In his January column, Senior Resident Fellow Nicolas Véron examines the European Union's performance in reacting to the global economic crisis. He explains that while the EU has had major difficulties in the wake of the crisis, there have been several positives: the European Central Bank has been seen as a key player and has restored stability to the markets; the EU is creating the world's first supranational financial authorities; and the euro has withstood prophecies of its inevitable break-up. Véron adds, however, that the biggest challenges still lie ahead. Few political arrangements have been as tested by the economic and financial crisis as the European Union. The EU is a relatively recent endeavor, with its origins in 1950. It has… Read more
Bruegel blog
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The Jury is Still Out on the European Union's Crisis Performance
21st January 2010
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Le Imprese non paghino le difficolta delle banche
19th January 2010
In this column, Visiting Scholar Ignazio Angeloni argues that the exit phase from the financial crisis will prove particularly dangerous for European small and medium sized enterprises. Many of them, though viable in the long run, are endangered by a prolonged negative cash flow, tight lending by banks and shifting patterns of international demand and competitiveness. Public intervention (eg. through credit guarantees) to temporarily protect SMEs is justified in these circumstances. Click here to download this comment in Italian. Read more
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La cura Volcker puo non bastare
19th January 2010
In this column published in the Italian Il Corriere della Sera, Visiting Scholar Ignazio Angeloni argues that the 'Volcker rule' (the recent proposal by the US administration to ban proprietary trading for comercial banks) is neither necessary nor sufficient to reduce systemic risks in the financial sector. Risks in recent years have mainly come from non-bank intermediaries (hedge funds like LTCM, investment banks, insurance companies). Pridential regulation should be as uniform as possible across types of intermediaries and jurisdictions. Click here to download this comment in Italian. Read more
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Last Year in Copenhagen
11th January 2010
Director Jean Pisani-Ferry takes a look at the results of the Copenhagen climate change summit and its implication for global governance. He points out the economic challenges in the way of a future climate accord, examines the diverging reactions of the different state actors to the climate summit and discusses the failures of the United Nations in the process. The noughties opened inauspiciously with a setback for global governance with the election of George W. Bush, who believed in US leadership and was sceptical of multilateralism. They closed in Copenhagen with a UN-generated multilateralist fiasco. The largest-ever assembly of heads of state in history ended in confusion with an ambiguous three-page text which was not even formally adopted.Reactions in Europe… Read more
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Why Europe Struggles - And How it can Recover
11th January 2010
Director Jean Pisani-Ferry addresses the questions about Europe's structure, governance and competitiveness that arose from the financial crisis. Among them: Why was Europe hit so hard by the financial crisis? What does the crisis tell us about Europe's internal challenges? How lasting and severe will the fiscal and consequences be? What is the agenda for financial reform? As the European economy slowly emerges from the Great Recession of 2008-2009, questions abound that will occupy the minds require the energy of policymakers for many more months or possibly years: why was Europe hit so hard by the financial shock? What does the crisis tell us about Europe's internal challenges? How lasting will its consequences be? How severe will its social consequences… Read more
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EU Has Major Challenges to Confront
6th January 2010
In a column for the business daily the Australian Financial Review, Senior Fellow Nicolas Véron describes the successes and follies of the European Union in the aftermath of the crisis and warns of the many challenges that await the EU. These include a restructuring of the banking industry and the creation of cross-border co-ordination mechanisms; the establishment of a clear framework to address the possibility of sovereign default from member states; and a closing of the gaps in the EU institutions' democratic accountability in order to make fiscal federalism a possibility. European nations used to dominate the world, and no longer do. The European Union, ostensibly created to avoid new wars, can also be seen as a device to remain… Read more
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Will Governments Overrearch in their Crisis Interventions?
17th December 2009
Senior Resident Fellow Nicolas Véron writes in his monthly column about the fear that governments have acquired too much discretionary power in the wake of the financial crisis. Véron argues that the crisis has already led to cases of government outreach, citing several examples, and warns that such overreach is dangerous for long-term economic competitiveness. For more than two years, financial turmoil has forced an ever wider scope of government intervention in many countries. It is natural that public authorities extend their reach in emergencies, and in many cases there was no other reasonable option. Moreover, in spite of the market rebound, many economies remain disrupted and fragile, making new emergency developments likely, as recent headlines about Dubai or Greece… Read more
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A Long March to an EU Patent?
17th December 2009
Senior Resident Fellow Bruno van Pottelsberghe discusses the next steps policymakers need to take after EU industry ministers agreed on a package on 4 December that may pave the way for a European community patent (COMPAT). Discussing the effects of such a patent, van Pottelsberghe points to his recent working paper on the costs and benefits of the COMPAT and argues that national decision-makers must act so as not to get leapfrogged by China and other developing economies. Forty-seven years after the first call for a Community patent, the EU may have taken the first step.The package agreed by EU industry ministers on 4 December may pave the way for an „EU' or community patent – but, if it does,… Read more
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EMU Warfare: The Colin Powell doctrine has come to Europe
12th December 2009
Bruegel Director Jean Pisani-Ferry analyses the events leading up to May 9 a historic week for the European monetary union. In this article, he questions the unprecedented decisions that governments had to take with, regard to the euro area debt crises, and the long-term repercussions of them. The author questions if European policymakers have boxed themselves into a corner. If they only bought time with the decision to put up 500bn in loan guarantees available to finance assistance to ailing states and do they risk an even bigger catastrophe than the one they have avoided. May 9 will go down in European monetary history as the day when long-held taboos were thrown overboard. After endless weeks of agony over… Read more
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The Baltic Misery Needs a Solution
10th December 2009
Writing for the European policy website Euractiv.com, Resident Fellow Zsolt Darvas proposes a solution for the Baltic states, based off his Policy Contribution The Baltic Challenge and Euro-Area Entry. Darvas argues that the economic rationale surrounding certain aspects of the criteria for entry into the Euro area are unsound and should be reformed, allowing for immediate Euro-area entry for the Baltic states. The global financial and economic crisis has not turned into another global Great Depression. The Baltic situation, however, is very gloomy. After losing about 20 percent of GDP in the last two years, Latvia and Lithuania are still expected to contract by an additional 4 percent in 2010, while Estonia is expected to stagnate. There are also serious… Read more