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881. What lessons can be learned from the EU emissions trading scheme?

Author:
Christian Egenhofer and Noriko Fujiwara
Publication Date:
02-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The EU emissions trading scheme (EU ETS) is designed to help EU member states achieve their commitments to limit or reduce greenhouse gas (GHG) emissions in a cost-effective way. It was not meant to work as a stand-alone tool but as part of the package of abatement measures across the board. It is a cap-and-trade system. Member states first impose caps on GHG emissions – initially only CO2 until 2012 – from installations in specified sectors, mainly the power sector and industry subsectors (e.g. steel, cement, glass, paper and pulp). Emissions from these sectors amount to 40% of total EU emissions. Next, they allocate allowances to installations. Each installation surrenders a number of allowances equal to the total emissions from that installation during the preceding year.
Topic:
Climate Change, Economics, and Environment
Political Geography:
Europe

882. Iceland on the brink? Options for a Small, Financially Active Economy in the Current Financial Crisis Environment

Author:
Daniel Gros
Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
For small financially active countries the exchange rate assumes particular importance, not only as a shock absorber, but potentially also as a source of shocks during financial market crises. This is very much in evidence today in the case of Iceland which is being hit hard by the recent turbulence in financial markets.
Topic:
Economics and Financial Crisis
Political Geography:
Europe

883. A new budget for the European Union?

Author:
Stefano Micossi, Maria Teresa Salvemini, and Alfonso Iozzo
Publication Date:
05-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The present budget of the European Union has long ceased to represent European policy priorities; it is the result of decisions taken decades ago and subsequent incremental adjustments decided under the pressure of external events or for political expediency. Its increasing detachment from emerging needs and policy priorities undermines support for the Union among public opinion.
Topic:
Democratization, Economics, and Markets
Political Geography:
Europe

884. Is Social Europe Fit for Globalisation?

Author:
Jørgen Mortensen, ain Begg, and Juraj Draxler
Publication Date:
08-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This policy brief picks up the main observations and arguments included in a study undertaken by CEPS for the Directorate-General for Employment, Social Affairs and Equal Opportunities of the European Commission. It was presented by Iain Begg at a major Commission conference in Brussels on 16 April 2008, which had broad attendance by officials, media people and researchers, and was concluded by a keynote speech by José Manuel Barroso, President of the Commission. The conference took place at a time of emerging financial crisis and rising oil and food prices, aspects emphasised by some speakers as elements throwing new light on some of the arguments in the report. Hans-Gert Pöttering, President of the European Parliament, stressed that promotion of knowledge and innovation constitutes an important condition for enhancing the competitiveness of the European economy. Thus, the Union should take on a leadership role in combining globalisation with social policy, fighting climate change and fostering environmental stability. Mr. Barroso, in his conclusions underlined the necessity of a renewal of social policies based on equal opportunities, access and solidarity.
Topic:
Economics, Globalization, International Political Economy, Markets, and Labor Issues
Political Geography:
Europe

885. Recalibrating EU Policy towards the Western Balkans

Author:
Michael Emerson
Publication Date:
10-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The time is not only ripe but pressing for the EU and the states of the Western Balkans to recalibrate and reinforce the current pre-accession strategy. Trade policy should be moved beyond existing free trade commitments for all the Western Balkans to enter the customs union of the EU and Turkey. Eurozone doctrine should be adapted to realities. Rather than regarding the use of the euro by Montenegro and Kosovo as an unfortunate turn of events, the costs and benefits of unilateral adoption of the euro by not-yet member states of the region should be more openly appraised, and the option to 'euroise' recognised as a possibility. It is good that the EU has moved at the declaratory level toward s visa 'liberalisation', which means scrapping visas rather than just 'facilitation' measures. However the Commission has not yet published guidelines or timelines for this. The region should be put on track for access to the Structural Funds on terms and scales progressively approaching those from which new member states such as Bulgaria and Romania already benefit. The ratio of these aid receipts between the new member states and the Western Balkans is currently 4:1; the former are receiving more than they can handle efficiently, whereas the Western Balkans have huge unsatisfied needs. Overall the case is made for significant moves towards 'functional membership' of the whole of the region with the EU, which would be a highly useful advance, irrespective of how or when the EU overcomes its Lisbon Treaty hiatus.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe, Turkey, Kosovo, Bulgaria, Balkans, Romania, and Lisbon

886. The Banking Crisis: Causes, Consequences and Remedies

Author:
Paul De Grauwe
Publication Date:
11-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The paradigm that financial markets are efficient has provided the intellectual backbone for the deregulation of the banking sector since the 1980s, allowing universal banks to be fully involved in financial markets, and investment banks to become involved in traditional banking. There is now overwhelming evidence that financial markets are not efficient. Bubbles and crashes are an endemic feature of financial markets in capitalist countries. Thus, as a result of deregulation, the balance sheets of universal banks became fully exposed to these bubbles and crashes, undermining the stability of the banking system. The Basel approach to stabilise the banking system has as an implicit assumption that financial markets are efficient, allowing us to model the risks universal banks take and to compute the required capital ratios that will minimise this risk. I argue that this approach is unworkable because the risks that matter for universal banks are tail risks, associated with bubbles and crashes. These cannot be quantified. As a result, there is only one way out, and that is to return to narrow banking, a model that emerged after the previous large-scale banking crisis of the 1930s but that was discarded during the 1980s and 1990s under the influence of the efficient market paradigm.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
Europe

887. Remapping Inequality in Europe: The Net Effect of Regional Integration on Total Income Inequality in the European Union

Author:
Jason Beckfield
Publication Date:
06-2008
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Research on the determinants of inequality has implicated globalization in the increased income inequality observed in many advanced capitalist countries since the 1970s. Meanwhile, a different form of international embeddedness — regional integration — has largely escaped attention. Regional integration, conceptualized as the construction of international economy and polity within negotiated regions, should matter for inequality. This paper offers theoretical arguments that distinguish globalization from regional integration, connects regional integration to inequality through multiple theoretical mechanisms, develops hypotheses on the relationship between regional integration and inequality, and reports fresh empirical evidence on the net effect of regional integration on inequality in Western Europe. Three classes of models are used in the analysis: (1) time-series models where region-year is the unit of analysis, (2) panel models where country-year is the unit of analysis, and (3) analysis of variance to identify how the between- and within-country components of income inequality have changed over time. The evidence suggests that regional integration remaps inequality in Europe. Regionalization is associated with both a decrease in between-country inequality, and an increase in within-country inequality. The analysis of variance shows that the net effect is negative, and that within-country inequality now comprises a larger proportion of total income inequality.
Topic:
Economics, Globalization, and Social Stratification
Political Geography:
Europe

888. Country Economic Forecasts: Germany

Publication Date:
12-2008
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
Germany appears to be slipping deeper into recession. The latest industrial figures are alarming: production fell 2.1% in October and orders were down 17.3%. If output remained at current levels to year-end, then Q4 would be down 3.2% on Q3, but the situation is deteriorating. The manufacturing PMI is below 40 and the expectations component of the Ifo is at its lowest level since the first oil crisis in the early 1970s. Key to the rapid decline has been an abrupt halt to investment, both in Germany and globally. Investment in machinery and equipment had stalled in Q3 and domestic orders of capital goods then dropped 6% in both October and November. Business investment will fall by over 4% in 2009. But exports have also seen a rapid decline, having fallen in both Q2 and Q3, while export expectations are near all-time lows. Export volumes are expected to drop next year, despite the depreciation of the euro. We have slashed our growth forecasts, with GDP now likely to fall by at least 1% in Q4. And we now do not expect the economy to emerge from recession until 2009H2 and for the economy to shrink by over 2% in 2009 overall – the biggest drop in over 60 years. Rapidly declining oil prices and an extended recession mean inflation could fall close to zero by next summer. Inflation has already slowed to 1.4% in November from a peak of 3.1% in July.
Topic:
Economics and Financial Crisis
Political Geography:
Europe and Germany

889. Der kollektive "Buddenbrooks-Effekt"

Author:
Christoph Deutschmann
Publication Date:
05-2008
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The paper views the current financial crisis in light of long-term structural socioeconomic changes in advanced industrial societies. In Western Europe, the United States and Japan, the period of economic prosperity after the Second World War led to a remarkable accumulation of wealth among the middle class that had surprisingly little effect on the substantial fortunes of the wealthiest upper class. This affluence gave rise to pension and investment funds emerging as a new type of collective actor in global financial markets, while the economy was marked by increasing instability, declining growth rates and financial crises. The paper tries to clarify the interconnections between these phenomena using the framework of a multilevel analysis that culminates in a model I call the “collective Buddenbrooks effect” (“Buddenbrooks” being a family saga by Thomas Mann): Structural upward social mobility will lead to an increasing imbalance in capital markets, since the volume of financial assets looking for profitable investment will rise as the social reservoir of solvent debtors and promising investment opportunities decline. Advanced industrial economies are thus characterized by a bias towards capital export and excessive financial liquidity, with the well-known consequences of low economic growth rates and the danger of speculative bubbles on global capital markets. The middle class that originally benefitted from postwar prosperity is negatively affected, too. I argue that the current crisis cannot be understood sufficiently without taking this structural socioeconomic background into account.
Topic:
Economics, International Political Economy, International Trade and Finance, Political Economy, and Political Theory
Political Geography:
United States, Japan, and Europe

890. The Post-2010 Lisbon Process: The Key Role of Education in Employment and Competitiveness

Author:
Daniel Gros and Felix Roth
Publication Date:
12-2008
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper points out that education should be the central objective of the post-2010 Lisbon Process. Compared to other OECD countries, the member states of the European Union perform poorly when it comes to key indicators of innovative potential, such as the percentage of students enrolled in tertiary education and the educational quality of Europe's students. Education makes a three-fold contribution to a country's economic health. First it is beneficial for employment rates, second it is a key driver for long-term economic growth and third it appears to be beneficial for social cohesion. It will be crucial for European countries to attain higher levels of tertiary education and increase the quality of their education.
Topic:
Economics, Education, and Regional Cooperation
Political Geography:
Europe and Lisbon