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421. On the Tasks of the European Stability Mechanism

Author:
Stefano Micossi, Fabrizia Peirce, and Jacopo Carmassi
Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
In recent weeks pressures on the euro and eurozone sovereign debtors have subsided. Buoyant growth in the global economy, increasingly benefiting also the European economy, has of course played an important role in calming financial markets. But even more important has been the perception that France and Germany are again working constructively for a strong economic Europe. More broadly, the acute turbulence in financial markets since the spring of 2010 may have finally convinced our political leaders, notably including the German political establishment, that the benefits of a stable currency far outweigh the costs that may have to be borne to make it work properly. The euro will only be trusted if the member states effectively coordinate their economic policies not only to ensure fiscal stability, but also to eliminate persistent divergences in productivity leading to unsustainable imbalances between national savings and investment (Schäuble, 2011).
Topic:
Security, Economics, Regional Cooperation, Monetary Policy, Financial Crisis, and Governance
Political Geography:
Europe, France, and Germany

422. The Case for 'More Single Market'

Author:
Jacques Pelkmans
Publication Date:
02-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
With the Commission's consultation period on the Single Market Act (European Commission, 2010) nearing its end, it is high time for the EU to get its act together. Priority should immediately be restored to the issue of the Single Market, and EU powers to deepen and widen the internal market, where economically justifiable, ought to be utilized to the full. This CEPS Policy Brief explains why.
Topic:
Economics and Regional Cooperation
Political Geography:
Europe

423. Lessons from the East European Financial Crisis, 2008-10

Author:
Anders Åslund
Publication Date:
06-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In the fall of 2008, Central and Eastern Europe became a flashpoint in the global financial crisis. The ten new eastern members of the European Union were in a state of severe overheating in all regards. Inflation surged everywhere and to double digits in Bulgaria, Estonia, Latvia, and Lithuania. Wages and real estate prices skyrocketed, rendering these countries ever less competitive, which further undermined their current account balance. Output plunged and unemployment soared.
Topic:
Economics, Global Recession, and Financial Crisis
Political Geography:
Europe, Lithuania, Estonia, Bulgaria, and Latvia

424. Who Captures Value in Global Supply Chains?

Author:
Jyrki Ali-Yrkkö, Petri Rouvinen, Timo Seppälä, and Pekka Ylä-Anttila
Publication Date:
02-2011
Content Type:
Working Paper
Institution:
Berkeley Roundtable on the International Economy
Abstract:
Available statistics tell us little about the economic consequences of increasing global dispersion of production processes. In order to shed light on the issue, we perform grass roots detective work to uncover the geography of value added in the case of a Nokia N95 smartphone circa 2007. The phone was assembled in Finland and China. In the case when the device was assembled and sold in Europe, the value-added share of Europe (EU-27) rose to 68%. Even in the case when it was assembled in China and sold in the United States, Europe captured as much as 51% of the value added, despite of the fact that it had rather little role in supplying the physical components. Our analysis illustrates that international trade statistics can be misleading; the capture of value added is largely detached from the physical goods flows. It is rather services and other intangible aspects of the supply chain that dominate. While final assembly – commanding 2% of the value added in our case – has increasingly moved offshore, the developed countries continue to capture most of the value added generated by global supply chains.
Topic:
Economics, Globalization, Industrial Policy, International Trade and Finance, and Markets
Political Geography:
China, Europe, and Finland

425. Allies Yet Rivals: International Politics in 18th Century Europe.

Author:
Gavin Weins
Publication Date:
01-2011
Content Type:
Journal Article
Journal:
Journal of Military and Strategic Studies
Institution:
Centre for Military, Security and Strategic Studies
Abstract:
Alliances have, and likely always will have, a common feature of international diplomacy for a number of reasons. First, the primary objective of any government is defence and states will attempt to heighten security through international agreements. Second, military and economic power is unevenly distributed among states and weaker powers will unavoidably gravitate toward stronger powers in search of increased protection and commercial benefits. Third, an alliance can occasionally be the most effective means of tying the hands of a rival. Despite the variety of objectives that encourage the formation of alliances and the numerous forms that international agreements can assume, Marco Cesa argues that international relations theory has consistently recognized the existence of only one type of alliance: those agreements between states that are designed to confront an aggressive and dangerous “common enemy.” Above all, this viewpoint has one-dimensionally characterized alliances as unions of separate forces, policy-coordination organizations, or as takers of joint action against some third party. The “internal” dimensions of alliances, or the complex negotiations between allies, have consequently been overshadowed by the “external” dimensions, or the measures implemented by the allies to confront the threatening power. Nevertheless, states are almost always involved in ambiguous and clandestine diplomatic manoeuvres against not only enemies, but allies as well. Through an examination of this “darker side” of alliances, Cesa attempts to highlight the shortcomings of traditional international relations theory and, at the same time, offer an alternative framework for the examination of inter-ally relations.
Topic:
Economics and Government
Political Geography:
Europe

426. Balancing growth and stability in EU financial reform

Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
The financial crisis has forced a reappraisal of the regulatory architecture, globally and in the EU and its member states. Around the world, policymakers are proposing significant changes to rules governing the financial sector, with the goal of making the financial system more resilient. Given the large and visible costs of financial instability for Europe, it is natural for European policymakers to make the avoidance of financial crises a high priority. But it is also important to recognise that regulation carries a range of costs that can dilute the economic benefits of a competitive and dynamic financial services sector. The academic literature has robustly established that financial development is not only the consequence of economic growth but also a driver. If the EU is to achieve the ambitious goals for unleashing private enterprise and creating jobs set out within the Europe 2020 agenda, then it cannot afford to overlook the role of the financial system in fostering innovation and growth. As supervisory authorities consider a broad set of proposals to strengthen the regulatory infrastructure, a n important quest ion that arises is how to assess the aggregate impact of these various measures. Although each may look sensible in isolation, they could still impose a larger - than - expected burden on the financial system when take n in the aggregate. The focus of policy reforms should be on forcing financial institutions to internalise the social costs of their risk - taking decisions rather than suppressing financial innovation. Credible policies to allow the failure of financial institutions would encourage market monitoring of risk - taking, reducing the need for additional prudential regulation and minimising costs to the taxpayer in the event of bankruptcy. Policymakers should aim to put in place an objective, sustainable and flexible regulatory regime, as the design of the regulatory framework will play a significant role in the future development of both the financial industry and the wider economy. International consistency in the regulatory reform agenda is also important so as not to risk fragmentation of global capital markets, which bring significant economic benefits to companies and consumers alike. The economic and social purpose of financial markets is the efficient allocation of capital, and the regulatory agenda must be framed around this goal. At a time when the European economy is struggling to recover lost ground, changes to the regulatory regime should not unduly restrict the potential of the financial sector to contribute to the continents future prosperity.
Topic:
Development, Economics, Globalization, International Trade and Finance, and Financial Crisis
Political Geography:
Europe

427. Another Slowdown

Author:
John H. Makin
Publication Date:
06-2011
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Market conditions in the United States, Japan, China, and Europe portend a weakening global economy. While not dramatic in any one region save an earthquake-burdened Japan, these conditions could accumulate to create a problematic loss of momentum for global growth, especially compared to current upbeat consensus views for the second half of 2011.
Topic:
Economics, International Trade and Finance, and Global Recession
Political Geography:
United States, Japan, China, and Europe

428. 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

429. 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

430. 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