Overview publications

Watts Next: Securing Europe’s Energy and Competitiveness

Where the EU’s Energy Policy Should Go Now

Frédéric Gonand, Pedro Linares, Andreas Löschel, David Newbery, Karen Pittel, Julio Saavedra, Georg Zachmann

Russia’s invasion of Ukraine in February 2022 led to gas supply in Europe dropping significantly, shaking the EU out of its complacency regarding energy procurement and consumption habits. The costs of going green on top of more expensive energy are putting a strain on European competitiveness, with higher energy prices hitting the chemical, steel and metal processing industries in countries like Germany, Spain or Poland particularly hard.

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Economic Causes for the Rise of Populist and Nationalist Movements

Florian Dorn, David Gstrein and Florian Neumeier

In recent years, radical right-wing political groups and populist movements have strongly gained popularity in many Western democracies. The presidency of Donald Trump and the increasing political polarization in the US, the Brexit vote in the UK, as well as the electoral successes of nationalist parties in many Western countries – such as the Alternative für Deutschland (AfD) in Germany, Rassemblement National in France, the Sweden Democrats, or the Movimento 5 Stelle, Lega, or Fratelli d’Italia in Italy – serve as evidence of this trend. One of the key features of many of these movements is an anti-establishment, anti-immigration, and anti-globalization rhetoric. In this article, we summarize the existing literature studying the extent to which economic causes contribute to the rise in populism.

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Climate Policy Priorities for the Next European Commission

Clemens Fuest, Andrei Marcu, Michael Mehling

From the earliest announcement of the European Green Deal, the current EU political cycle has been defined by an unprecedented acceleration in the scale and pace of climate policy. Under difficult conditions that sometimes tested the ability to engage stakeholders, including various external shocks, the EU has put forward and largely passed an unprecedented legislative agenda, which was meant to have, and is having, deep impacts on the EU economy and society at large. Much has changed in the world since the European Green Deal and the “Fit for 55” packages were conceived, including a dramatic increase in industrial policy actions by Europe’s trade partners, a deteriorating geopolitical landscape, and an energy crisis that has been aggravated by these factors, all of which has led to persistent fiscal and economic pressures. 

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Monitoring the Impact of Sanctions on the Russian Economy

Quarterly Report Vol. 2

Vasily Astrov, Lisa Scheckenhofer, Camille Semelet, Feodora Teti

In 2023, Russia experienced a 3.5% economic growth, but forecasts for 2024 indicate a slowdown to 1.5% due to tightened monetary policies and the expected global economic slowdown. Despite large military spending and Western energy sanctions eroding budget revenues, fiscal deficits have been generally kept under control. Intensified scrutiny of third-country firms violating energy sanctions widened discounts on Russian oil prices in late 2023. Generally, Russian import patterns remained relatively stable. In particular, EU exports of economically critical and common high priority goods to Russia in November 2023 represent just 2% of its prewar levels, underscoring the effectiveness of sanctions in halting direct exports. Besides China and Hong Kong, Türkiye and CIS countries became vital suppliers, meeting Russia's demand for economically critical goods and high-priority items.

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Reconfiguration of Supply Chains: What Are the Priorities of German Firms?

Cevat Giray Aksoy, Andreas Baur, Lisandra Flach, and Beata Javorcik

While eight out of ten German manufacturing firms reported material shortages at the height of the pandemic in December 2021, this share had fallen to 18 percent in October 2023. Nonetheless, the recent attacks by the Yemeni Houthi rebels on container ships in the Red Sea highlight the fact that supply chain risks remain significant.

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BRICS Enlargement – What Are the Geoeconomic Implications?

Alicia Garcia Herrero, Mark N. Katz, Pádraig Carmody, Günther Maihold, Isabella Gourevich, Dorothee Hillrichs and Camille Semelet

In January 2024, five politically and economically heterogeneous countries ‒ Saudi Arabia, Iran, Ethiopia, Egypt, and the United Arab Emirates ‒ joined the BRICS. The BRICS+ countries now represent around 45 percent of the world’s population and around a third of global GDP. The BRICS were originally founded as an economic alternative to the Western bloc led by the USA and the EU. The idea was to offer the countries of the Global South a counterweight to Western institutions. The current change in the geopolitical and geoeconomic framework has driven the expansion of the BRICS. And it will also play an important role in shaping the international order of tomorrow.

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New Evidence on the Effects of EU Regional Policy

BIG-DATA-BASED ECONOMIC INSIGHTS

Julia Bachtrögler-Unger, Mathias Dolls, Carla Krolage, Paul Schüle, Hannes Taubenböck and Matthias Weigand

EU Cohesion Policy constitutes an important item in the EU budget. For the Multiannual Financial Framework 2021–2027, EUR 392 billion is reserved for the promotion of economic and social cohesion among the regions of the European Union. This article presents results from a pilot study that combines official data on projects co-funded by the ERDF and the CF in the programming period 2007–2013, with remote sensing data on night light emission and land cover to assess the effect of EU funding on economic growth at the municipal level, where regional GDP data are not available. Our approach can also be applied in other contexts, for example to study the impact of investment projects funded by Next Generation EU.

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Mentoring Improves the School-to-work Transition of Disadvantaged Adolescents

ECONOMIC POLICY AND ITS IMPACT

Sven Resnjanskij, Jens Ruhose, Katharina Wedel, Simon Wiederhold and Ludger Woessmann

This article evaluates the effectiveness of one of the largest mentoring programs for disadvantaged adolescents in Germany. The aim of the program “Rock Your Life!” is the successful transition of adolescents from lower secondary school to an apprenticeship or upper secondary school. Mentoring programs can strongly improve the transition from school to work for disadvantaged adolescents. The results show that substituting a lack of family support with other adults can help disadvantaged children in adolescence.

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Why Moving towards a Strong Decentralized Federal State Would Be Beneficial for the European Union

INSTITUTIONS ACROSS THE WORLD

Vesa Kanniainen

Few politicians dare to think aloud about federal models for the European Union. Even as a concept, the federal state is problematic. The perception of an unwieldy organization arises when the goal is a light consensus federation, where the Commission’s power is limited and the member states have more power to run their own affairs. In the European Parliament elections, each state still has its own electoral district. Some member states are divided into several constituencies. There is no need for EU-wide elections at the parliamentary level, nor EU-wide parties.

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Monitoring the Impact of Sanctions on the Russian Economy

Quarterly Report Vol. 1

Vasily Astrov, Artem Kochnev, Lisa Scheckenhofer, Vincent Stamer, Feodora Teti

 Despite EU restrictions, only around one-third of pre-war exports to Russia are fully sanctioned; most trade remains unaffected or subject to numerous exemptions. While exports have decreased by 32%, imports have increased by 17% due to innovative ways to bypass trade sanctions. China is Russia’s most important alternative country of origin for products under sanction: 61 percent of all products subject to sanctions come from China. The Russian economy shows signs of recovery, driven by robust domestic demand from wartime fiscal stimulus, contributing about 10% to GDP in 2022-23. Real GDP and industrial production have grown by 2.5% and 3%, respectively, indicating recovery from the economic crisis.

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