The Bank Resolution Compromise: Incomplete, but workable? CEPS Commentary, 19 December 2013

Calling the Single Resolution Mechanism an “inelegant step in the right direction”, this Commentary singles out the Single Resolution Fund, with its considerable mutualisation of risk, as the key advance – but one that will require changes over time in the extremely complex decision-making mechanisms agreed

The seniority conundrum: bail out countries but bail in private, short-term creditors? CEPS Commentary, 6 December 2010

Despite its large size relative to the small Irish economy, the bailout announced by the Eurogroup following its meeting of 28 November 2010 is not working, as evidenced by the continuing rise in risk premiums. CEPS Director Daniel Gros argues in this commentary that part of the problem lies in a seemingly innocuous provision in the proposed permanent successor to the current European Financial Stability Facility in 2013. The argument is tricky, but at the heart of the problem lies the insistence that rescue financing is senior to private debt while simultaneously ruling out rescheduling of short-term debt

Germany as Scapegoat. CEPS Commentary, 10 December 2013

Germany has been an attractive target for external-deficit countries in Europe and beyond, but beating up on Germany alone appears to be the wrong way to get results. This CEPS Commentary by Daniel Gros argues that the discussion of Germany’s surplus confuses the issues in two ways. First, he points out that although the German economy and its surplus loom large in the context of Europe, an adjustment by Germany alone would only modestly benefit the eurozone periphery. Second, in the global context, he finds that adjustment by Germany alone would benefit many countries a little, but other surplus countries including Russia, China and Japan, would benefit disproportionally

Next time must be different. CEPS Commentaries, 4 November 2009

In signing the Lisbon Treaty on November 3rd, Czech President Václav Klaus brought to an anti-climatic close years of protracted and often acrimonious negotiations to overhaul the European Union’s institutional infrastructure. The EU's reform treaty is now fully ratified and is expected to enter into force on 1 December 2009. However frustrating and bruising the ratification experience may have been, it is hoped that the whole saga will have the unintended (but finally, positive) consequence of strengthening the determination of those wishing to ensure that the next round of treaty change can enter into force even if one or more member countries is not willing or able to agree to it

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (aka Fiscal Compact). CEPS Commentary, 8 March 2012

All in all, this Commentary finds that the Fiscal Compact signed on 2 March 2012 by all member states of the EU (except the UK and the Czech Republic) may be long on good intentions but is rather short on substance. The main danger is that that it has been oversold and in no way constitutes a first step towards fiscal or political union. It is likely that the ratification process (e.g. the referendum in Ireland) and then the implementation process in some difficult countries (e.g. France) will receive a lot of attention and create a distorted impression of the importance of the Fiscal Compact. Once the initial excitement is over, however and national fiscal rules have been put in place, this Treaty will quietly be forgotten

Competitiveness pact: flawed economies? CEPS Commentary, 18 March 2011

The economic philosophy behind the Competitiveness Pact now before the European Council can be summarized by two hypotheses: 1. If we fix (relative?) wages, no external imbalances can arise since relative costs determine export performance. 2. Higher productivity always means more ‘competitiveness’, and is thus always useful to reduce divergences. On first sight, this Commentary finds that both theses seem to make sense, but on closer inspection, neither corresponds to reality

A liquid Europe? CEPS Commentaries, 12 October 2011

In his latest Commentary, Daniel Gros allows that the eurozone might just be stepping back from the brink. He attributes this welcome development to the inclusion of a key component that has been missing so far in any proposed framework to resolve the ongoing sovereign debt crisis, namely a liquidity backstop for the eurozone’s fiscal authority

Adjusting to a credit cycle bust: The role of fiscal policy. CEPS Commentary, 27 July 2012

In response to the often-heard accusation that “austerity is killing growth in Europe”, Daniel Gros asks in this new Commentary: “What austerity?” Looking at the entire budget cycle, he finds that the picture of austerity killing growth simply does not hold up. Since the bursting of the bubble in 2007, Gros reports that the economic performance of the US has been very similar to that of the euro area: GDP per capita is today about 2% below the 2007 level on both sides of the Atlantic; and the unemployment rate has increased by about the same amount as well: it increased by 3% both in the US and the euro area. Thus, he concludes that over a five-year period, the US has not done any better than the euro area although it has used a much larger dose of fiscal expansion

Europe's Competitiveness Obsession. CEPS Commentaries, 5 June 2010

In this commentary, CEPS Director Daniel Gros argues that the current emphasis on wage divergences in the eurozone and the proposition that governments "must do something about competitiveness" risks leading to an excessively activist approach to economic policy coordination, with governments and EU institutions constantly trying to influence wage-setting in the private sector. This might work – at least partly – in the current crisis, but it will not prevent problems in the future unless divergences in domestic demand are also addressed