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In the present context of intensifying competition between the major trading economies and potentially game-changing technological developments, the European Union is generally seen as the weaker party. Lacking the ‘hard power’ derived from military capabilities, it has laid claim to a ‘soft power’ of normative influence externally, yet even that is only partially utilised. Nor has Europe been able to exercise the power to coerce – ‘sharp power’ – commensurate with its economic weight as a trading bloc equivalent in size and reach to the US or China, its most prominent global competitors. How can Europe strengthen its position, and in what fields? Through a scenario exercise, we develop eight policy proposals aimed at countering Europe´s vulnerabilities and enabling it to assert its sharp and soft power more effectively. Specifically, we consider the feasibility, means and scope for their realisation. Together, they provide a transformative agenda for the EU’s position in the world.

The Faustian bargain at the heart of Brexit can be portrayed as a trade-off between enhanced control and economic benefits. Most commentators expect the UK economy to take some sort of hit from leaving the UK, but in the words of one prominent ‘leave’ supporter, it would be a ‘price worth paying’, to regain control over decision-making. https://www.politicshome.com/news/europe/eu-institutions/news/73963/arron-banks-%C2%A34300-loss-price-worth-paying-brexit. For convinced Brexiteers, a UK unshackled from the EU will rapidly transform itself to be able to take advantage of opportunities in emerging markets and other dynamic parts of the global economy, while ‘remainers’ see distancing the UK from its largest market as an egregious act of self-harm. Both sides have been culpable of misleading statements. Similar dissembling occurred in relation to the public finances. The article explores how competing, poorly understood and often incoherent interpretations of economic propositions fed into Brexit, leading to misguided policy decisions and confusion in the debates around how to reset the UK’s economic relationship with the EU.

The UK’s decision to leave the European Union will have a wide-ranging effect on the British economy, but the scale and sequencing of the likely effects are hard to gauge. The uncertainties surrounding how a country separates itself from a regional economic bloc have posed challenges to the economics profession about how best to analyse the many consequences. The paper discusses the main lines of relevant economic argumentation, and reviews the evidence from studies of the likely effects of “Brexit”. It then considers how the UK’s economic linkages with the EU might evolve and examines some of the ensuing political economy challenges. The concluding section ponders the role of economists in so contentious a political development.

Since 1988, when the current EU Cohesion Policy was introduced, it has played an influential role in setting priorities for policies aimed at dealing with the effects of European economic integration on regional and social disparities. Although, latterly, the amount of money spent in the UK through the European Structural and Investment Funds (ESIF) has declined, EU programmes have had a disproportionate effect on the design and implementation of UK policies shaping regional and local economic and social development. This paper starts by recalling how EU Cohesion Policy has functioned in the UK, then considers how Brexit may affect regional and social development and the need for a corresponding policy response, focusing on the sorts of policies currently supported by the European Regional Development Fund (ERDF) and the European Social Fund (ESF). The paper shows that filling the policy vacuum will be far from straightforward because complementary national policies and institutional frameworks have lacked consistency or coherence. It concludes by examining the wider policy issues arising from rethinking domestic policy outside the ESIF framework. The sub-national level, in particular, will need a fresh approach following Brexit.

The European Union budget is small and fulfils only a limited range of functions, yet it provokes regular disputes among the Member States and institutions of the Union. This paper describes the structure of the budget and shows that standard theories, such as fiscal federalism, are not well-suited to analysing how the EU budget operates or the political economy behind it. The paper then looks at how much the UK contributes towards the EU budget and explains why some of the claims made about it in the public discourse are inaccurate.

EU Member States, particularly in the Euro Area, have been pushed to adopt more extensive and intrusive fiscal rules, but what is the evidence that the rules are succeeding? The EU level Stability and Growth Pact (SGP) has been – and remains – the most visible rule-book, but it has been complemented by a profusion of national rules and by new provisions on other sources of macroeconomic imbalance. Much of the analysis of rules has concentrated on their technical merits, but tends to neglect the political economy of compliance. This paper examines the latter, looking at compliance with fiscal rules at EU and Member State levels and at the rules-based mechanisms for curbing other macroeconomic imbalances. It concludes that politically driven implementation and enforcement shortcomings have been given too little attention, putting at risk the integrity and effectiveness of the rules.

The ECOFIN Council decision of November 2003 that noted the existence of ‘excessive deficits’ in France and Germany but did not impose sanctions on these two governments was widely interpreted as sounding the death-knell for the Stability and Growth Pact. A ruling by the European Court of Justice on 13 July 2004 annulled this decision, paving the way for reform of fiscal policy coordination in the Euro Area. This article examines what caused the difficulties that have arisen, reviews and appraises a range of proposals for reform of EMU's fiscal policy rules and suggests a way forward.

There are differing views about the need for economic policy coordination in the EU and about the adequacy of the system that has evolved under EMU. This article examines the case for such policy coordination, then describes and assesses the current arrangements for both ‘hard’ coordination — epitomised by the much-maligned Stability and Growth Pact (SGP) — and the ‘soft’ forms of coordination that have evolved in the EU to complement formal rules. Although the system achieves more than is sometimes recognised, it is shown to have weaknesses. Options for reforming the SGP and other facets of the system are discussed.

Since the mid-1990s, several steps have been taken towards an integration of social policy in the EU. Yet there is reluctance in many quarters to go further. This article introduces the special issue on integration of EU social policy and explores the case for more comprehensive `Europeanization'. We argue that the norms that underlie the European model provide the rationale for integration, and that the usual focus on the undoubted differences between countries in the approaches to, and delivery mechanisms of, the welfare state are not as great an obstacle as is often assumed. With the advent of EMU and with many common problems to confront, the EU countries have good reasons to adopt a common approach to social policy, even if implementation remains at the national level. The open method of coordination provides the means of reconciling these aims and the article concludes with a discussion of how it might evolve to achieve a more integrated EU policy.

In the early morning of 26 March 1999, the EU’s heads of state and of government emerged from a marathon meeting to unveil the Financial Perspective for the period 2000-2006. Six weeks later, the deal was formally approved by the European Parliament by a 2-1 majority. The outcome should, therefore, be that the EU’s finances are secure for the next seven years. That a deal was reached may, at first sight, seem surprising, as the auguries were not good as Germany took over the Presidency at the beginning of the year. Perhaps paradoxically, the debacle of the resignation of the Commission and the ensuing soul-searching about the future of the Union may have helped, as Europe’s leaders felt obliged to try to rebuild confidence. The start that week of the bombing campaign against Yugoslavia was probably also significant, as a continuing squabble over relatively tiny sums of money would have looked petty. Yet although the importance of securing a deal should not be under-estimated-failure would have risked plunging the EU into financial crisis within a few months-the agreement ducks most of the major questions about the role and character of the EU budget. Moreover, many specific elements in the package are backward steps that are more likely to lead to more intractable problems in future. Even though there is provision within the Budget for a steady growth of expenditure on the Central and Eastern European countries, both before and after accession, there must also be suspicions that the new Financial Perspective will delay rather than facilitate enlargement. This paper appraises the 2000-2006 Financial Perspective as now agreed and examines its shortcomings in relation to the development of the EU. The next section considers the question of why there is an EU budget and points to the confusion in aims ascribed to it. The background to the new agreement is then described and appraised. In the concluding sections, I focus on what might have been and possible ways forward.

Improved competitiveness, as we all know, is the path to economic nirvana. Plainly, it is a sought-after property of any economy: the term is frequently used by politicians and commentators on economic and business matters. As cities increasingly engage in competition with one another at different levels, the determinants of competitive advantage are coming under intense scrutiny. Many an economic development strategyÐ whether at national, regional or urban levelÐ starts from the premise that `something can be done’ to make an economy more competitive. There is a high-powered Competitiveness Advisory Group which reports to the European Commission (Jacquemin and Pench, 1997); the US has a special commission for competitiveness and the UK government produced a succession of White Papers on the subject in the 1990s. In the latest, the new Labour government highlights the need for the `right local environment for business success’ (Department of Trade and Industry, 1998). The OECD (1996, 1997a, 1997b) too has published a series of reports on the subject, looking particularly at new industries. But there is precious little agreement either on what the term `competitiveness’ means or on how policy should aim to enhance it. Yet most people have an instinctive understanding that some economies function better than others and that there are systematic reasons for this. We know one when we see one, but it is dif® cult to de® ne an elephant. It tends to be taken for granted that some cities have lost their competitive edge, although it is less obvious what variables demonstrate this. In many parts of the world, major cities that were the powerhouses of their respective economies have lost ground substantially. The decline of traditional manufacturing or mining lies behind the relative decline of many of the `rustbelt’ cities of the North and East of the US or the old industrial cities of northern Europe. The poor economic performance and growing social problems of many British cities, especially over the past three decades, have prompted searching questions about their competitiveness and whether or not they specialise in the `right’ sorts of activities. It can also be argued that globalisation, advances in information technology and farreaching structural change have altered the terms of competition between cities (JensenButler et al., 1997). Jockeying for position between the large ® nancial centres such as London, New York and Tokyo has been recognised for some time (Sassen, 1991; Frost and Spence, 1993). European integration impels cities to be more alert to the

As Europe moves towards economic and monetary union, the shortcomings in the de velopment of European social policy will be come more apparent. Thus, although there have been plenty of initiatives affecting work ing conditions and the Social Fund is clearly an important instrument of Commission policy, few policy developments at the European level could be said to have had much effect on redis tribution. This article assesses the scope for a more explicit involvement in social policy, es pecially social protection, by the European tier and considers the consequences of a failure to address this issue. Despite the likely opposition to any proposals to confer some responsibility for social protection on the supranational tier, the need for changes in current arrangements is demonstrated. This article reviews proposals for E U level social protection and discusses obstacles to their implementation, notably the lack of cross-border solidarity. It is argued that the manner in which social protection is dealt with will be an important pointer to the future character of the E U and that this issue needs to be given greater prominence on the political agenda.

In writing recently about the economic problems that Northern Ireland faces (Begg and Mayes, 1994) we argued, uncontroversially, that an end to the ‘Troubles’ would significantly alter the region's prospects. Our analysis, nevertheless, focused on other factors which might be amenable to policy action. With an end to the Troubles in Northern Ireland now on the cards, these other characteristics of the Northern Ireland economy must be expected to be of increased importance in determining the Province's competitiveness compared with other parts of the UK and, indeed, other regions of the European Union. In particular, Northern Ireland is a prime example of a ‘peripheral’ economy, located as it is at the North-Western corner of the EU and facing the further barrier of a sea crossing to markets other than the Republic of Ireland. It is also a region that shares a number of the characteristics of the older industrial regions of Britain, such as high unemployment, persistent emigration of working-age population and difficulties in achieving industrial restructuring (Harris et al., 1990; Harris 1991).

The Spanish economy has undergone a transformation in the last decade, in the course of which it has emerged as a significant industrial power. This process has been associated, in part with EC membership since 1986, a result of which has been a reorientation of trade away from traditional trading partners, such as Latin America and towards the EC. In 1991, 67-2 per cent of Spanish exports of manufactures went to other EC countries, compared with 51-2 per cent in 1980. Spain has, too, been a favoured destination for foreign direct investment in recent years, facilitating the development of new industries. Spain, however, faces a number of challenges in the next few years. First, it has to contend with economic and monetary union (EMU). This will entail not only monet ary discipline to ensure that the Maastricht convergence criteria are met, but also continuing effort on structural policies to sustain competitiveness. Second, the persist ence of a rate of unemployment which has been the highest in the EC for several years, coupled with the social policy aim of encouraging a higher rate of female participation in the labour force means that employment creation will be a priority. Third, the need has been identified for Spanish industry to internationalise in order to underpin the economy's performance. A fourth challenge is to ensure a more balanced regional pattern of development. Much of the growth in the late-1980s was in the relatively more prosperous Madrid and Catalonia regions, as well as in the auton omous region of Valencia, all of which benefited dispro portionately from the inward investment boom. In contrast, some of the 'rustbelt' areas in the North have been adversely affected by the decline of traditional industries such as shipbuilding and steel-making, while the less-developed regions in the South and West con tinue to lag behind in their industrial development. For political as well as economic reasons, redressing the regional balance is vital. In meeting these aims, Spanish industry has a pivotal role to play both in supplying domestic demand and in securing foreign earnings. Before 1975 and the end of the Franco regime, Spain had successfully industrialised its economy, largely by concentrating on consumer goods manufactures and with quite significant protection. In the wake of the 1973/4 oil crisis, industrial growth fal tered, as can be seen from Chart 1, with the result that manufacturing production in 1984 was no higher than it had been a decade earlier. Renewed growth in output only occurred from 1984 onwards, considerably helped by a substantial labour cost advantage, but with different industries, notably motor vehicles, leading the way. However, as the OECD (1992: p. 78) notes, 'Six years of rapidly rising wages, coupled with the appreciation of the peseta, have considerably reduced the wide labour cost margin that Spain enjoyed in the past'.

Employment in the high technology sectors is unevenly distributed across Great Britain, with the south of the country having a higher share of such activity than the north. New Towns appear to have been more successful than other urban areas in attracting high technology, and this continued to be the case during the 1980s. There is evidence of a relative increase of high technology activity in smaller urban areas since 1981, whereas the conurbations have been losing ground. The article presents new data on trends in employment in the high technology sectors and considers what they imply for policy towards economic development.

High technology manufacturing and services are not evenly spread throughout Great Britain. London and the rest of the South East dominate with almost half of all the high technology workforce: the rest of the South East, East Anglia and the South West have relative concentrations of high technology. In terms of urban areas, none of the evidence and statistical testing suggests any correlation between the location of high technology manufacturing and city size. High technology services do, however, appear to prefer larger cities. Both high technology manufacturing and services reject locations which contain a high proportion of traditional economic activities but are more likely to be found where producer services are also concentrated.

Regional development is one of the main EU spending priorities through its Cohesion Policy. Brexit is one of several influences on the future of the policy, whose evolution is part of a wider reshaping of the principles and practice of regional policy in Europe. In the context of emerging policy challenges and recent contributions to the regional policy literature, the article highlights innovation, human capital and effective institutions as three crucial dimensions of future policy. It argues that a shift in regional policy priorities, governance and territorial focus is underway – partly influenced by place-based policy thinking - at EU level under Cohesion Policy as well as under national regional policies in the EU27 and the UK.