Search

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 deepening economic crisis triggered by the coronavirus pandemic has elicited extensive policy responses, but also raises daunting challenges for global governance. This policy-oriented article explores the new challenges for multilateralism, assesses efforts to coordinate these policy responses, and considers likely outcomes.

This rejoinder responds to the eight comments to our report on ‘Enhancing Europe’s Global Power: A Scenario Exercise with Eight Proposals’. We address questions related to our definition of Europe, the notion of power, context and appropriateness of the scenario approach, the feasibility of enhancing European power, the rationale behind the proposed eight measures as well as the way ahead. Finally, we highlight green policies together with media and communication as promising candidates to increase European power.

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.

La mise en œuvre de l’investissement social suppose une analyse economique rigoureuse. Elle doit permettre de montrer en quoi une depense de protection sociale a un moment donne ne se limite pas a une consommation, c’est-a-dire a un transfert monetaire simple que les physiciens qualifieraient de « dissipatif », car il n’aurait qu’un effet a court terme. La notion d’investissement suppose au contraire que les sommes mises en jeu produisent un effet, qui, dans le cas de la protection sociale, ne peut se mesurer, le plus souvent qu’a moyen ou long terme. Le calcul de la rentabilite de l’investissement social et la maniere de le mettre en œuvre font l’objet de debats methodologiques et normatifs intenses, pour calculer sa rentabilite, mais aussi pour evaluer son caractere redistributif vis-a-vis de ses beneficiaires et pour optimiser la gestion du risque entre l’Etat, les individus et les investisseurs prives.

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.

This policy brief evaluates the backdrop to the European Commission’s proposals for the EU’s coming seven-year budget round, or Multi-annual Financial Framework. As usual, the negotiations are a careful balancing act between net contributors to the EU budget and its main beneficiaries and are expected to extend well into 2019. This budget round also faces the additional complications of Brexit, which will impact the revenue side of the equation, and new security, cohesion and migration challenges which will fuel pressure for more spending. The briefing examines these pressures and argues that, with so many interests to balance and limited political capital to expend, the Commission will have little room for manoeuvre even before the Member States start unpicking apart its proposals.

Like any form of investment, social investment will generate a rate of return and will represent a good use of public funding only if that rate of return is high enough compared to alternative uses of the resources. As with assessments of the benefits of action to prevent climate change, it is important to identify the main costs and benefits over time and to take into account the cumulative results of longer-term effects. However, because many of the consequences of social investment only materialize in the longer run, the justification for making social investments will be crucially affected by the discount rate chosen. This chapter examines how social investment can best be assessed from an economic standpoint, drawing attention to aspects that may prove contentious.

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 trade-off between risk reduction and risk sharing has been at the heart of debates concerning EU economic governance over the last five years, but there are few signs as yet of a solution being reached.

The extensive economic governance reforms in the euro area since 2010 have put in place a system (EMU 2) that is intended to be more intrusive, prescriptive and enforceable in constraining Member State economic policies. It can be characterized as a recasting of the stability-orientated framework which is intended to correct the acknowledged shortcomings of the original set-up (EMU 1), but does not fundamentally alter the policy model. Rather its ambition is to be more effective, notably in implementation. This article revisits the economic arguments for monetary integration and considers whether the core features of the new model and the economic logic that underpins them will improve the governance of EMU in assuring macroeconomic stability. It draws attention to remaining gaps in the governance system and discusses possible further reforms.

Since the sovereign crisis erupted in the autumn of 2009 when the true scale of the Greek fiscal deficit was revealed, the European Union (EU), and especially the euro area, has staggered from crisis to crisis. Major initiatives have, however, been taken to improve economic governance and to put in place a more resilient framework for the euro. This article assesses how the EU has responded to the crisis and offers explanations for why the reform process has been slow and indecisive. It shows that potentially enduring solutions are on the table, but that they have been hard to introduce because of differing national perspectives and disagreements about how the burdens of adjustment should be shared. The article concludes by setting out plausible options and explaining what they entail.

Cohesion is an important EU policy domain that was originally primarily about regional development, but which has since acquired wider objectives. This article examines the definition of cohesion and how cohesion policy has evolved in the EU. It then looks at the impact of cohesion policy as a process in European integration, before focusing on possible reforms of cohesion policy. Five main dimensions of reform explored are the underlying remit of the policy, whether it should be retained in richer member states and regions, the linkages between innovation and cohesion, legitimacy issues and the economic governance role of cohesion policy. The article concludes that new thinking is needed to deal with the many unresolved issues around the future of cohesion policy.

The financial crisis has reopened debate on the architecture of financial regulation and prudential supervision in the EU, calling into question the home country control principle that has prevailed since the mid-1980s. This article discusses how the growth of cross-border financial intermediation can best be regulated to limit the ensuing risks of financial contagion. It argues that a supranational supervisory system is now needed for some intermediaries, but that proximity to market actors at national level remains important. This points to a quasi-federal system as the way forward, but in constructing such a system account has to be taken of the diversity of Member State structures and preferences. The article concludes that even if a much more extensive EU-level competence is theoretically the optimal way forward, political considerations make it unlikely, suggesting that the crisis has broader implications for European integration.

L’economie suedoise s’est remise avec brio de la profonde depression qu’elle a subie au debut des annees 1990 et a par la meme occasion refondu son modele social, revenant en quelques sortes au modele Rehn-Meider qu’elle avait suivi avec succes jusqu’aux annees 1980. Les partenaires sociaux jouent un role significatif dans la regulation du marche du travail, comme dans d’autres pays nordiques, mais contrairement au Danemark, la Suede jouit d’une protection de l’emploi relativement solide. Depuis le milieu des annees 1990, le pays a suivi une politique macroeconomique visant sa stabilite et les inegalites salariales y sont faibles. Un marche du travail aux politiques actives et un engagement fort vis-a-vis de l’egalite des sexes font aussi partie du policy-mix. La Suede beneficie d’un taux d’emploi eleve et d’industries fortement exportatrices, et pourtant le nombre d’heures travaillees y est relativement bas : ce paradoxe apparent s’explique en partie par les possibilites etendues de conges remuneres et par les mecanismes d’incitation du systeme de protection sociale. Depuis les annees 1960, pratiquement toute la croissance de l’emploi s’est produite dans le secteur public, une tendance non viable sur le long terme, et certaines critiques posent la question de la rentabilite des politiques actives d’emploi. Cet article conclut neanmoins que la Suede a prospere dans la globalisation, creant par la une base solide pour une prosperite durable et la justice sociale du pays. On peut malgre tout se demander si la transformation d’un modele, aussi reussie soit-elle pour l’instant, pourra resister au temps.

Over the last two decades, there have been far-reaching transformations in the ways central banks operate, especially in regard to how openly they communicate with other actors. Transparency in central banking has two quite distinct motivations. The first is to provide a means of holding the central bankers to account, while the second is about the efficiency of their policy-making. These two motivations for transparency reflect contestable norms about the choices central banks make. The paper discusses how transparency in central banking functions and explores how the underlying norms might be open to contestation. A typology showing the rationale for, and effects of, different forms of transparency is constructed and its implications assessed.

This paper considers what will be required to make Economic and Monetary Union (EMU) sustainable following the successive crises of recent years. It starts by laying out the policy benchmark, namely the successive ‘President Reports’ produced by EU institutions. It then suggests three dimensions of sustainable integration relevant to EMU, namely the pursuit of sustainable growth, the need to take into account what we call ‘varieties of modernisation’ and the ‘ownership’ of democratically sustainable reforms. It then evaluates the recasting of EMU governance against the benchmark of sustainable integration.

Sustainable development is an elusive concept that encompasses the macroeconomic and the social, as well as the environmental. It has become a defining principle of European socio-economic development, but is also beset by many uncertainties which bear on how it is interpreted in governance terms. This chapter reviews the governance of sustainable development in the EU in the light of the many uncertainties and conceptual ambiguities that surround policy-making in this area. Although sustainability offers an appealing conceptual framework for the socio-economic development of the EU, a key conclusion of the chapter is that it struggles to provide clear directions for decision-making. Nevertheless, it will remain important as a norm for the EU’s future development.

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.

This article proposes and develops a concept - investability - that can be used for analysing the competitive position of cities or regions, and formulating policy responses. It can be defined as conditions that are conducive to a higher level of investment and refers principally to the business environment in which economic agents operate. The paper discusses various influences on investment decisions and how they will impinge on different classes of potential investors. Policy implications are developed and the ways in which the concept might be used in policy making are examined.

Public expenditure and taxation are at the core of the relationship between governments and citizens. Yet transparency in fiscal policy has been relatively neglected, compared to its significance in other policy areas, notably monetary policy. This chapter first discusses what is meant by transparency, then goes on to explore the underlying rationale and theoretical models for having it. The varied experience of fiscal transparency and the role of international organizations, such as the International Monetary Fund and the Organisation for Economic Co-operation and Development, in encouraging governments to implement it are reviewed. The principles that fiscal policy should seek to follow are discussed as is its role in the policy process, and the chapter concludes by highlighting issues on which further research might focus, such as how information disclosure affects policy making and the optimal degree of transparency.

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

In efforts to promote cohesion in the EU, the structural funds are an important instrument. The current mandate for the funds comes to an end in 1999, and it mill have to be renegotiated shortly against a backdrop of the start of EMU and probable enlargement of the EU. This paper reviews the principles governing the structural funds and looks at the problems they face in practice. It then considers possible reforms to meet the obligations on, and expectations of, the EU in the years to come, and what these would imply for different regions as well as the potential new member states.

The financial, economic and debt crises in Europe have prompted a flurry of governance reforms, as part of which substantial changes in financial regulation and supervision have been undertaken. This chapter describes the evolution of the crises and discusses the constraints on EU action, including the difficult political context and the constitutional limits on what the European Central Bank is able to do, as well as the complications of having only 17 out of 27 EU Members States inside the euro area. It summarises and appraises the governance changes made since 2009 and highlights “unfinished business” that still requires the attention of policy-makers. The paper concludes that although the governance changes are extensive and generally well-conceived, the fact that there is no European tax-payer, only national ones, will continue to limit what the EU can do.