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2031. Distributional Consequences of Climate Change Impacts on the Power Sector: Who gains and who loses?

Author:
Dirk Rübbelke and Stefan Vögele
Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Climate change tends to negatively affect the power sector, inter alia, by causing cooling problems in power plants and impairing the water supply required for hydro-power generation. In future, when global warming is expected to increase, autonomous adaptation to climate change via international electricity markets inducing reallocations of power generation may not be sufficient to prevent supply disruptions. Furthermore, the consequent changes of supply patterns and electricity prices might cause an undesirable redistribution of wealth both between individual power suppliers and between suppliers and consumers. This study ascertains changes in European power supply patterns and electricity prices caused by ongoing global warming as well as related redistribution of wealth for different climate change scenarios. Our results confirm that autonomous adaptation in the power sector should be complemented by planned public adaptation in order to preserve energy security and to prevent undesired distributional effects.
Topic:
Climate Change, Economics, Energy Policy, and Markets
Political Geography:
Europe

2032. Adjustment Difficulties and Debt Overhangs in the Eurozone Periphery

Author:
Daniel Gros and Cinzia Alcidi
Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper describes four key drivers behind the adjustment difficulties in the periphery of the eurozone: The adjustment will be particularly difficult for Greece and Portugal, as two relatively closed economies with low savings rates. Both of these countries combine high external debt levels with low growth rates, which suggest they are facing a solvency problem. In both countries fiscal adjustment is a necessary condition for overall sustainability, but it not sufficient by itself. A sharp cut in domestic consumption (or an unrealistically large jump in exports) is required to quickly establish external sustainability. An internal devaluation (a cut in nominal wages in the private sector) is unavoidable in the longer run. Without such this adjustment in the private sector, even continuing large-scale provision of official funding will not stave off default. Ireland's problems are different. They stem from the exceptionally large losses in the Irish banks, which were taken on by the national government, leading to an explosion of government debt. However, the Irish sovereign should be solvent because the country has little net foreign debt. Spain faces a similar problem as Ireland, although its foreign debt is somewhat higher but its construction bubble has been less extreme. The government should thus also be solvent, although further losses in the banking system seem unavoidable. Italy seems to have a better starting position on almost on all accounts. But its domestic savings rate has deteriorated substantially over the last decade.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
Spain and Ireland

2033. Taking Stock: EU Common Commercial Policy in the Lisbon Era

Author:
David Kleimann
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The first 16 months of the EU's common commercial policy (CCP) in the post-Lisbon period provide indicative insights into how the European Parliament, the European Commission and the Council of Ministers interpret their respective roles under the new legal framework introduced by the Lisbon Treaty. This paper analyses the amendments, the institutional capacities to respond to the reform challenges and the evolving institutional balance applying to Lisbon-era common commercial policy. Against this backdrop, the paper gives an overview of the changing dynamics of EU trade and investment policy in a context of enhanced politicization resulting from the European Parliament's involvement in the decision-making process. Particular importance is given to the question whether enhanced EP involvement in decision-making has the potential to lead to a scenario resembling the policy process in the United States, where congressional responsibility for trade and investment policy has resulted in the capture of the policy agenda by special interest groups and snail-paced policy progress (if any) in recent years. Accordingly, the paper scrutinizes the political preferences that the European Parliament is introducing into current European trade policy debates as well as the framework legislation and trade agreements. Finally, it is argued that parliamentary involvement in making common commercial policy has the potential to narrow the gap between European public political preferences and perceptions, on the one hand, and actual EU trade policies on the other, and to place EU trade and investment policies on a foundation of renewed public political support. In the author's view, however, it is imperative that such an achievement is based on well-informed, responsible, sustainable and clearly communicated policy proposals from the MEPs, who respond to and seek to balance the multiplicity of interests of CCP stakeholders in European civil society and respect the Union's international obligations.
Topic:
Economics, International Trade and Finance, and Treaties and Agreements
Political Geography:
Europe

2034. The New Stability and Growth Pact: Primum non nocere

Author:
Claudio Vicarelli and Marco Fioramanti
Publication Date:
03-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The recent economic and financial crises have shown the weakness of EU economic governance. A process of strengthening macroeconomic and fiscal surveillance started in the course of 2010; among other proposals, the European Commission suggested a new binding criterion of debt reduction: debt-to-GDP ratio is to be considered sufficiently diminishing if its distance with respect to the 60% of GDP reference value has reduced over the previous three years at a rate of the order of one-twentieth per year.
Topic:
Debt, Economics, International Trade and Finance, Financial Crisis, and Governance
Political Geography:
Europe

2035. Has the financial crisis shattered citizens' trust in national and European governmental institutions? Evidence from the EU member states, 1999-2010

Author:
Felix Roth, Felicitas Nowak-Lehmann D., and Thomas Otter
Publication Date:
02-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The financial crisis has affected trust in national and European governmental institutions in different ways. This paper analyses the determinants of trust in the national and European institutions over the last decade and comes to the conclusion that inflation reduces citizens' trust only when the economy runs smoothly. In times of crisis, citizens do not worry about inflation but rather about jobs and the effects of a recession. Declining trust in national governments is related to an increase in unemployment in the EU-15 in all time periods, whereas trust in the European Commission and the European Parliament seems to be strongly associated with the situation in the real economy (unemployment and growth of GDP per capita) only in times of crisis. Yet in the EU-27, falling levels of trust in the national and European governmental institutions during times of crisis seem to be primarily related to an increase in government debt. In an EU-15 country sample, this negative relationship appears to be driven by countries that owe a larger share of their increase in government debt to aiding/bailing out their financial sector and the implementation of significant austerity measures.
Topic:
Debt, Economics, Financial Crisis, and Governance
Political Geography:
Europe

2036. Britain, Ireland and Schengen: Time for a smarter bargain on visas

Author:
Michael Emerson
Publication Date:
08-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
For the present UK government, full accession to the Schengen area, a passport- free travel area covering most of Europe, is a red line that it will not cross. Ireland shares a common travel area and land border with the UK and is also bound by this decision. However, it is becoming increasingly clear that the UK, along with Ireland, is suffering serious economic and reputational costs as a result of its separate visa and border management policies.
Topic:
Economics, International Trade and Finance, Markets, and Regional Cooperation
Political Geography:
Britain, United Kingdom, Europe, and Ireland

2037. TARGET2 Unlimited: Monetary Policy Implications of Asymmetric Liquidity Management within the Euro Area

Author:
José M. Abad, Axel Löffler, and Holger Zemanek
Publication Date:
07-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
This paper analyses the implications of a continued divergence of TARGET2 balances for monetary policy in the euro area. The accumulation of TARGET2 claims (liabilities) would make the ECB's liquidity management asymmetric once the TARGET2 claims in core countries have crowded out central bank credit in those regions. Then while providing scarce liquidity to banks in countries with TARGET2 liabilities, the ECB will need to absorb excess liquidity in countries with TARGET2 claims. We discuss three alternatives and their implications for absorbing excess liquidity in core regions: 1) using market-based measures might accelerate the capital flight from periphery to core countries and would add to the accumulation of risky assets by the EC B; 2) conducting non-mark et based measures, such as imposing differential (unremunerated) reserve requirements, would distort banking markets and would support the development of shadow banking; and 3) staying passive would lead to decreasing interest rates in core Europe entailing inflationary pressure and overinvestment in those regions and possibly future instability of the banking system.
Topic:
Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe

2038. An evaluation of the French proposal for a restructuring of Greek debt

Author:
Christian Kopf
Publication Date:
06-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
French commercial banks are proposing a swap of €85.5 billion in Greek government bonds maturing between 2011 and 2014 into a combination of new long-term Greek bonds with principal guarantee and cash payments. If this initiative were implemented under the proposed parameters, private creditors would only suffer a minimal haircut and official lenders would be provided with cash-flow relief of around €20 billion over the next three years, but the solvency of the Hellenic Republic would worsen significantly.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Europe

2039. Iran in the shadow of the 2009 presidential elections

Author:
Rouzbeh Parsi
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
In the past two years the Iranian domestic political scene has undergone a major upheaval where many established norms and institutional frame-works have been abandoned or seriously weakened. A new baseline and sense of normalcy has yet to be established.
Topic:
Democratization, Economics, Politics, Insurgency, and Financial Crisis
Political Geography:
Iran and Middle East

2040. Suckers, Punters, Pathbreakers: When Homo Oeconomicus Is Selflessly Selfish

Author:
Anthony de Jasay
Publication Date:
06-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Rational choice presupposes that people do what they like better than any available alternative. If, however, we mistrust what they declare to like or what psychology is supposed to tell us about it (a pardonable enough mistrust), we can only infer what they like from observing what they do. We must be content with revealed preference. The theory of choice is locked into the tautology of “they do what they like because they like what they do,” and requiring their preferences to be orderly and consistent is of little practical help. In its elegance, modern choice theory, as represented in neoclassical economics, is too smooth and slippery to be very useful.
Topic:
Economics