Publications
The UniCredit-Commerzbank deal is a test case for the ECB, which will reverberate into the future, and be a golden opportunity for its supervisory board to uphold its independence
This dismantling of the European Grean Deal would be one of the main mistakes that the Europeans could make. The often critics should not lead us to underestimate or marginalize people's desire to take action and deny the necessity to accelerate the transition.
Robust port infrastructure can significantly mitigate the risk of supply chain disruption, suggesting that government efforts are better targeted at improving the performance of ports and critical infrastructure more broadly, rather than implementing protectionist measures.
On September 19, mister Roth gave a lecture to Bocconi students titled “Europe at the Crossroads: Turning Today’s Poly-Crisis Into Tomorrow’s Poly-Opportunity”. Eleanor Spaventa, a professor of European Law at Bocconi and a member of the IEP@BU managing board, chaired the event co-hosted by IEP@BU and the Department of Legal Studies.
While the focus of the new Commission will be crystallizing over the months and years to come, this short analysis of the mission letters for the future Commissioners suggests that the recent intervention of Mario Draghi on Europe’s competitiveness has been agenda-setting for the policy priorities as defined by Commission President Ursula von der Leyen.
After a detailed presentation of the Green Deal’s main measures in each sector, we will focus on a few of them to analyze its failures or successes in greater detail.
The economic transformation required to reach global net zero goals relies on the mining and transformation of certain minerals and metals for the production of low-carbon technologies. Increasing global demand for these critical materials, combined with their uneven geographical distribution, raise potential supply issues that pose economic security and transition risks for the European Union. This report sets out the nature of the challenge, the policy responses and ways forward for the bloc.
The September 2024 state elections in Germany mark a low point in public support for the governing left-wing coalition and a high point for the populist right. Often overlooked, the elections might also mark the fading of the German socialist party Die Linke into political irrelevance. Its demise teaches us valuable lessons for modern European politics
The fight against poverty is not a new one. It has been a feature of national policies and academic research for many decades. However, the ways in which a State fights against poverty have changed over time, continuously evolving to approach new challenges through the adoption of new tools and 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.
We find that the profitability of high-risk tech companies, associated with high rates of failure, is very dependent on the cost of restructuring, which itself is driven by employment protection legislation.
As Europe begins to face the start of its own relationship with fentanyl, it is paramount that policymakers learn from the lessons of American and Australia in crafting their response. Policymakers need to bear in mind that drug users are consumers who will respond to the changing economic environment wrought by their efforts.
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.
After revisiting the pros and cons, this paper concludes that, all in all, the rationale for introducing an ECB-sponsored digital euro for citizens, retailers, and producers, is not solidly established. Today’s highly dynamic, innovative, and efficient digital payment ecosystem does not require such an instrument, which would unavoidably duplicate existing applications and probably struggle to match private innovation.
If Trump is elected in November 2024, the security outlook of Europe could deteriorate very fast as Russia may attempt to seek the opportunity of taking NATO off balance. It is therefore essential that the Commission and the forthcoming Defence Commissioner begin the policy planning and design well in advance and preferably as soon as they take office, as to move past preliminary negotiations and have blueprints ready for approval should the situation require it.
In June 2024, the EU has unleashed a powerful weapon in its arsenal against money laundering and terrorist financing: a comprehensive package of new rules designed to close loopholes, enhance transparency, and strengthen enforcement.
Identifying the appropriate level of spending is difficult and there is not really any science about this. This is because different considerations play a role, including military strategy to political psychology.
There are lessons to be learned by comparing the most recent elections in France and the UK. The French electoral system is characterized by two-turn constituency elections where several short-listed candidates qualify for a second round should no-one reach more than 50% of the votes in the first round. The British system, conversely, assigns a given constituency seat to whoever wins the plurality in a given constituency, regardless of whether or not the candidate reaches 50%.
While defense procurement and production remain fragmented across Europe and the EU and its member states invest less in their security and defense than the US, new EU and EU-sponsored initiatives demonstrate that Europeans are aware of this and attempt to reduce these shortcomings – political and fiscal obstacles notwithstanding.
A key area of frustration for voters on both the left and the right is the poor performance of the NHS. With ever-longer waiting lists for hospital appointments and declining local services, voters are deeply concerned about the state of their beloved health service.
Defense expenditure in EU members rose by 50% (net of inflation) between 2015 and 2023, with an increase in the expenditure-to-GDP ratio (Figure 2, referring to the current EU members). The increase involved all EU members, including not NATO members during the period under consideration.
European politics has become more fragmented which makes governing a tall task, but also makes the EU more political. After decades of being perceived as too technocratic and distant, the fight for the European Union’s top jobs became more highly anticipated and much more political.
The latest European Defence Industrial Strategy outlines a commitment to support investments by Member States and the European defence industry in the development and market introduction of cutting-edge defence technologies and capabilities.
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
The European Sovereign Bond market gyrations erupted in the wake of President Emmanuel Macron’s call for a snap parliamentary vote after his party’s defeat to Marine Le Pen’s National Rally in the European elections have sparked a debate on the opportunity of an activation of the Transmission Protection Mechanism (TPI).
Europeans want policymaking that is culturally more conservative, for example, better protection of external borders and more priority on the wellbeing of European natives rather than third-country immigrants.
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 paper explores the evolution of the EU's policy on disinformation, evaluates its current strategies, and discusses future perspectives, emphasizing the importance of transparency and accountability in the digital age.
The main consequence of not achieving an integrated financial market is that Europe will not be able to finance the huge investment requirements needed for its ambitions in the fields of climate transition, energy security, digital evolution, defense, etc…
It is therefore possible that even the election of the Commission President will not change the overall picture, with the real game taking place whenever the European Parliament is called to vote on the fundamental choices that Europe will face in the coming years, from managing the digital and green transitions to fundamental decisions on the common defense and security policies.
The elections for the European Parliament of June 6-9 had a clear winner, the extreme right, and also a clear loser, the economy.
After decades of being perceived as too technocratic and distant, the fight for the European Union’s top jobs has become highly anticipated and much more political
"I live in Milan, I vote for Europe." This is the name of the initiative through which the Municipality of Milan, the European Parliament, and the Institute for European Policymaking at Bocconi University worked together to chat with Milanese residents about Europe.
C’è una sorta di meccanismo “Comma 22” che alle elezioni europee si declina così: i giovani sentono la politica come distante dai loro problemi e per questo votano meno, ma proprio perché votano meno la politica dà loro meno peso. Come si risolve?
Aging is quite possibly bringing havoc to social security systems across the rich World. It is happening slowly, but it is destiny
There is a large positive effect of new membership to the EU without cost to previous members. The EU enlargement seems to be a positive sum game.
In our first forecast for the EP 2024 elections based on our model, in January 2024, we predicted a “sharp right turn”. In our latest forecast, and our final one before the election, we are still forecasting that the next EP will be considerably more right-leaning than the current one, and that the two groups to the right of the EPP will be considerably larger than they currently are.
The Fed and the ECB conducted monetary policy reviews in 2019-2020, when most of the above shocks were still in the making or yet to come. Both of them seem largely obsolete today, or at least incomplete. There is no appetite to restart them.
ASML has a global monopoly on EUV, the most advanced lithography technology that is on the Wassenaar Arrangement list of dual-use technologies and requires an export license. The Dutch government approved the export license of EUV-technology to China in 2018. The US government was not pleased and tried to press its ally to consider the security issues.
Whatever one thinks of the European project, a collision course with Brussels is not only a waste of time, but will also likely undermine the Dutch position in the world.
These findings stem from a survey conducted in December 2023, encompassing nearly 13,000 EU citizens. Our dataset is representative of the EU as a whole and, more specifically, of Belgium, France, Germany, Italy, the Netherlands, Poland, and Spain. In Italy, we interviewed 1,325 citizens.
The U.S. Supreme Court will soon rule on three cases with important implications for the ability of social networks to moderate content, particularly when it comes to disinformation and political propaganda. These developments may also have an impact in Europe
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?
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.
Elisabeth Braw, a widely respected expert in international relations and security, is currently a senior fellow at the Atlantic Council, a think tank based in Washington, D.C. Before transitioning to research, she was a journalist, a background that informed her recent book published by Yale University Press, titled Goodbye Globalization: The Return of a Divided World.
European automakers currently face increasing pressures. While the region’s manufacturers long dominated global sales revenues, several competitors from Asia have recently moved into the top ten. But European companies have faced similar difficulties before, and the responses of the region’s automakers and policymakers to previous challenges offer insight for the present, especially on the issues of global competition and energy transition.
The 1960s and 1970s acute industrial conflicts were at the root of the demise of large companies in the Italian economy, setting in motion a trend of reduction in company size that continued over the ensuing decades
The European manufacturers have different views on the new challenge from China and the potential outcome of the EU anti-subsidy investigation although it can be expected that the Chinese advance will go to the detriment of all European manufacturers.
It is now over two years since Russia launched its brutal full-scale invasion of Ukraine. Ever since those early days, a broad network of CEPR economists has been working intensively with colleagues in Ukraine and across the international research and policy communities to explore how to tackle the big economic challenges of the war and how to plan for the country’s post-war reconstruction.
It is often assumed that Germany’s economic relations with China are so important that Berlin tends to take a softer stance on China-EU relations than its EU partners – or at least that this used to be the case until most recently. In particular, it is feared that German industry might be more vulnerable to disruptions of the supply of Chinese inputs than other European countries. However, this impression of a greater dependency of German industry and its supply chains from China is not borne out by the data.
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 concept of green backlash has recently become more salient in the news, in part due to the widespread farmers’ protests held in a number of European countries. However, there is so far not much robust empirical evidence of an electoral penalty against governments that implement ambitious climate policies.
This essay examines the international trade policies of the two presumed Candidates for president in 2024, Joseph Biden and Donald Trump.
This paper shows that the current operational framework of monetary policy relying on excess liquidity, together with a high level of interest rates, produces a remarkable redistribution of interest payments across the national central banks of the Eurosystem, due to the rules governing the pooling of monetary income among them. This mechanism implies significant fiscal transfers across the member countries of the euro area. Our estimates for 2023 show that their size can be in the order of several billion euro.
The polls for the forthcoming European Parliament elections indicate a further surge of the radical and/or sovereigntist right. This result might destabilize again traditional partisan and inter-institutional equilibria and weaken the support to EU authority at a time when serious challenges and difficult choices loom large. Does the EU risk plunging back into an “existential crisis”, as it happened a decade ago in the aftermath of the 2014 elections?
This policy brief highlights that while the green subsidies provided by the Inflation Reduction Act of the United States are homogeneous across beneficiaries, the subsidies associated with the Green Deal industrial plan are highly fragmented across European member States. We quantify the extent of resource misallocation due to this subsidy dispersion by using the model of Hsieh and Klenow (2009), calibrated on the EU electricity-producing industry. We compare both the actual allocation of subsidies, and a policy of subsidies coordinated at the EU level, to a hypothetical frictionless benchmark with no subsidies. We find that moving to coordinated subsidies can increase productivity by more than 30% with respect to the uncoordinated scenario, substantially reduce the productivity gap with the United States, and generate gains worth up to 6% of the EU value-added in the industries considered. Policy recommendations include greater EU-level coordination to minimize misallocation and enhance productivity.
The EU-sponsored Eurobarometer polls routinely estimate support for EU defence integration between 70% and 80% of respondents, while a recent poll by the independent Bertelsmann Stiftung polling branch, Euopinions, returned a 87% support level. However, the devil is in the details: what is meant by “European defence policy” can wildly differ between people, and these simple questions present no trade-offs.
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.
This paper, prepared on a request by the European Parliament, contributes to a reflection aimed at identifying ways to revive and upgrade the banking union, so as to enable it to cope with the major transformational challenges facing Europe as we move forward in the 21st century: Green, Digital, Geo-Strategic and Structural.
Why have energy and goods prices followed the traditional trajectory – first up, then down – but the services sector has remained plagued by inflationary pressures?
There's a prevailing skepticism regarding whether existing competition laws are equipped to curb the tendency of AI to foster prices above competitive levels, as these laws were originally crafted to target explicit collusion between companies
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.
Even though European banks do have solid Basel ratios, their profitability is insufficient to make them attractive for investors. This suggests that – from the market’s perspective - the system may not be as sound and stable as regulators believe
If the EU (and other rich countries) is genuinely interested in tackling climate change, it has to ensure that adequate funding is available for adaptation and loss and damage. It can then justifiably expect all countries to pitch in with mitigation.
The Council of the European Union (EU Council) agreed on a provisional set of new fiscal rules in its meeting on December 20, 2023, that introduces significant changes to the Commission’s proposals. The fiscal reform marks progress but is, at the same time, a lost opportunity.
Italy must be compliant ex post, and not only ex ante, with the new fiscal rules if it intends to guarantee the long-term sustainability of its public debt.
The current EU natural gas price cap on gas does not lower TTF volatility, fails to prevent price spikes, and has no significant impact on lowering inflation and commodity market volatility.
The climate diplomacy surrounding the COP28 summit has taken center stage in the inaugural session of the working lunch series organized by the Institute for European Policymaking in collaboration with the European Council on Foreign Relations and the SDA Bocconi School of Management.
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.
On December 200,2023, The European Parliament and the Council agreed on five key proposals of the New Pact on Migration and Asylum proposed by the EU Commission in September 2020 and aimed at creating a uniform system of regulations and policies around migration and asylum for the EU. The main aim of the new pact was to replace the Dublin system which relied heavily on first-country-of-entry criteria creating a burden for frontline member states.
Without a serious change in the regulations, or a substantial investment in the bureaucratic capacity and the infrastructure for migrants, Dublin is bound to be more real on paper than in practice and many ports of entry are likely to remain in a constant state of emergency.
While increased bureaucratic documentation might make the European AI research landscape less appealing, better documentation will likely result in more thorough and potentially meaningful research.
The new framework has a higher degree of built-in flexibility. By tailoring fiscal adjustment to the situation of individual countries, the reform overcomes one major issue with the previous set of rules – namely the excessive use of flexibility clauses and overlays, to soften the otherwise too strict uniform adjustment paths.
In the absence of crystal-clear considerations to be drawn on the legal domain, it is advisable to refrain from celebrating the AI Act (as well as its alleged substantial failure) as a turning point or a historical achievement. Let the final legal provisions speak, first.
The Council and High Representative for foreign Affairs must ensure that Common Foreign and Security Policy do not deprive individuals of their rights, and must, as a matter of EU constitutional law, include in all instruments a jurisdictional clause indicating the national court responsible to ensure effective judicial protection.
If the European Union wants to have a global economic weight, it must equip itself with great European banking champions capable of attracting capital globally and able to support Europe as a development platform.
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.
As the discussion on the next EU enlargement that might include Ukraine in the bloc proceeds, the support of European citizens to support Ukrainians remains solid but not as solid as in the recent past. Eupinions - a Bertelsman Stigtung project - has monitored how the EU sentiment has evolved towards Ukraine over 18 months.
We identify specific industrial products that are projected to be in high demand in the EU and can be realistically produced given North African countries’ existing capabilities. Specializing in these products, North African countries can diversify their export basket, which has been shown to correlate positively with economic development.
The EU should be ready to offer candidate countries at least participation in the single market, partial access to the EU's budget, and observer status in EU institutions by 2030.
We use the pricing mechanism of perpetual loans by our proposed European Debt Agency to determine a dynamic yield corridor that captures idiosyncratic risk and filters liquidity risk.
There is no doubt that monetary policy reacted late to the rising inflationary pressures experienced in 2021-22. The major central banks subsequently caught up rapidly and hiked interest rates at an unprecedented pace. However, as inflation reached its peak at the end of 2022 and has been falling since then, central banks may once again be late in adjusting their policies.
On October 30, 2023, the Biden Administration issued the Safe, Secure and Trustworthy Development and Use of Artificial Intelligence Executive Order 14110, which marks a key development in the global race to regulate AI
The way the EU Commission and governments envisage launching future enlargements without strengthening the EU in parallel could have negative consequences for all Europeans, in the EU and in candidate countries.
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
Whatever comes out of this election result, Dutch politics has become more volatile and complex in the coming years. This will likely have consequences not only for the Netherlands but also for the EU
La Nota di aggiornamento del Documento di Economia e Finanza indica che la stabilizzazione del debito pubblico italiano richiede il raggiungimento di un surplus primario superiore al 3% del Pil nel giro dei prossimi 3-4 anni. Una manovra restrittiva di questo tipo non ha precedenti storici.
On November 13, the Institute for European Policymaking co-organized with IAI, the Istituto per gli Affari Internazionali, an event in Rome dedicated to discussing the implication of the US Industrial Reduction Act on European industries and, specifically, on Italian companies.
The EU negotiating delegation at the UN Dubai conference will put forward initiatives to phase out CO2-emitting fossil fuels and fossil fuel subsidies.
On November 9th, the Institute for European Policymaking organized its first in-person event in Brussels: The Impact of IRA on the EU Industrial Policy: Challenging Conventional Wisdom.
Ralph Ossa, a professor of Economics at the University of Zurich currently on leave, has been appointed as the WTO chief economist in the most challenging time for the organization. In the first World Trade Report since his appointment, Ralph Ossa and his colleagues challenge the prevalent narrative of an inevitable decline of globalization that we have experienced in the last three decades.
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.
ECB independence is inconsistent with the present overreach of the institution into the economic policies of the member states, a function for which the ECB is not accountable.
A continuous political drive will be necessary, at all levels of government, to guarantee enough momentum in terms of both the necessary implementation of the approved reforms, and the timely disbursement of the sum related to already authorized public investments.
Our analysis indicates that the budgetary documents presented by the Italian government are based on excessively optimistic forecasts regarding GDP growth, the effectiveness of budgetary measures and the revenues connected to privatizations. As a result, the very small projected decline in the public debt/GDP ratio is not likely.
How can broad public support for policy reforms and gridlock be overcome? The main mechanism for achieving this in political systems across the democratic world is open competition for the main executive office: the President of the Commission, in the case of the EU.
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.
