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21. Recovery and reform in the EU’s most vulnerable regions

Author:
Alison Hunter and Marta Pilati
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
Europe’s most vulnerable regions, characterised by persistent low growth and poverty, face a systemic lack of specific EU support. These regions display particularly high levels of vulnerability to the social, economic and territorial impacts of COVID-19, which will affect their recovery trajectories. They risk being left further behind in the EU’s complex pathway towards ‘a green and digital recovery’. The Union’s lack of focus and action for investing in these most vulnerable regions must be addressed. First and foremost, EU institutions and member states should recognise that some territories will struggle much more than others in their recovery trajectories. Ignoring their plight would have potentially far-reaching consequences. The EU’s ‘convergence machine’ could be damaged irreparably, with long-term – and potentially political – consequences. Alison Hunter and Marta Pilati continue their extensive research on the Union’s low-growth, poor regions, calling for the founding of a specific EU initiative to support them as well as further targeting by the existing policy architecture. In particular, they recommend: creating an EU policy space for regions experiencing long-term low growth and poverty, to promote the value and visibility of place-based support; aligning Cohesion Policy and the Recovery and Resilience Facility for improved policy coherence and greater investment impact; and tailoring support for growth-enhancing reforms in the EU’s most vulnerable regions. The EU’s green and digital recovery strategy fails to account for the specific needs of its poor and low-growth regions. Existing disparities and fragmentation challenges across the Union could widen or even become entrenched, casting new doubts on the EU’s ability and commitment to strengthen its convergence agenda and execute a just transition. The fallout could lead to a rise in territorial and political tensions while leaving many vulnerable places behind. Hunter and Pilati outline an agenda for a new EU initiative that champions reform support for these vulnerable territories and improves their prospects for a digital and green recovery.
Topic:
Political Economy, Poverty, Reform, European Union, Digital Economy, Economic Growth, Green Technology, Recovery, COVID-19, and Economic Recovery
Political Geography:
Europe

22. How to get European businesses to digitalise

Author:
Frederico Mollet
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
Europe’s underperforming tech sector and reliance on foreign technologies has long alarmed its policymakers. But a significant – and often overlooked – factor in the EU’s economic underperformance over the last two decades is its slow business digitalisation. EU industry, especially SMEs, struggles with the prosaic challenge of integrating digital technologies into its business models and operations. The preoccupation tends to be on how to foster new digital start-ups. But what about the digitalisation of existing firms? The EU budget and recovery fund are armed with a range of new EU funding streams and programmes to tackle this challenge. With its 2030 targets and new policy framework, the EU aims to catch up with the previous generation of digital technologies and ensure that it does not miss out on the next wave of transformational change. Otherwise, Europe will fall behind its economic competitors even further. But there are still some gaps in the EU’s game plan for business digitalisation. Frederico Mollet outlines several areas where the new policy framework can be optimised, and new initiatives would be worthwhile: Additional funding should be mobilised from Cohesion Policy funds. Business digitalisation is a critical factor in regional convergence, and so an increased funding share would be in line with the policy’s main objectives. The Commission should use its coordinating and convening powers to get banks to commit to a best practice code, to assess digitalisation loans and improve their staff’s digital knowledge. Public authorities should leverage private partners. Many firms lack the awareness and information necessary to digitalise, but a number of ‘access points’ and private sector networks (e.g. finance providers, B2B businesses, supply chain networks) can reach them. The EU should consider complementing the design and implementation of European Digital Innovation Hubs and transition pathways – its main programmes for supporting business digitalisation directly – with 5 additional components. Taken together, these recommendations will bolster the funding available for business digitalisation, tackle some of the critical barriers to finance, and optimise the delivery of the Commission’s programmes.
Topic:
Political Economy, Science and Technology, European Union, Business, and Digitalization
Political Geography:
Europe

23. Rethinking EU economic governance: The Stability and Growth Pact

Author:
Francesco De Angelis and Frederico Mollet
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
It is time to reimagine the EU’s economic governance. In early 2021, the EPC set out to do just that in its Rethinking EU Economic Governance Task Force. Drawing on insights from participating experts, academics and policymakers, this first Policy Brief in a series of EPC publications outlines how the debate on the Stability and Growth Pact (SGP), the EU’s framework for fiscal and macroeconomic surveillance, has evolved and the reform options that have surfaced. There is broad dissatisfaction with the SGP and how it has fared in an environment of prolonged low-interest rates, missed inflation targets and low growth. In February 2020, the European Commission launched a review of the SGP in an attempt to address its shortcomings, but it was quickly put on hold by COVID-19, when the fiscal rules were suspended. Half a year later, the Commission is finishing what it started. We are in a drastically different world since the European Commission launched the review. Not only has government debt increased significantly, but regional, economic and social divides have worsened, policymakers face inflationary pressures for the first time in decades, and the Recovery and Resilience Facility and accompanying EU-level bond issuance fundamentally changed the EU’s economic architecture. In parallel, there is a widespread acknowledgement that averting, as well as adapting to, the climate crisis requires a steep increase in public investment. Thanks to the EPC Task Force’s ongoing work, Francesco De Angelis and Frederico Mollet can pinpoint the SGP’s major flaws, post-COVID-19 challenges, and five broad categories of reform options: Interpretative flexibility to smooth fiscal adjustment paths and potentially place less emphasis on problematic indicators. Moderate non-treaty reforms to reduce complexity and procyclicality and increase enforceability. The ‘golden rule’ to exempt some public investments from the fiscal rules. Central fiscal capacity for macroeconomic stabilisation. Off-balance-sheet investments to increase public investment.
Topic:
Political Economy, Governance, European Union, Economic Growth, COVID-19, Economic Stability, and European Commission
Political Geography:
Europe

24. Volume 71 Issue 2

Author:
Gökhan Karabulut
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
Istanbul Journal of Economics
Institution:
Istanbul University Faculty of Economics
Abstract:
Istanbul Journal of Economics-İstanbul İktisat Dergisi is an open access, peer-reviewed, scholarly journal published two times a year in June and December. It has been an official publication of Istanbul University Faculty of Economics since 1939. The manuscripts submitted for publication in the journal must be scientific and original work in Turkish or English. Being one of the earliest peer-reviewed academic journals in Turkey in the area of economics, Istanbul Journal of Economics-İstanbul İktisat Dergisi aims to provide a forum for exploring issues in basicly economics and publish both disciplinary and multidisciplinary articles. Economics is the main scope of the journal. However, multidisciplinary and comparative approaches are encouraged as well and articles from various social science areas such as sociology of economics, history, social policy, international relations, financial studies are welcomed in this regard. The target group of the journal consists of academicians, researchers, professionals, students, related professional and academic bodies and institutions.
Topic:
Economics, Globalization, International Trade and Finance, Oil, Political Economy, Natural Resources, Exchange Rate Policy, and Industry
Political Geography:
Europe, Turkey, and Asia

25. Pork, infrastructure and growth: Evidence from the Italian railway expansion

Author:
Roberto Bonfatti, Giovanni Facchini, Alexander Tarasov, Gian Luca Tedeschi, and Cecilia Testa
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
This paper studies the role played by politics in shaping the Italian railway network, and its impact on long-run growth patterns. Examining a large state-planned railway expansion that took place during the second half of the 19th century in a recently unified country, we first study how both national and local political processes shaped the planned railway construction. Exploiting close elections, we show that a state-funded railway line is more likely to be planned for construction where the local representative is aligned with the government. Furthermore, the actual path followed by the railways was shaped by local pork-barreling, with towns supporting winning candidates more likely to see a railway crossing their territory. Finally, we explore the long-run effects of the network expansion on economic development. Employing population and economic censuses for the entire 20th century, we show that politics at a critical juncture played a key role in explaining the long-run evolution of local economies.
Topic:
Development, Political Economy, Infrastructure, and Railways
Political Geography:
Europe and Italy

26. China's Belt and Road Initiative in Italy: An Analysis of Financial Cooperation

Author:
Nicola Bilotta
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Financial cooperation is essential to boosting bilateral economic ties, providing firms with more effective instruments to operate in foreign markets. It should come as no surprise, then, that financial cooperation was a pillar of the 2019 Memorandum of Understanding (MoU) reached between Italy and China in support of the latter’s Belt and Road Initiative (BRI). However, a preliminary analysis of BRI-related commercial agreements between Italian financial institutions and their Chinese counterparts shows that they have not resulted in any ground-breaking development. These Memoranda have apparently just added a “BRI” badge to pre-existing trends of collaboration. The BRI-related MoUs in the field of financial cooperation do not, for the time being at least, justify concerns that China may gain an economic foothold in Italy large enough to win it much political influence. A more realistic risk is that these MoUs may undermine a common European approach to China, weakening the negotiating stance of the European Union’s. Paper prepared in the framework of the IAI project “When Italy embraces the BRI”.
Topic:
Foreign Policy, Political Economy, Governance, Finance, and Belt and Road Initiative (BRI)
Political Geography:
China, Europe, Asia, and Italy

27. CBDCs for Dummies: Everything You Need to Know about Central Bank Digital Currency (And Why You Shouldn’t Be Afraid of It)

Author:
Nicola Bilotta
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
“No cash accepted in this store”. What might seem to some like science fiction is on its way to becoming reality. The rise of non-cash payments is a global phenomenon, although moving at different speeds around the world. To keep up with the digitalisation of payments (and of the economy), many central banks are exploring the development of Central Bank Digital Currencies (CBDCs), a digital form of cash. Despite being confined to a technical discussion among experts, when (rather than if) launched, CBDCs concerns us all. Thus, raising awareness of what CBDCs are, and of their key economic and political dimensions, is crucial to ensure that citizens are not only passive spectators. This paper has the ambition to provide (non-expert) readers with straightforward and simple answers to some of the many questions they may have around CBDCs. It sets the ground to better understand what CBDCs are (and are not), their drivers and their possible design. It will explore the impact of CBDC systems on privacy, the geo-strategic drivers of CBDCs and the possible rivalry between public and private money. Paper prepared in the framework of a research effort on the risks and the opportunities related to Central Bank Digital Currencies (CBDCs) with the support of Intesa Sanpaolo and the Bank of Italy.
Topic:
Political Economy, Governance, European Union, Finance, Currency, and Digital Policy
Political Geography:
China, Europe, and United States of America

28. Covid-19 and the International Liberal Order: Goodbye “Global”, Hello “Regional”?

Author:
Irene Paviotti
Publication Date:
10-2021
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
The Covid-19 crisis is broadly recognised as a watershed moment in world history, prompting a radical rethink of social norms and accelerating a number of pre-existing geopolitical trends. When it comes to globalisation and multilateralism, two defining features of the current international order, the pandemic has accelerated a move towards regionalism on the one hand and clearly exposed the shortcomings of an unequal multilateral system on the other.
Topic:
Globalization, Health, Political Economy, Politics, European Union, Institutions, and COVID-19
Political Geography:
Europe

29. Firm Foundations: The Statistical Footprint of Multinational Corporations as a Problem for Political Economy

Author:
Timur Ergen, Sebastian Kohl, and Benjamin Braun
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
The discipline of comparative political economy (CPE) relies heavily on aggregate, country- level economic indicators. However, the practices of multinational corporations have increasingly undermined this approach to measurement. The problem of indicator drift is well-documented by a growing critical literature and calls for systematic methodological attention in CPE. We present the case for a rocky but ultimately rewarding middle road between indicator fatalism and indicator faith. We illustrate our argument by examining two important cases – Sweden’s recent export success and the financialization of non-financial corporations in France. A careful parsing of the data suggests corrections to common characterizations of the two cases. Swedish exports have been reshaped by intragroup trade among foreign subsidiaries of domestic corporations. The growth of financial assets held by French firms is attributable to the growth of foreign direct investment and to cumulative revaluation effects, while what remains of financialization is concentrated among the very largest firms. Based on these findings, we propose a methodological routine that parses data by zooming in on the qualitative specifics of countries, sectors, and firms, while using all available options for disaggregation.
Topic:
Political Economy, Economic Growth, Multinational Corporations, and Financialisation
Political Geography:
Europe, France, and Sweden

30. The Political Economy of Industrial Policy in the European Union.

Author:
Fabio Bulfone
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The Great Recession renewed calls for a return of state activism in support of the European economy. The widespread nationalization of ailing companies and the growing activism of national development banks led many to celebrate the reappearance of industrial policy. By reviewing the evolution of the goals, protagonists, and policy instru- ments of industrial policy since the postwar period, this paper shows how state intervention never ceased to be a crucial engine of growth across the EU. It argues that the decline of the Fordist wage-led production regime marked a turning point in the political economy of industrial policy with the transition from inward-looking to open-market forms of state in- tervention. The main features of open-market industrial policy are then discussed referring to the cases of the internationalization of national champions in public service sectors and the proliferation across the EU of industrial clusters. Finally, the paper reviews postcrisis in- stances of state intervention and highlights how, rather than breaking with past tendencies, the Great Recession further accelerated the shift towards open-market industrial policy.
Topic:
Development, Economics, Political Economy, Regional Cooperation, European Union, Integration, and Industry
Political Geography:
Europe