Fiscal federalism in crisis: lessons for Europe from the US

Policy Contribution, 12 July 2010

Drawing comparisons between the fiscal architecture and situation in the US and the European Union, Bruegel Research Fellow Zsolt Darvas answers three questions in this Policy Contribution- Why has the euro been hit so hard? How would a more federal European fiscal union closer to the US model have helped? How do the euro area’s fiscal architecture reform plans stand up in light of the US example? He concludes that a higher level of fiscal federation is not inevitable for the viability of the euro area, but current European fiscal reform proposals carry political risk and their implementation could be deficient or lack credibility. Introduction of a Eurobond covering up to 60 percent of member states’ GDP would be a much more preferable solution. [Download it]

The opening up of eastern Europe at 20 - jobs, skills, and ‘reverse maquiladoras’ in Austria and Germany

Working Paper, 12 July 2010

Many people in the European Union fear that eastern enlargement has led to major job losses in 'old' member states, particularly in Austria and Germany, as the two most important neighbours of the countries that joined the EU in 2004 and 2007. Are these fears justified? To address this question, Bruegel non-resident Senior Fellow Dalia Marin makes use of new survey data of 660 German and Austrian firms with 2,200 investment projects in eastern Europe during the period 1990-2001. The new survey data represent 100 percent of Austrian and 80 percent of German direct investment in eastern Europe. [Download it]

Boosting innovation in Europe

Policy Contribution, June 28 2010

Innovation is key to the future of Europe. This Policy Contribution, written together by Mathias Dewatripont, Solvay Brussels School of Economics and Management; Bruno van Pottelsberghe and André Sapir, Senior Fellows at Bruegel and professors at ULB; and Reinhilde Veugelers, Senior Fellow at Bruegel and professor at Katholieke Universiteit Leuven, makes suggestions based on three principles: to give primacy to merit-based selection of projects at the European level, to strengthen the single market to make it conducive for research and innovation and to remove barriers that hinder dynamic restructuring. This paper is addressed to the July 2010 informal Competitiveness Council (Research) under the Belgian Presidency. [Download it]

Europe’s stress tests: only one step towards banking repair

29 July 2010 ( Eurointelligence, Kathimerini)

In this month’s column, Bruegel Senior Fellow Nicolas Véron analysis the implications of the bank stress tests announced earlier this month.  He looks at the positive and negative aspects of the results and explains why though European banks may have been given a clean sheet, a lot remains to be done to keep the banking sector resilient. [Download it]

Detailed disclosure is the key to stress-test success

15 July 2010 (Eurointelligence, La Tribune)

The European Union has committed to publish the results of stress tests of 91 of its largest banks at the end of next week. In this column, Bruegel Senior Fellow Nicolas Véron argues that the success of this unprecedented initiative will be largely determined by the degree of disaggregated detail in the disclosure of results. He also calls for enhanced disclosure of each bank's exposure to eurozone countries' sovereign risk to compensate for the fact that the stress scenario will not include a sovereign default. [Download it]  [Download in French]