Blog Post
Deposit insurance, like any insurance scheme, raises moral hazard concerns. Such concerns arising from European deposit insurance can be alleviated through a country-specific component in the risk-based premium for deposit insurance and limits on sovereign bond exposures on bank balance sheets. This column argues, however, that proposals to maintain national compartments in a new European Deposit Insurance Scheme are self-defeating, as such compartments can be destabilising in times of crisis.
Opinion
Europe needs to have its Italian voice. A stable government is required not only to pursue domestic policies and remain fiscally prudent but also to negotiate on euro-area reform, priorities in the EU budget and intensifying competition in global trade.
Blog Post
Our scholars Grégory Claeys, André Sapir, Dirk Schoenmaker, Nicolas Veron and Guntram B. Wolff, explore the next steps needed to create a more functional and coherent economic governance framework.
Policy Brief
Two diametrically opposed visions of the euro-area architecture have been put forward. Departing from both Juncker’s and Schäuble’s proposals, the author identifies new ideas to develop the euro-area governance
Blog Post
8 of the EU27 have not yet joined the Euro, and progress in euro-area enlargement seems to have stalled. Commission President Juncker wants to give new momentum to the process, but the path is full of political and technical hurdles. The Euro is unlikely to have any new members soon.
Policy Brief
Two of the banking union’s pillars – common European supervision by the European Central Bank and common European resolution by the Single Resolution Fund – are up and running. But the third, common European deposit insurance, is still missing. The authors propose to design the EMF as part of a broader risk-sharing and market-discipline agenda.
Policy Contribution
What are the remaining fragilities of the Euro architecture? This policy contribution assesses the institutional reforms put in place during and after the crisis and make some proposals for a coherent economic governance framework to make Europe’s monetary union more resilient.
Policy Contribution
While precautionary recapitalisation is a legitimate instrument for bank crisis management, the conditions set for it by BRRD (Bank Recovery and Resolution Directive) are restrictive and have so far been effective to prevent its inappropriate use on insolvent banks. Nevertheless, the European Stability Mechanism should be empowered to participate in future precautionary recapitalisations.
Policy Contribution
As regulators rush to strengthen banking supervision and implement bank resolution regimes, a macro approach to resolution is needed that considers both the contagion effects of bail-in and the continuing need for a fiscal backstop to the financial system. This can be facilitated through the completion of a banking union in which the European Stability Mechanism (ESM) becomes the fiscal backstop to the euro-area banking system.
Blog Post
Many voices are calling for the ESM to be developed into a fully-fledged European Monetary Fund. But what changes would this entail, and how could the new institution be governed? The authors see both need and hope for change.
Policy Contribution
At the current level of political and societal integration, a large federal budget is unrealistic in the euro area. The authors make three recommendations that would lead national fiscal policies to be more stabilising with respect to the economic cycle, while achieving long-term sustainability. They also recommend a move towards a European unemployment insurance scheme targeted at ‘large’ shocks, and a minimum set of labour-market harmonisation criteria.
Blog Post
Speech held at Bruegel Annual Dinner, Brussels 7 September 2015