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812. 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
- 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
813. Next steps toward a final deal with Iran
- Author:
- Steven Blockmans and Luigi Scazzieri
- Publication Date:
- 02-2014
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- On January 20th, the International Atomic Energy Agency (IAEA) confirmed that Iran had been implementing its commitments as part of the Joint Plan of Action (JPA) agreed by the E3+3 in Geneva on November 24th of last year. In particular, the Agency confirmed that Iran had not installed new centrifuges, that it had stopped enriching uranium above 5%, that it had disabled connections between cascades being used to enrich up to 20%, and that it had begun the process of diluting half of its stockpile of 20%, while the other half is to be converted to oxide over the next six months. Over the next six months, the IAEA will continue to monitor Iranian enrichment, and activities at Arak, Fordow and Natanz. Immediately following the IAEA announcement, the US and EU suspended some of the sanctions currently imposed on Iran. Sanctions relief, quantified at $7 billion, comprises both the suspension of some sanctions and the repatriation of $4.2 billion of oil revenues in tranches.
- Topic:
- Security, Economics, International Cooperation, International Organization, Treaties and Agreements, International Security, and Nuclear Power
- Political Geography:
- Iran
814. 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
- 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
815. The Crowding-out Effect of Mandatory Labour Market Pension Schemes on Private Savings: Evidence from renters in Denmark
- Author:
- Mikkel Barslund and Søren Arnberg
- Publication Date:
- 02-2014
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies
- Abstract:
- This paper aims to estimate the crowding-out effect of the Danish mandatory labour market pension reforms begun in 1993 on the level of total household savings for renters. The effect is identified via a large panel of individual administrative records utilising the differences in speed, timing and sectoral coverage of the implementation of the reform in the period 1997 to 2005. Little substitutability was found between current mandatory labour market pension savings and private voluntary savings. Each euro paid into mandatory labour market pension accounts results in a reduction in private savings of approximately 0 to 30 cents, depending on age. This low rate of substitution is only, to a minor extent, explained by liquidity constraints. The results point to mandatory pension savings having a large effect on total household savings. Thus, pension reforms that introduce mandatory savings have macroeconomic implications.
- Topic:
- Economics, Labor Issues, and Reform
- Political Geography:
- Denmark
816. 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
- 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
817. 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
- 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
818. 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
- 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
819. Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession
- Author:
- Thomas Barnebeck Andersen, Nikolaj Malchow-Møller, and Jens Nordvig
- Publication Date:
- 03-2014
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies
- Abstract:
- Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates weathered the crisis much better than countries with other monetary regimes, predominantly countries with fixed exchange rates. Part of this difference in growth performance reflects differences in export performance during the initial years of the crisis, which in turn can be explained by real exchange rate depreciations. However, IT seems also to confer other benefits on the countries above and beyond the effects from currency depreciation.
- Topic:
- Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
- Political Geography:
- Denmark
820. 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
- 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