Newsletter June 2018
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Dear Readers,

In EconPol’s second newsletter our experts comment on key issues ranging from data confusion in the EU-US trade dispute to the role of a European Minister of Economy and Finance, capital market union and the labour market effects of immigration. This newsletter also features reports on a series of EconPol events held in eight countries across Europe in recent months.

The Effects of Immigration in Developed Countries

How does migration impact the labour market, public finance and the political landscape? In this policy report network members Anthony Edo, Lionel Ragot, Hillel Rapoport, Sulin Sardoschau and Andreas Steinmayr, CEPII, show that immigration can create winners and losers in the host country’s native workforce by affecting the skill composition of receiving economies and changing wage dispersion. Cultural concerns, however, emerge as the key driver of scepticism towards immigration. Read more.

On the EU-US Current Account

With a trade war looming ever larger, EconPol experts Gabriel Felbermayer and Martin Braml focus on the figures behind EU-US economic relations. They uncover huge discrepancies in the data reported by the EU and the US, particularly with respect to primary income. Eurostat and the ECB urgently need to provide consistent data on trade with the US, warn the authors. But overall their analysis shows that the EU has a strong negotiating position and reveals no evidence of unfair transatlantic trade practices. Read more.

Which Role for a European Minister of Economy and Finance in a European Fiscal Union?

The European Commission has proposed appointing a European Minister of Economy and Finance to perform tasks like coordinating budgetary instruments and structural reforms, designing and implementing adequate fiscal policies for the euro area and coordinating the enforcement of the Stability and Growth Pact. EconPol network members Zareh Asatryan, Xavier Debrun, Annika Havlik, Friedrich Heinemann, Martin G. Kocher and Roberto Tamborini discuss the potential role the Minister could play in the development of the European Fiscal Union. Read more.

Trade Wars in a ‘Winner-takes-all’ Economy

What are the implications of Trump’s trade follies with tariffs for the rest of the world? EconPol network member Daniel Gros, CEPS, examines the nature of today’s trade wars by focusing on the high tech sector. He explains why differences in profit opportunities tend to escalate trade conflicts in a ‘winner takes all’ economy. Today, the US government is essentially backing its internet giants, while Europe and China are baying for their monopoly profits. This is a zero-sum game, warns Gros. Read more.

Why the IMF and OECD are Wrong about Inequality and Growth.

This EconPol Policy Brief reassesses the relationship between inequality and growth. In their empirical analysis network members Clemens Fuest, Florian Neumeier and Daniel Stöhlker show that there is no robust negative correlation between inequality and growth. For OECD countries, they find that higher inequality coincides with higher, not lower economic growth. Read more.

Long Run Consequences of a Capital Market Union in the European Union?

To accelerate capital market integration, help absorb asymmetric shocks and reduce the need for government support in times of crises, proposals have been put forward to create a Capital Market Union in the EU. EconPol expert Thomas Davoine, IHS, discusses the long-run consequences of perfectly integrated capital markets. Research shows that redistribution would take place, from fast to slow aging countries, with investors seeking access to the largest labour markets that deliver higher ROIs. GDP per capita could be over 2% lower in some countries and 2% higher in others compared to autarky. Read more.

Joint ZEW-EconPol Lunch Debate: Reforming the Eurozone: Prospects and Challenges

This Joint EconPol-ZEW Lunch Debate in Brussels focused on key issues like creating an economically-sound EMU reform package acceptable to both Northern and Southern Europe; precisely defining the responsibilities of a potential European Finance Minister; and determining the top priorities of a Eurozone budget. The discussion panel featured EconPol members Friedrich Heinemann, ZEW, and Roberto Tamborini, University of Trento, as well as Paulina Dejmek-Hack, European Commission, and Hans Vijlbrief, President of the Eurogroup Working Group. Read more.

Joint IES-VUB and EconPol Policy Forum: Future Perspectives for the EMU

This policy forum offered a broad-ranging and deep discussion of potential options for the future of EMU. Starting with an assessment of existing proposals, it investigated the economic, social and political implications of EMU, the changes that may be necessary to move forward, and assessed their political feasibility. The Forum speakers were Senior Fellow at FEPS and former European Commissioner László Andor, EconPol member and ifo President Clemens Fuest, and Managing Director of the Research Institute of the Finnish Economy (ETLA) Dr. Vesa Vihriälä. Read more.

Venice Summer Institute 2018: Country Clubs

The UK’s decision to leave the EU has fuelled debate over the future of political and economic integration in Europe. Support for a multi-speed Europe is growing, but this suggests that all countries are heading towards more integration. This EconPol session at the Summer Institute discussed the concept of a multi-tier EU, whereby members can choose to belong to a variety of "country clubs" each characterised by a specific form of policy cooperation or integration. The keynote speakers at the event were EconPol expert Daniel Gros and Enrico Spolaore, Tufts University. Read more.

EEAG Report 2018: What Now, With Whom, Where to- The Future of the EU

As the EU attempts to progress along its path of ever closer union, this year’s European Economic Advisory Group (EEAG) report, supported by EconPol, focuses on the symptoms of and possible cures for the current integration malaise. The report’s release was marked by a debate in Brussels followed by events in Berlin, Paris, Zurich, Prague, Stockholm, Rome, Madrid and Turin. Read more.

Confusion in USA/Europe’s Current Account Statistics

On 30 May 2018 Reuters ran a piece on the EconPol Policy Report by Gabriel Felbermayr and Martin Braml entitled: On the EU-US Current Account. Reuters quoted Felbermayr as saying that confusion over current account statistics is probably distorting the dispute over trade imbalances between the USA and Europe.

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Editor: Lisa Giani Contini.

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