powerful forces pushing for more polarisation, particularly in the labour market. Our research confirmed that early childhood education plays an important role, and it also appears to be increasingly uncontested as a policy prescription. However, the other frequently emphasised remedy to inequality - less selection in secondary education, particularly later division of children into separate tracks - is more problematic. Its effectiveness depends on the country in question and the target group, while education systems are extremely difficult to shift even on a long-term basis. A different, more-nuanced type of warning to policy-makers is delivered in our research on returns to higher education by field of study, which showed hidden rationality in how students choose their major.
Topic:
Economics, Education, and Labor Issues
Political Geography:
Europe

344. The EU's Use of 'Targeted' Sanctions: Evaluating effectiveness

Author:
Clara Portela
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This study analyses the use by the European Union of the novel concept of 'targeted sanctions' in the framework of its Common Foreign and Security Policy. It examines two sets of sanctions regimes featuring different degrees of efficacy: in Myanmar and Zimbabwe, the EU wielded measures in support of human rights and democracy objectives in the absence of a United Nations mandate, while it supplemented UN sanctions to stop nuclear proliferation in Iran and North Korea. The study highlights a number of facilitators of, or hindrances to, the efficacy of sanctions, such as the degree of support by regional powers or the presence of UN legitimation. It concludes that the EU sanctions regimes could be optimised by using more robust measures, designing them on the basis of ex ante assessments, enabling faster upgrades, monitoring their impact and adjusting them regularly and improving outreach efforts.
Topic:
Foreign Policy, Diplomacy, Economics, Regional Cooperation, and Sanctions
Political Geography:
United States, Europe, United Nations, and Zimbabwe

345. The Potential Evolution of the European Energy System to 2020 and 2050

Author:
Arno Behrens, Jonas Teusch, and Caroline Coulie
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper assesses the impact of decarbonisation of the energy sector on employment in Europe. Setting the stage for such an assessment, the paper provides an analysis of possible pathways to decarbonise Europe's energy system, taking into account EU greenhouse gas emissions reduction targets for 2020 and 2050. It pays particular attention to various low-carbon technologies that could be deployed in different regions of the EU. It concludes that efficiency and renewables play a major role in any decarbonisation scenario and that the power sector is the main enabler for the transition to a low-carbon economy in Europe, despite rising electricity demand. The extent of the decline in the share of fossil fuels will largely depend on the existence of carbon capture and storage (CCS), which remains a major source of uncertainty.
Topic:
Economics, Energy Policy, and Science and Technology
Political Geography:
Europe

346. The EMS Crisis of the 1990s: Parallels with the present crisis?

Author:
Daniel Gros
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The EMS crisis of the 1990 s illustrated the importance of a lack of confidence in price or exchange rate stability, whereas the present crisis illustrates the importance of a lack of confidence in fiscal sustainability. Theoretically the difference between the two should be minor since, in terms of the real return to an investor, the loss of purchasing power can be the same when inflation is unexpectedly high, or when the nominal value of government debt is cut in a formal default. Experience has shown, however, that expropriation via a formal default is much more disruptive than via inflation.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Italy

347. Cyber Threat and Response

Author:
James Andrew Lewis
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Everyone knows that the Internet has changed how we interact, do business, and share information. The Internet can be an "innovation engine," but the same engine of innovation drives cyber threats to change faster than cyber defenses can react. Cyber threats are complex, dynamic, and network defenses have trouble keeping up with them.
Topic:
Defense Policy, Economics, Science and Technology, and International Security
Political Geography:
Europe

348. Caspian Gas, TANAP and TAP in Europe's Energy Security

Author:
Ariel Cohen
Publication Date:
04-2014
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Russia's occupation of the Crimea and possible incorporation of Eastern Ukrainian regions demonstrated Europe's vulnerability to Gazprom's energy power. Whatever the EU's reactions, diversification of energy supply to diminish Russia's market share is likely to be one of them. TAP is one step towards the strategic goal of diminishing Gazprom's huge presence in Europe. But in view of the proposed construction of the Russian South Stream, how could Central Europe, and especially Bulgaria, Romania, Austria and Lithuania, ensure energy diversification? What next for the Southern Corridor? Is Russia going to accept and tolerate infrastructure growth of the Caspian and other competitors south of its borders?
Topic:
Economics, Energy Policy, and Markets
Political Geography:
Russia, Europe, Lithuania, Bulgaria, Romania, and Austria

349. Shale gas in Europe: much ado about little?

Author:
Tania Zgajewski
Publication Date:
04-2014
Content Type:
Working Paper
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
Shale gas is an unconventional form of gas because its extraction is more difficult or less economical than that of conventional natural gas. It has become an important item of energy policy during the last years since new processes have allowed its extraction. In the medium term, shale gas should foster a reinforcement of the gas part in the world's energy mix. In 2011, the IEA released an influential report entitled "Are we entering a golden age of gas?" This report suggests that shale gas could help substantially boost global gas use. It also warns at the same time that this success could bring into question the international goal of limiting the long-term increase in the global temperature to 2° C above pre-industrial levels.
Topic:
Economics, Energy Policy, Environment, and Human Rights
Political Geography:
Europe

350. The Eurasian Customs Union: the economics and the politics

Author:
Nicu Popescu and Iana Dreyer
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
European Union Institute for Security Studies
Abstract:
Long ignored by the West, the Eurasian Customs Union (consisting of Russia, Belarus and Kazakhstan) has recently been brought into the international limelight. The project – an attempt by the Kremlin to create a rival to the European Union and its Eastern Partnership project – attracted attention when Moscow, with its characteristic bluntness, began to pressure Armenia, Georgia, Moldova and Ukraine to join the grouping and drop their plans to sign Association Agreements with the EU. Although Russia has not succeeded in convincing all these states to join, it managed to do so with Armenia in September 2013, and the political tussle over the issue with Ukraine played a central role in triggering the country's current crisis.
Topic:
Economics, International Political Economy, International Trade and Finance, and Power Politics
Political Geography:
Europe, Eurasia, and Asia