Bringing macroeconomics back into the political economy of reform: The Lisbon Agenda and the 'fiscal philosophy' of EMU

The Lisbon Strategy supports reform of member states’ tax-benefit systems while the ‘fiscal philosophy’ of the EU postulates that governments should allow only automatic stabilisers, built into tax-benefit systems, to smooth aggregate income. We ask whether these two pillars of EU economic governance are compatible. By exploring how structural reforms affect fiscal stabilisation, we complement a political economy literature that asks whether fiscal consolidation fosters or hinders structural reforms. We conclude, based on simulations in EUROMOD, that Lisbon-type reforms may worsen the stabilising capacity of tax-benefit systems

Independent or lonely? Central banking in crisis

The financial crisis has called our understanding of central bank independence (CBI) into question. Central banks were praised for bold interventions but simultaneously criticized for overreaching their mandates. Central bankers themselves have complained that they are ‘the only game in town’. We develop the second generation theory of CBI to understand how independence can turn into loneliness when a financial crisis calls for cooperation between fiscal authorities and the central bank. Central banks are protected from interference when there are multiple political veto-players, but the latter can also block cooperation. Furthermore, central banks in multi-veto-player systems operate under legal constraints on their financial stabilization actions. They can circumvent these constraints, but this invites criticism and retribution. More surprisingly, central banks have strategically invoked their constraints in order to gain cooperation from political authorities

Caenorhabditis elegans predation on Bacillus anthracis: Decontamination of spore contaminated soil with germinants and nematodes

Remediation of Bacillus anthracis-contaminated soil is challenging and approaches to reduce overall spore levels in environmentally contaminated soil or after intentional release of the infectious disease agent in a safe, low-cost manner are needed. B. anthracis spores are highly resistant to biocides, but once germinated they become susceptible to traditional biocides or potentially even natural predators such as nematodes in the soil environment. Here, we describe a two-step approach to reducing B. anthracis spore load in soil during laboratory trials, whereby germinants and Caenorhabditis elegans nematodes are applied concurrently. While the application of germinants reduced B. anthracis spore load by up to four logs depending on soil type, the addition of nematodes achieved a further log reduction in spore count. These laboratory based results suggest that the combined use of nematodes and germinants could represent a promising approach for the remediation of B. anthracis spore contaminated soil

Post-Crisis Lesson for EMU Governance from the Principal-Agent Approach

This paper contributes to the ongoing debate on fiscal consolidation and the questionable effectiveness of the Stability and Growth Pact by addressing the problem of economic governance in the EMU with a game-theoretic principal-agent approach. Following the theory of delegation, we develop a principal-multi agent model where the EMU authorities act as a collective principal that designs contracts for each of two agents that reflect Europe's "South" and "North". We investigate what happens when agents face hidden-information moral hazard problem and when they are able to coordinate their actions. Bearing in mind the applicability of incentive mechanisms, we discuss the optimal contracts for the principal and each of the agents. We prove that the most efficient solution consists of tailor-made contracts, according to which highly indebted countries must be offered strong incentive mechanisms in the form of substantial penalties but also rewards (e.g., preferential loans). We also stress the importance of taking into account positive spillover effects, which could be facilitated by economic integration and fiscal policy coordination between the EMU Members

The macroeconomic imbalance procedure as European integration: a legalisation perspective

The Macroeconomic Imbalance Procedure seeks to prevent and correct destabilising economic imbalances in the European Union. Scholars are divided as to whether this instrument of economic policy coordination relies on the same intergovernmental modes of decision-making as the Broad Economic Policy Guidelines or reflects supranational institutions more significant role in EU economic policy following the euro crisis. Such diametrically opposed interpretations are symptomatic of longstanding concerns over the lack of a clear-cut definition of European integration. To address these definitional difficulties, this paper turns to the concept of legalisation. Taking account of the design and early implementation of the Macroeconomic Imbalance Procedure and using the Broad Economic Policy Guidelines as a point of comparison, it shows that the former can be understood as a modest but clear-cut increase in legalisation compared to the latter. On this basis, it considers whether legalisation, in spite of its own conceptual limitations, can contribute to a more rigorous definition of European integration

Hybridization in parasites: consequences for adaptive evolution, pathogenesis and public health in a changing world

[No abstract available

What difference does Euro membership make to stabilization? The political economy of international monetary systems revisited

For many political economists, the loss of monetary sovereignty is the major reason why the Southern periphery fared so badly in the Euro area crisis. Monetary sovereignty here means the ability of the central bank to devalue the exchange rate or to buy government debt by printing the domestic currency. We explore this diagnosis by comparing three countries - Hungary, Latvia and Greece – that received considerable amounts of external assistance under different monetary regimes. The evidence does not suggest that monetary sovereignty helped Hungary and Latvia to stabilize their economies. Rather, cooperation and external assistance made foreign banks share in the costs of stabilization. By contrast, the provision of liquidity by the ECB inadvertently facilitated the reduction of foreign banks’ exposure to Greece which left the Greek sovereign even more exposed. By viewing the Euro area as a monetary system rather than an incomplete state, we see that what is needed for Euro area stabilization is cooperation over banking union, rather than a fully-fledged federal budget

The Roles of Fiscal Rules, Fiscal Councils and Fiscal Union in EU Integration

EU-level fiscal rules have not been able to prevent the large-scale accumulation of government debt in many eurozone countries. One explanation was major flaws in the rules. Some of these flaws have now been corrected. But the failure of the rules depended also on fundamental problems of time inconsistency. The same time-inconsistency problems that the rules were designed to address also apply to the rules themselves. Fiscal councils may be subject to less of such problems than rules. Still it is unlikely that a monetary union where bail-outs of governments are part of the system is viable in the long run. The sustainability of the euro may require a restoration of the no-bail-out clause and a strengthening of the banking union in ways that would allow it to cope with the financial repercussions that could arise from allowing government bankruptcies