Europe’s tardiness to come to agreement on Greece let alone the EU budget shows worrying degree of focus. This week, the European Commission has the opportunity to concentrate European economic governance on the countries and the problems that really matter. Wednesday, the European Commission is releasing its annual growth survey (AGS) and its alert mechanism report (AMR). The AGS is supposed to be the central document guiding European economic governance in the next year. It is supposed to set priorities for fiscal, macroeconomic and structural policies for the EU as a whole. The problem with such a document is that it easily is too broad and misses the focus on the real priorities. In recent papers (see An Assessment of… Read more
Bruegel blog
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Time to focus
27th November 2012
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Should Europe Emulate the US?
23rd November 2012
Paul Krugman, the Princeton University economist and blogger, recently summarized diverging transatlantic trends as follows: “Better here, worse there.” It is a shocking observation: as recently as in 2009, European politicians and commentators lambasted the US for being at the root of the financial turmoil and hailed the euro for protecting the continent from it. Unfortunately for Europe’s boosters, the facts are unambiguous. According to the European Commission, US per capita GDP is expected to return to its 2007 level next year, whereas it is expected to remain 3% below that level in the eurozone. Likewise, unemployment was roughly the same on both sides of the Atlantic in 2009-2010, but it is now almost four percentage points lower in the… Read more
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The German implementation of the fiscal compact - towards more ambition (in German)
20th November 2012
This testimony was presented at a hearing at the Bundestag Haushaltsausschuss on 19 November 2012. Der Fiskalvertrag erfordert die Umsetzung bestimmter Vorgaben in nationale Haushaltsregeln. Die Vorschläge der Bundesregierung zu einem unabhängigen Fiskalrat, der die Einhaltung dieser Regeln überwachen soll, werden als insgesamt relativ wenig ambitioniert eingeschätzt. Der Stabilitätsrat kann nicht als vollständig unabhängiger Fiskalrat im besten Sinne der Literatur betrachtet werden. Sein unabhängiger Beirat hat nicht ausreichend definierte Informationsrechte und sein Benennungsverfahren könnte verbessert werden. Auch die Informationsrechte des Parlaments sind verbesserungsfähig. Der Beirat sollte gestärkt werden, um diese Probleme zu beheben. Dadurch würde Deutschland die angestrebte internationale Vorbildfunktion verbessern. 1) Einleitung Der Vertrag über Stabilität, Koordinierung und Steuerung in der Wirtschafts- und Währungsunion, kurz Fiskalvertrag, ist ein zentraler… Read more
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Decarbonisation is no 100 metre race
16th November 2012
In November 2012, the European Climate Commissioner made a proposal to stabilise the European Union’s emission trading system – a market for greenhouse gas emission allowances that has been in place since 2005. Under the proposal, allowances worth six month of EU emissions (900 mn tonnes) would be temporarily taken out of the trading system, and sold in 2019 and 2020 rather than 2013-2015. Read more
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The Greek debt trap: missing the wrong target
15th November 2012
IMF and European officials have publicly clashed over the date by when Greece public debt should be reduced to 120 percent of GDP. The IMF insists on the earlier target date of 2020, while the Europeans propose 2022. Both are wrong: a 120 percent target, whether it is reached in eight or ten years, will not restore trust now and will not make investments in Greek bonds attractive to private investors a decade from now. A credible strategy should involve zero-interest official lending and indexing loans to GDP. A major reason for Greece's public debt misery is a negative feedback loop between high public debt and the collapse in GDP. The loop is especially strong when there are widespread expectations… Read more
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Internal energy market: The pieces of the puzzle do not fit
15th November 2012
The internal energy market is the cornerstone of European energy policy. Most consumers like it because it increases competition and eventually reduces their energy bills. Suppliers are partly released from their dependence on the whims of national politicians. Climate activists like it because it allows the renewable resources of an entire continent to be used. And energy security enthusiasts appreciate that internal rebalancing within the single market allows individual foreign supplies to be replaced if needed. The European Commission's energy market communication (to be) published on November 15 indicates that there are major obstacles blocking the implementation of the internal energy market by the political target date, 2014. The communication points frankly to numerous core issues: due to national renewable… Read more
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Filling Europe’s bottomless pit
9th November 2012
After so many packages, the Greek parliament passed another round of austerity measures on Wednesday night. As reported by the Financial Times, the new measures include cuts of between 5 and 35 per cent in pensions and public sector salaries, tax increases on fuel and cigarettes, and higher charges for state healthcare. The retirement age will rise from 65 to 67 for recent entrants to the workforce. Yet this will not at all solve the budget gap, which may seem like a bottomless pit from the eyes of euro-area partners. Greece has been granted two financial assistance programmes by euro-area partners and the IMF (the first in May 2010 and the second in March 2012), totalling almost €240 billion. But… Read more
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A sunset clause for Europe's banking union
7th November 2012
Europe is determined to move ahead quickly with a banking union, after EU leaders gave it the green light at summits in June and October. Most of the discussion is focused on the supervisory mechanism while work on bank resolution is still in its infancy. A strong central supervisor will certainly be of great importance in overcoming the crisis around the euro. On 12 September, the European Commission published its proposal for the single supervisory mechanism, which would give the European Central Bank substantial supervisory powers. The October summit agreed to move ahead with the proposals and discussions now focus on how to improve the proposal. However, the proposal has shortcomings. These arise because of the Commission and EU Council… Read more
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Compétitivité : les trois débats
5th November 2012
Un seul suffirait au malheur du gouvernement. Mais sur la compétitivité, trois débats s’enchevêtrent : ils portent sur l’urgence d’une réponse ; sur la nature du mal ; et sur les solutions. Le premier est simple à trancher. En août 2012 le déficit extérieur cumulé sur un an était de 41 milliards ; en 2007 il était de 12 milliards; et en 2002, il s’agissait d’un excédent de 22 milliards. Il y a dix ans la France comptait 130.000 entreprises exportatrices et sa part dans les exportations de l’OCDE était de 8% Read more
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Tim Geithner and Europe’s phone number
4th November 2012
According to a famous (yet apocryphal) joke by Henry Kissinger, there is no telephone number to call to speak to Europe. Indeed the fragmentation of European power and representation makes it difficult to determine who can speak for the EU or the euro area. US Treasury Secretary Tim Geithner however has found out with whom to speak to discuss responses to the euro crisis. This, at least, is what his official schedule indicates: from January 2010 to June 2012, the last date for which his calendar is publicly available, he had no less than 168 meetings or phone calls with Euro-area officials, plus 114 with the IMF. And the person he spoke most often with, apart from the IMF chief, was the ECB president. Read more