Newsletter February 2018
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  • CEPSlab18 – EconPol Lab – Taxation of the Digital Economy – 23 February 2018,
    9h15 – 10h30
  • EconPol Press Conference: EEAG Report 2018 – 26 February 2018, 10h30 – 11h30
Dear Readers,

It is our pleasure to bring you EconPol’s first newsletter! This issue features a selection of our publications and a review of the events organised by the network to date. In the future we will bring you news of EconPol’s latest research, its policy contributions, and activities on a bi-monthly basis.

What is EconPol?

The European Network for Economic and Fiscal Policy Research (EconPol Europe) is a unique collaboration between policy-oriented university and non-university research institutes that are contributing their scientific expertise to the debate over the EU’s future design. The network was founded by the ifo Institute together with eight other renowned European research institutes in spring 2017 to bring a new voice to research in Europe. Learn more.

Deadly Embrace – Sovereign and Financial Balance Sheets Doom Loops

Jean Tirole, Nobel Memorial Prize Winner in Economic Sciences (TSE), and top economist Emmanuel Farhi provide their theory of the feedback loop that allows for both domestic bailouts of the banking system and sovereign debt forgiveness by international creditors or solidarity by other countries. Read more.

Economic Effects of Brexit on the European Economy

Brexit negotiations to date have been drawn-out and difficult. Clemens Fuest and his ifo co-authors characterise the value chains linking the UK and the EU and identify how various goods and services sectors have benefitted from the UK's membership of the EU Single Market and Customs Union. They also simulate different scenarios to quantify the economic consequences of Brexit. Read more.

The Future of Eurozone Fiscal Governance

What are the options for reforming fiscal governance in the Eurozone? This report focuses on two approaches: the ‘Maastricht model’ and the ‘US model’. It argues that combining increased risk sharing with greater market discipline and risk reduction could achieve a more resilient and economically successful Eurozone.

The Nature of Shocks in the Eurozone and Their Absorption Channels

Booms and recessions differ in severity across Euro Area member states whose vulnerability to shocks depends largely on differences in labour market. The private sector has a huge potential to absorb asymmetric shocks, but the EA performs rather weakly by international comparison. Cinzia Alcidi, Mathias Dolls, Clemens Fuest, Carla Krolage and Florian Neumeier explain why promoting capital market integration may improve the private sector’s shock absorption capacity. Read more.

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

Accountability bonds revive market discipline in the Eurozone without endangering fiscal and financial stability. Clemens Fuest (ifo) and Friedrich Heinemann (ZEW) revisit their concept of accountability bonds in the light of current developments, respond to criticism and explain why this innovative instrument stands a real chance of building a consensus. Read more.

A Stronger Euro Area – Barking Up the Wrong Tree?

Juncker’s "Roadmap For a More United, Stronger and More Democratic Union" is big on vision and short on detail. It also takes Europe in the wrong direction, warns David Gros (CEPS). He explains why small, concrete steps aimed at strengthening financial stability would have been more useful. Read more.

Catalonia’s Lessons for European Fiscal Union

The referendum on Catalonia severely tested Spain’s cohesion. The pro-independence movement criticised the heavy financial burden borne by Catalonia and its limited budgetary autonomy. According to Friederich Heinemann (ZEW), Europe can learn a few valuable lessons from the Catalonia experience. Read more.

A Trumpian Turn in EU Trade Politics

Is the EU’s latest anti-dumping legislation merely a thinly-veiled form of protectionism? Why has Germany remained silent for so long. Gabriel Felbermayr takes a critical look at the reforms. Read more.

EconPol Europe’s Founding Conference: "The Euro – Which Way to Go?"

was a resounding success, bringing together over 200 top researchers, politicians, experts and journalists to discuss, learn and intensively network. The 2-day conference focused on the governance of fiscal and monetary policy in Europe. In his opening address, Clemens Fuest outlined EconPol’s key objectives, namely to bridge the void between national economic debates and those at a European level. Watch his welcome address here.
Europe has created a successful monetary union but is failing on the critical matter of economic union, says Francois Villeroy de Galhau, Governor of the Bank of France. In his keynote speech, he reviews 25 years of developments since the signature of the Maastricht Treaty. Watch his keynote speech here.

1st EconPol Europe CESifo PhD Workshop

The first CESifo EconPol Europe PhD Workshop took place at ifo in Munich on 1–2 February, 2018. At the event ESMT President Jörg Rocholl gave a keynote on "Breaking the Doom Loop: The Eurozone Basket". Rocholl summarises his views in this brief interview. To watch Rocholl’s full speech click here.
In its Brussels Briefing on December 4th 2017 the Financial Times features a trade graphic from EconPol’s Policy Report on the Economic Effects of Brexit as its Chart du Jour. "A new stat-filled paper from the European Network for Economic and Fiscal Policy Research simulates the trade impact from various post-Brexit trade scenarios – from a WTO-only deal to a free trade agreement."

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Editor: Lisa Giani Contini.