Financial-Transaction Tax: Small is Beautiful
Policy Contribution, 8 February 2010
Based on a paper they wrote for the European Parliament Economic and Monetary Affairs Committee, Resident Fellows Zsolt Darvas and Jakob von Weizsäcker discuss the merits of the much-discussed financial-transaction tax. They argue that the case for taxing financial transactions for the sake of not raising revenue is relatively weak, but a financial-transaction tax could be useful in limiting socially-undesirable transactions. On this basis, they say, a very small, coordinated tax on financial transactions could be implemented successfully. [download it]
Memo to the New Commissioner for Energy
Policy Contribution, 30 December 2009
In this supplement to Bruegel's Memos to the European Commission, Resident Fellow Georg Zachmann analyses the recent developments in European energy policy and looks at the upcoming challenges in the area, making a number of recommendations to the newly-appointed Energy Commissioner. Zachmann notes that while liberalising energy markets and combating climate change will remain top priorities in the next term of office, securing energy supplies and energy price issues might temporarily lose some appeal due to the crisis-induced dip in the demand for energy. He claims that mitigating climate change, directing investments towards network infrastructure and creating a single energy market should be the three interlinked priorities for the Energy Commissioner. [Download it]
Memo to the New Digital Agenda Commissioner
Policy Contribution, 25 January 2010
Senior Resident Fellows Reinhilde Veugelers and Bruno van Pottelsberghe provide recommendations for the term of new Digital Agenda Commissioner Neelie Kroes in this supplement to Bruegel's Memos to the New Commission: Europe's Economic Priorities 2010-2015. They argue that Kroes should move past a focus on infrastructure and concentrate more on ICT's potential to contribute to growth in the European Union. This should include a focus on emerging ICT products and services to help foster an ICT single market and more public support for R&D and innovation, through tailored programmes designed to aid high-risk innovative projects conceived by new ICT companies. [Download it]
The EU’s Role in Supporting Crisis-Hit Countries in Central and Eastern Europe
Policy Contribution, 31 December 2009
The crisis has hit central and eastern European countries harder than other regions of the world. In this Policy Contribution, Resident Fellow Zsolt Darvas looks at the role of the EU and its institutions in supporting crisis-hit CEE countries, the stabilising effects of the EU’s coordinated multilateral financial assistance, and the commitment shown by Western European banks to the region. However, Darvas argues that there were certain actions, or lack thereof, coming from EU institutions and governments, that have amplified the effects of the crisis on CEE countries. The European Central Bank has given little direct support to non-euro-area countries, and the EU has done little for EU neighbourhood countries. Meanwhile, euro-area membership has shielded from the crisis some countries with worse fundamentals than many CEE countries. [Download it]
Cost Benefit Analysis of the Community Patent
Working Paper, 23 December 2009
The creation of a European Community Patent (COMPAT) came a step closer this month when Sweden brokered a preliminary agreement on the issue. In this working paper, Senior Resident Fellow Bruno van Pottelsberghe uses simulations to take a look at the advantages, disadvantages, winners and losers from the creation of the COMPAT. He finds that it would drastically reduce the relative patenting costs for applicants while generating more income for the European Patent Office and increased savings for the business sector. He also explains that the lost of economic rents for patent attorneys, translators and lawyers specialised in patent litigation and the drop of controlling power for national patent offices may explain why there has been such resistance to the COMPAT thus far. [Download it]
Monetary Policy on the Way Out of the Crisis
Policy Contribution, 17 December 2009
Senior Non-Resident Fellow Jürgen von Hagen recommends the proper steps for European monetary policy in order to lead the eurozone out of the crisis. He argues that the tentative recovery in the euro area indicates that both monetary and fiscal policy can be normalised soon. However, because delaying fiscal consolidation would result in greater debt burdens whereas monetary policy can be quickly adjusted to respond to unforeseen developments, there is less risk involved if a fiscal exit comes first. In any case, the two strategies must be coordinated and the European Central Bank must be very clear on its interest rate policies. This paper was prepared as part of testimony for the European Parliament Economic and Monetary Affairs Committee's Monetary Dialogue with ECB President Jean-Claude Trichet. [download it]
Bruegel in the media
The Best Course for Greece is to Call in the Fund
Op-ed, The Financial Times, 2 February 2010
Director Jean Pisani-Ferry and Senior Fellow André Sapir argue that the best option to solve the 'Greek crisis' is to bring in the IMF for a stand-by agreement involving conditional lending to the Greek government. While the EU is hesitant to bring in the IMF, Pisani-Ferry and Sapir maintain that the IMF is better suited to handle the political problems that would accompany such a bailout. This op-ed was published in The Financial Times (2 Feb) and NRC Handelsblad (3 Feb). [download it]
Retraites: réformer une bonne fois pour toutes
Op-ed, Le Monde, 1 February 2010
In French daily Le Monde, Director Jean Pisani-Ferry takes a look at the issue of retirement system reform in France in light of President Nicolas Sarkozy's proposed plans. Pisani-Ferry argues that reforming the retirement system is necessary to tackle rising public deficits and has the added advantage of not burdening current consumption. [download it]
Lessons From the Euro Area
Op-ed, Világgazdaság, 21 January 2010
Writing in leading Hungarian business daily Világgazdaság, Resident Fellow Zsolt Darvas examines what the financial crisis has taught us about various euro-area economies and what lessons that holds for Hungary's possible accession into the euro zone. Despite the difficulties of Greece, Ireland and others, he argues, adopting the euro would still hold major benefits for Hungary. [download it]
The Jury Is Still Out on the European Union's Crisis Performance
Op-ed, 21 January 2010
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. This column has been published in Forbes Russia (21 Jan) with a similar version published in Australian Financial Review (6 Jan). [download it]
Last Year in Copenhagen
Op-ed, Le Monde, 11 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. This Op-ed was published in French daily Le Monde and Chinese business magazine Century Weekly (both 11 Jan). [download it]
To read a version of the column in French, please click here.
Why Europe Struggles - And How it can Recover
Op-ed, Century Weekly, 11 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? This column was published in Chinese business magazine Century Weekly. [download it]
Recent Bruegel Publications
Banking Crisis Management in the EU: An Interim Assessment
Working Paper, 9 December 2009
Director Jean Pisani-Ferry and Senior Fellow André Sapir provide an in-depth examination of the the banking crisis in the European Union, starting with a discussion of the pre-crisis banking landscape and including an assessment of the management of the crisis and the lessons learned going forward. The authors argue that the EU was institutionally ill-prepared to manage the crisis, with the response characterised by ad hoc actions and a lack of transparency. They say, however, that coordination has remarkably not been impeded by a divide within the euro area and policy performance has been better than expected given the sub-optimal nature of EU financial institutional arrangements. [download it]
The Crisis: Policy Lessons and Policy Challenges
Working Paper, 2 December 2009
Bruegel Director Jean Pisani-Ferry, with Agnès Bénassy-Quéré (CEPII, University Paris-Ouest and Ecole Polytechnique, Paris), Benoît Coeuré (Ecole Polytechnique, Paris) and Pierre Jacquet (ENPC, Paris, and Agence Française de Développement) provide an in-depth analysis of the financial crisis. The authors review the main causes of the crisis, pointing to three different, non-mutually exclusive lines of explanation: wrong incentives in the financial sector, unsustainable macroeconomic outcomes, and misunderstood and mismanaged systemic complexity. They also discuss supervisory and regulatory reform going forward, including an examination of several macroeconomic and financial-sector issues. [download it]
No Green Growth Without Innovation
Policy Brief, 23 November 2009
This Policy Brief, co-written by Senior Non-Resident Fellow Philippe Aghion, Senior Resident Fellow Reinhilde Veugelers and David Hemous of Harvard University, attempts to change the terms of the debate surrounding climate change policy. The authors argue that policymakers should do more to encourage innovation and investment in ‘green’ research and development rather than focusing solely on the setting of a carbon price. Using a model developed by Aghion in a previous paper, they argue that a carbon price would have to be about 15 times higher in the first five years and 12 times higher in the next five years if innovation is not properly subsidised by governments. The authors also provide several policy recommendations for incentivising this type of ‘green growth’ in the private sector. [download it]