Why has the crisis been bad for private pensions, but good for the flat tax? The sustainability of 'neoliberal' reforms in the new Member States. CEPS Working Document No. 356, October 2011

In this paper, we examine two questions related to the sustainability of the major, neoliberal, economic and social reforms in the new EU member states, namely the flat income tax and private pension pillars. First, we look at the relationship between the political consensus/controversy at the time major policy reforms were passed and the future sustainability of these reforms after a change of government. Second, we explore what we call a paradox of reverse sustainability, whereby the flat income tax has been more politically resilient during the global financial and economic crisis than private pensions, even though ex ante expectations and the literature would lead us to expect the opposite. The paper shows that controversy at the time the reforms were passed had no effect on subsequent sustainability, and the levels of partisanship and public support with regard to a specific reform seem less important than the political costs and benefits. We also find that despite their apparent neoliberal bent, the two policies are versatile enough to be shaped towards a variety of policy goals, allowing their introduction and retention in a variety of economic and social circumstances. In other words, even though private pensions and particularly the flat tax have powerful political connotations, they are by no means policy straitjackets. While both reforms could sustain themselves throughout the ‘good’ times before the global crisis, their fates diverged during the crisis. Neither public support nor the large constituency of savers could fully protect private pensions from a policy reversal during a period of exceptional fiscal pressure. That is because a reversal was associated with significant, short-term fiscal gains and the states where these reversals took place also took a range of other decisions that were politically extraordinarily difficult. On the other hand, we demonstrate that the introduction or potential reversal of the flat tax was not associated with significant, short-term revenue gains. It is the relatively ‘cheap’ nature of the flat tax that distinguishes it from private pensions, because it sends a highly cost-effective signal in terms of revenues lost owing to its existence

Protecting employment in the time of coronavirus: What is the EU’s €100 billion going to buy? CEPS Policy Insights No 2020-08 / April 2020

This paper briefly analyses the proposal by the European Commission to establish SURE, the ‘European instrument for temporary support to mitigate unemployment risks in an emergency’. The SURE facility would borrow up to €100 billion on the financial markets, lend it to member states to finance short-time work schemes and similar measures, using guarantees from the member states themselves. The analysis makes the point that the scheme should be seen, first and foremost, as a proof of European solidarity to counter hostile propaganda from Russia and China about the EU’s ineffectiveness. It can also have an impact on national policies to deal with the coronavirus and to assist the most damaged and/or fiscally weak member states, but this effect is likely to be limited. Potentially, the most important feature of SURE is that it explicitly refers to itself as the forerunner of a future European Unemployment insurance scheme

Is Juncker’s enthusiasm for a common labour authority premature? CEPS Commentary, 18 September 2017

In his State of the Union speech, the European Commission President Jean-Claude Juncker touched upon the hot political issue of posted workers. He mentioned two proposals: -New rules on posting of workers following the principle “Workers should earn the same pay for the same work in the same place” -Creation of a European Labour Authority to enforce “all EU rules on labour mobility… in a fair, simple and effective way

Are we seeing ‘peak’ Germany? Why we should be cautious before recommending Merkel and Schröder to other countries. CEPS Commentary, 7 September 2017

There is a well-known phenomenon called the “skyscraper index” that relates the number and height of skyscrapers to the economic cycle.[1] At the peak of a bubble, ground is broken for the start of construction of the most ambitious projects. In the same manner, one can observe a tendency in the international community of policy-makers, journalists and academics to advocate policies akin to those adopted by countries that display all the signs of enduring success, just prior to taking a major stumble. This is particularly worrying if this tendency leads other countries to undertake similarly radical changes in their own policies that might not have the expected salutary effect

Can Spain break the curse of the periphery? The upcoming Spanish election and what it means for Europe. CEPS Essay No. 24, May 2016

In this CEPS Essay, Miroslav Beblavý takes stock of the changing situation in Spanish politics one month before the early elections, which are expected to take place on June 26th in the hope that a new government can finally be formed. He finds that in both in politics and in economics, Spain resides at an immensely important inflection point situated between the European periphery and its core

Constrained discretion : monetary policy frameworks, central bank independence and inflation in Central Europe, 1993-2001

The thesis has two overarching objectives. One is to understand monetary policy in the Czech Republic, Hungary, Poland and Slovakia during 1990s and early 2000s; the other to use these findings to shed light on monetary policy in less developed, but highly open and financially integrated market economies. In order to achieve its aims, it analyses specific factors with significant influence on the conduct or outcomes of monetary policy in these countries; it analyses the transmission mechanism of monetary policy in Central Europe, based on a technique called vector autoregression; and examines use of principal types of constraints on policy discretion, such as central bank independence, exchange rate commitments and domestic targets for monetary policy, in countries of the sample. The thesis finds that strong internal and external pressures, together with frequent bouts of fiscal irresponsibility and sizeable additive and parametric uncertainty regarding the working of the economy, led, in all four countries, to pronounced macroeconomic vulnerability and a need for periodic adjustment to dangerous fiscal and external imbalances. Reaction of policy-makers in countries of the sample to this environment can be characterized as discretion constrained by a strong nominal anchor and real exchange rate considerations. Experience of Central European countries shows that various elements of a commitment by monetary authorities are not duplicatory or contradictory, but interdependent in contributing to the goal of constraining discretion. During the period studied, the two key overall developments in policy were the gradual shift of emphasis from exchange rate targets to domestic targets and (within domestic targets) a shift from monetary targets to inflation targets. This approach has been largely successful

Students in Work and their Impact on the Labour Market. CEPS Working Document No. 410/July 2015

The purpose of this study is to evaluate the size and composition of the student labour force in order to consider its potential impact on labour markets in the European Union. The paper is based on an analysis of EU Labour Force Survey data from 2011, supplemented by the findings of the EUROSTUDENT project. The structure of student labour is discussed within the framework of the so-called ‘crowding-out’ literature, which identifies competition for jobs between students and low educated non-students, particularly in the retail and wholesale sectors. In contrast to these assumptions, the authors found that, depending on the age of the student, the profile of student workers closely matches that of non-students with medium- to-high educational attainment. In general, the retail and wholesale sectors are of importance in the employment of students under the age of 25, but students typically take positions in the middle of the occupational hierarchy, rather than in the lower-grade positions. Meanwhile, older students, often professionals furthering their education while studying, are typically located in similar jobs and sectors to university graduates. A common trait of student work is its very high degree of flexibility compared to that of non-students. Nevertheless, the structure of student labour does not lead us to believe that student workers are particularly prone to be present in the precarious segment of the labour market

The case for a European unemployment benefit scheme. CEPS Commentary, 19 May 2015

In this CEPS Commentary, Ilaria Maselli and Miroslav Beblavý argue that the European economic governance system needs to be equipped with a supranational automatic stabiliser that would kick-in automatically in the event of an economic downturn, to avoid unduly burdening national public finances. In their view, the option of creating an unemployment benefit system for the euro area should be given serious consideration. The possible variations of such a system and their implications will be the subject of in-depth study at CEPS over the coming year

Time for some shock (absorption): Reinsurance of national unemployment insurance should be a Commission priority. CEPS Commentary, 1 October 2014

In presenting their priorities for the new European Commission, Miroslav Beblavý and Ilaria Maselli assert in this CEPS Commentary that the time has come to devise an EU-level shock absorption mechanism. In their view, the instrument that best aligns varying political and economic objectives is a form of reinsurance of national systems of unemployment insurance. The primary motivation for the reinsurance proposal is that it can have a substantial stabilising effect, especially in case of large shocks, and, at the same time, be politically realistic in terms of contributions, costs and administrative burdens

Social Investment and State Capacity. CEPS Working Document No. 419/February 2016

This paper looks at the difference between the levels and nature of social policy expenditure in northern and northwest European countries and the countries of southern, central, and eastern Europe, and examines the relationship between social investment and state capacity in these country groupings. The authors show that southern and eastern countries have a much greater preference for ‘compensating’ rather than ‘capacitating’ social policy spending. Furthermore, the state capacity in these countries is lower, which generates less state revenue. Based on these observations they conclude that low state capacity and low state revenue go hand in hand with the preference for capacitating social policies, as these policies involve less delegation and discretion than social investment policies. This paper shows that high state capacity is probably a necessary precondition for effective social investment policies, although some limited alternative paths do exist