Daniel Gros
Daniel Gros is Director of the Institute for European Policymaking @ Bocconi University.
Between 2020 and 2022 he was Distinguished Fellow and Member of the Board of the Centre for European Policy Studies (CEPS). Before that, was the director of CEPS since 2000. In 2020, he held a Fulbright fellowship and was a visiting professor at the University of California, Berkeley. In March-June, 2022 he was visiting Research Fellow at the Robert Schuman Centre of the European University Institute, Florence.
Gros is also currently an adviser to the European Parliament. Previously he worked at the International Monetary Fund and collaborated with the European Commission as economic adviser to the Delors Committee, which developed plans for the euro. He has been a member of high-level advisory bodies to the French and Belgian governments and advised numerous central banks and governments, including Greece, the United Kingdom, and the United States at the highest political level.
He has published extensively on international economic affairs, including on monetary and fiscal policy, exchange rates, banking, and climate change. He is the author of several books and editor of Economie Internationale and International Finance. He has taught at several leading European universities and contributes a globally syndicated column on European economic issues to Project Syndicate. He holds a PhD in economics from the University of Chicago.
Commentary
European Policies
The report on The Future of European Competitiveness presented by Mario Draghi provides a clarion call for economic reforms to stop Europe’s relative decline. This short comment cannot do justice to the report with over 300 pages of supporting material. We will concentrate just on two key messages regarding innovation and investment.
The mobile telecom sector is often taken as a case study of fragmentation of the single market leading to less investment and a loss of technological leadership. However, a closer examination of the data suggests that the fragmentation also implies more competition leading to lower prices for consumers in Europe.
A popular thesis in policy circles is that there is an “investment gap” that Europe needs to fill to face the great challenges of our times, such as the digital and green transitions. However, the notion of the “investment gap” used by policymakers is often vague and therefore it risks legitimate a wasteful allocation of public resources.
EU firms should be able to satisfy a large share of the increases in defence expenditure that are required immediately to support Ukraine and also those in the medium and longer-term
Imposing such high tariffs on BEVs from China without any evidence of damage to EU industry does not make sense and will only backfire on the ability of EU industry to export their own cars.
The elections for the European Parliament of June 6-9 had a clear winner, the extreme right, and also a clear loser, the economy.
Through its missions and governance, Horizon Europe does not meet the innovation challenge and anchors our industry in the mid-tech range. This report argues that current European efforts, while laudable, are insufficient, in both quantity and quality. Important reforms are required to enable Europe to compete in the value-creating space.
The pattern of macroeconomic catch-up seen in the EU’s enlargement process is a remarkably positive story - if largely unsung and still incomplete. The catch-up achieved so far constitutes a key backdrop to today’s debate about further enlargement. Without the rapid growth of the most recently acceding states it would be impossible for the EU to contemplate taking further poor members.
A key factor that policy often overlooks is substitutability. Almost every raw material has substitutes. A combination of substitution and some stock piling would be sufficient to de-risk the supply of raw materials to a large extent.
While American and European central bankers might prefer to focus on their progress in tamping down inflation, there is no use pretending that they did not play a significant role in creating the problem.
IRA and the EU single Market
With many new restrictive measures in place one would have expected trade to fall. However, the most one can say is that globalisation has turned into slowbalisation.
The EU is encouraging other countries to follow its lead and support the green transition. This requires massive subsidies in many different sectors. Why should the EU then complain if other countries outcompete it in terms of subsidizing the production of green goods?
L'Inflation Reduction Act (IRA), firmato dal Presidente degli Stati Uniti Joe Biden quasi un anno fa (agosto 2022), è il primo importante provvedimento per contrastare il cambiamento climatico che il parlamento degli Stati Uniti abbia mai approvato. La ragione principale di questo successo è che l’IRA non impone oneri all’industria USA ma garantisce molti sussidi.
In this Working Document, we do not try to provide an overall evaluation of the IRA or its cost-effectiveness with regard to addressing climate change and US emissions. Rather, we investigate its impact on the US market and on EU export opportunities, concentrating on the material content of the IRA – not its intention.
A detailed analysis suggests that the handicap for European producers in the US market will be limited. This small negative effect is likely to be overwhelmed by the much-increased market, implying that the IRA leads to increased opportunities for exports of electric vehicles and renewable inputs to the US. Our calculations suggest that over time the US market for electric vehicles could increase by a factor of 4 and renewables installations should also increase by hundreds of percent. A commentary by Daniel Gros.
So much international trade happens in dollars that it would be very difficult to turn the tide against the currency any time soon.
Monetary Policy
Why have energy and goods prices followed the traditional trajectory – first up, then down – but the services sector has remained plagued by inflationary pressures?
The euro area has been subject to a series of very different shocks, some of which, such as the COVID-19 pandemic, were unprecedented. While the ECB’s reaction to these deflationary shocks was vigorous, it persisted too long with its expansionary measures and failed to see their inflationary impact when energy prices shot up. The future is likely to bring new challenges, but climate change might not be the most important threat to price and financial stability.
This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 15 February 2024.
While American and European central bankers might prefer to focus on their progress in tamping down inflation, there is no use pretending that they did not play a significant role in creating the problem.
In the discussion on monetary policy in the presence of supply shocks, we focus on the Euro area to understand the recent wave of inflation.
So much international trade happens in dollars that it would be very difficult to turn the tide against the currency any time soon.
Our starting point was the stark increase in non-energy price inflation, which is the key element for the ECB since monetary policy cannot do anything about energy prices. Could the ECB have foreseen this development? Our analysis suggests that this would have been difficult based on past experience.
Inflation rates in the euro area and US increased sharply in 2022, in part following large energy price shocks. This column analyses the pass-through from energy prices to core inflation since the 1970s for the US and Germany. It shows that this pass-through is not constant over time, but time-varying. Pass-through from energy to inflation during the 1970s was high in the US, but not in Germany. Both countries experienced high pass-through in 2022, but this has declined in the most recent quarters, consistent with a return to more normal inflation dynamics.
The US and the euro area have similar headline inflation rates, but very different drivers. In the US, inflation is mainly driven by housing costs. By contrast in the euro area energy now provides an important negative element, that is offset to a large extent by still increasing food prices
Artificial Intelligence
A concise introduction into the workings of large language models is presented. We start with an introduction to the attention mechanism, the core of the transformer architecture, which is then followed by a discussion of the steps needed to engineer the base model, a generatively pretrained transfromers (GPT), to a working chatbot like ChatGPT.
Seminars
Public debt has crucial economic consequences. With a focus on Italy in the European context, we will discuss the origins of public debt, its consequences for citizens and the economy, the future perspectives and the false myths about government debt.
Public presentations
The launch event of the report on EU Innovation Policy, a joint project IEP@BU-CESifo-TSE.
Un incontro in partnership con IAI per discutere rischi e opportunità dell’IRA per l’Unione Europea sulla base del working paper IEP@BU “The EU and the US Inflation Reduction Act, No Rose Without Thorns”.
The Inflation Reduction Act (IRA) is a vast and complex piece of legislation that has been both over- and under-rated. Its fiscal cost and domestic impacts are likely to be larger than anticipated. But its impact on the EU is very likely to be small and, on balance, positive – thus not validating the supposed need for a European response.
L'evento trae spunto dalla pubblicazione del paper "The EU and the US Inflation Reduction Act, No Rose Without Thorns" curato da Daniel Gros, del Report ISPI "Industrial Policy's Comeback - The Next Geopolitical Clash" curato da Alessandro Gili e Davide Tentori, e dello studio EPRS "Accrescere il valore aggiunto europeo in un'epoca di sfide globali".
Conferences
Save the date for the upcoming IEP@BU Annual Event and register here
The Florence School of Banking and Finance Annual Conference, co-organized this year with the Institute for European Policymaking at Bocconi University, will examine the Banking Union’s “mature” phase against the background of the early state and goals.
wEUbinars
China’s effort to promote venture capital investment through government-sponsored so-called guidance funds echoes practices in other parts of the world, with mixed results. This session considers the Chinese experience in an international comparative perspective. A Peterson Institute digital event with Nicolas Véron, Li Bo, and Daniel Gros.
IEP@BU - ECFR Working lunches
Le strategie economiche europee danno grande rilevanza al de-risking dalla Cina, ovvero alla riduzione delle dipendenze nei settori strategici, rifiutando però una più ampia separazione delle economie, data l’importanza dei rapporti economici con Pechino, soprattutto per alcuni paesi. Con Agathe Demarais (ECFR), Daniel Gros (IEP@BU), and Stefano Feltri (IEP@BU)
Open Discussions
Join us for a brainstorming seminar dissecting the anti-subsidy investigation on Chinese Battery Electric Vehicles (BEVs) launched by the Commission. The paper explores the economic and legal aspects of this case highlighting the peculiar pricing strategies of European and Chinese manufacturers, the policy conflict with the Green Transition and the EU’s own support for batteries.
Join us for a brainstorming seminar dissecting the EU's innovation journey, focusing on the European Innovation Council within Horizon Europe. The paper, presented by Daniel Gros and Giorgio Presidente, compares R&D spending patterns, highlighting challenges such as low innovation support, minimal allocation to a "DARPA-style" program, and inefficient governance.