Current publications

Cover: EEAG Report 2018

EEAG Report on the European Economy 2018: What Now, With Whom, Where To - The Future of the EU

Torben Andersen, Giuseppe Bertola, John Driffill, Clemens Fuest, Harold James, Jan-Egburt Sturn and Branko Urosevic

As the EU attempts to progress along its path of ever closer union and bold enlargement, the European Economic Advisory Group (EEAG) report 2018 focuses on the symptoms of and possible cures for the current integration malaise. It highlights the role of trust in allowing national and supranational organisations to function; reviews the role of admission criteria and governance rules, and considers economic convergences and public policies across EU states.

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Cover EconPol Working Paper 7 2017

Dynamic Scoring of Tax Reforms in the European Union

Salvador Barrios, Mathias Dolls, Anamaria Mafei, Andreas Peichl, Sara Riscado, Janos Varga and Christian Wittneben

Dynamic scoring, or the evaluation of tax reform effects, is common practice in the US, but has never been applied to the EU’s fiscal governance framework. Adopting a novel approach, the authors analyse hypothetical reforms of the social insurance contributions system in Belgium. They find that the self-financing effect of a reduction in employers’ social insurance contributions is far greater than that of a comparable reduction in employees’ social insurance contributions.

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Cover EconPol Opinion blanco 2018

A Trumpian Turn in EU Trade Politics and the Silence of Germany

Gabriel Felbermayr

On December 5, 2017, the European institutions - Commission, Council, and Parliament - reached political agreement on reforming the EU’s trade defense instruments. This “modernization” of anti-dumping legislation is, in fact, an attempt to provide the EU with stronger tools to tackle the allegedly “unfair” practices of its trade partners. On its website, the Commission advertises that the deal will enable the EU to impose higher duties on dumped products. Does Germany’s position signal a new and worrying stance toward free trade?

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Sustainable Fiscal Policy Calls for More Restrictive Debt Rules for Eurozone

Sustainable Fiscal Policy Calls for More Restrictive Debt Rules for Eurozone

Clemens Fuest

In view of loud complaints over alleged austerity policy in Europe, the call for tougher debt ceilings seems untimely. It is claimed that the current rules are too restrictive and will hamper public investment. The next German federal government's position on reforming European Monetary Union is one of the main issues on the table in the coalition negotiations and it is highly controversial. ifo President Clemens Fuest is convinced that a serious application of the existing concepts for ensuring sustainable fiscal policy would call for stricter, not softer debt rules. This Opinion explains why Europe needs stricter debt rules and should not follow in Japan’s footsteps.

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Cover EconPol Policy Brief 04 2017

Banks as Buyers of Last Resort for Government Bonds?

Daniel Gros

A key remaining issue for the completion of the Banking Union is the concentrated exposure of banks in many countries to their own sovereign. This paper examines the belief that banks should be allowed to buy large amounts of their own sovereign so that they can stabilise the market in a crisis and argues that it is mistaken for two reasons. In the first instance, banks are only intermediaries for private savings, and secondly, banks have a higher cost of funding than do their sovereign. The overall conclusion is that governments should make it more attractive for households (and other real money investors) to hold government debt directly.

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Cover EconPol Working Paper 6 2017

Addressing the Core-Periphery Imbalances in Europe: Resource Misallocation and Expansionary Fiscal Policies

Luigi Bonatti and Andrea Fracasso

How can the euro area tackle its perennial problems of core/periphery imbalances and anaemic long-term growth? According to network members Luigi Bonatti and Andrea Fracasso, Università di Trento, there is no quick-fix solution. Temporary fiscal stimulus does not produce permanent improvements, while the upfront costs and short-term negative impact of structural reforms can feed distributional conflicts. Permanent cross-national transfers provide local relief, but also exacerbate tensions among member states. The authors advocate a nuanced approach focused on the key role of structural differences in affecting income and growth differentials, as well as competitive imbalances across the euro area.

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Cover EconPol Policy Report 4/2017

Economic Effects of Brexit on the European Economy

Gabriel Felbermayr, Clemens Fuest, Jasmin Groeschl and Daniel Stöhlker

On 29 March 2017, the UK Government notified its exit to the EU in accordance with Article 50 of the EU Treaty.1 Brexit is therefore officially initiated. On 29 April, the Heads of State and Government of the European Council adopted the guidelines for negotiations between the EU and the UK in accordance with Article 50 TEU. Negotiations between the EU27 and the UK on the important issues of exit and discussions on future political and economic relations between the EU27 and the UK have begun in July 2017 and have proven difficult since then.


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Cover EconPol Policy Report 3/2017

The Nature of Shocks in the Eurozone and Their Absorption Channels

Cinzia Alcidi, Mathias Dolls, Clemens Fuest, Carla Krolage and Florian Neumeier

We investigate the degree of (a)symmetry of macroeconomic fluctuations within the euro area (EA). Our findings indicate, first, a high degree of co-movement of cyclical GDP across EA member states. However, the amplitudes of national business cycles appear to vary notably, meaning that booms and recessions differ with regard to their severity across EA member states. Second, the co-movement of cyclical unemployment is somewhat less pronounced than that of cyclical GDP and the sensitivity to common shocks is even more heterogeneous, suggesting that differences in labour market conditions play an important role with regard to the vulnerability to common shocks. Turning to potential stabilization mechanisms, we find that in general, the private sector has a huge potential to absorb asymmetric shocks. However, in international comparison, the shock-absorption capacity of the private sector in the EA is rather weak. Recent evidence suggests that promoting capital market integration may improve the private sector’s shock absorption capacity.

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Cover EconPol Policy Brief 3

Accountability Bonds – Reconciling Fiscal Policy Based on Market Discipline with Financial Stability

Clemens Fuest and Friedrich Heinemann

Accountability bonds revive market discipline in the Eurozone without endangering fiscal and financial stability - and they address the various concerns from difference sides. Clemens Fuest (ifo Institute) and Friedrich Heinemann (ZEW) have proposed the new type of bonds for overcoming the debt crisis in the Eurozone two years ago. In our new EconPol Policy Brief, the two EconPol network members revisit their concept of accountability bonds in the light of current developments, respond to criticism and explain why they are an innovative instrument that stand a real chance of building a consensus, now more than ever.

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Cover EconPol Working Paper 5 2017

We need more Europe in the Monetary Union. Which Europe? Hints from policy games.

Luciano Andreozzi and Roberto Tamborini

Under the pressure of the 2008 crisis serious flaws have emerged in the design of the European Economic and Monetary Union (EMU) as a supranational architecture which aims at generating and distributing  collective benefits from integration among highly interdependent countries. If we agree that more Europe is needed, we shall urgently ask "Which Europe?" Economists Luciano Andreozzi and Roberto Tamborini from EconPol network partner Università di Trento introduced an interesting policy game setup of two interdependent countries where each sovereign government seeks to optimise its own welfare function reflecting social preferences over policy options and their outcomes. Read here why the strategy of further integration by an extended system of binding rules enforced by technocratic agencies may be unsuccessful and which consequences should be drawn.

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