How to herd cats: economic policy coordination in the Euro zone in tough times

How to herd cats: economic policy coordination in the Euro zone in tough times

Negotiating the Medium-term Financial Perspectives for the Enlarged EU: the Future of the European Budget.

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Integrity and Efficiency in the EU: The Case Against the European Economic Constitution. CES Working Paper, no. 130, 2006

The European Constitutional Treaty (ECT) was presented by its drafters as an explicit constitution for the European Union (EU 25). A possible explanation for its rejection by the French and Dutch citizens in the course of spring 2005 is that it did not sufficiently amend the implicit constitution of the EU 25, the European Union Treaty (EUT), which was truly the object of voters’ aversion. Assuming this to be true, there should be a thorough debate on the relevance and viability of the de facto current constitution of the European Union. In this paper, we engage in this debate by identifying what is essentially wrong with the economic provisions of the EUT, which we designate as the “European economic constitution.” Using a constitutional political economy approach, we first attempt to demonstrate that both what we define as the “principle of integrity” and the “principle of efficiency” of collective action appear to be violated by the European economic constitution. This occurs, respectively, because its provisions are not neutral, nor revisable, and because they do not sufficiently allow for the possibility of cooperative collective decision (leading to convergence in welfare) in a more than ever numerous and heterogeneous EU. Our essential argument in this respect regards the implications of the structurally different economic performances and incentives of small and large countries under the European economic constitution. Finally, since the present European trade-off between “integrity” and “efficiency” appears sub-optimal, we present two original ways of achieving potentially better ones in the EU, through a “Great compromise” or “Economic constitution(s),” expressing a preference for the latter

Negotiating the medium-term financial perspectives for the enlarged EU:The future of the European budget

Although the 2004 enlargement adds some 70 million inhabitants to the EU population, which was about 370 million before, and in spite of the very significant gap in average incomes between old and new members, the latter being much poorer, the size of the EU budget will hardly increase, by a mere 15% till the end of the current programming period, in 2006. With the opening of a new round of negotiations over the next multi-annual financial perspectives for the period 2007-2013, in a context of slow growth, competing objectives and tight financial situations in most EU15 member states, the future size and composition of the European budget are open to debate and the choices that have to be made will, to a large extent, shape the future of the common policies and of the existing instruments of financial solidarity, with likely consequences on economic growth and its distribution amongst member states. This paper presents and discusses the main proposals that have been put forward at the initial stage of this negotiation. It then extends the analysis to broader considerations about common policies, most notably the Common agricultural policy (CAP) and the structural and regional policies, and collective goods for the EU, and about the various institutional and budgetary arrangements, as well as sources of financing, that may be contemplated to implement European policies or to achieve common objectives by means of a more decentralized budgetary system. It also discusses the delicate issue of net contributions and analyzes the pros and cons of various alternative sources of financing for the EU budget, including a European tax

Country size and strategic aspects of structural reforms in the EU. NERO meeting, OECD, Paris, June 12, 2006.

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Inflation divergence and public deficits in a monetary union

We reconsider the link between domestic public debts and average and domestic inflation rates in a monetary union, using a modified version of a model by Beetsma and Vermeylen (2002). It is thus possible to show that the causation between the inflation dynamics and the public finances might go from the former to the latter. We are thus able to tackle the issue of persistently divergent inflation rates within the euro area. We also demonstrate that the homogeneous fiscal rules defined in the Stability and Growth Pact are ill-suited and might even be counterproductive. This conclusion is all the more true as the EU is on the eve of enlargement towards the CEECs: our results show that imposing homogeneous fiscal rules to the CEECs may prove disruptive.inflation, public debt, monetary union, fiscal rule

Mondialisation économique et financière : de quelques poncifs, idées fausses et vérités

La mondialisation économique et financière suscite des débats et controverses dont les termes sont, le plus souvent, emprunts de confusion. Bénéfique pour certains, maléfique pour d’autres, la mondialisation est tantôt parée de toutes les vertus, tantôt affublée de tous les vices. Cet article propose une grille de lecture économique des différentes facettes de ce phénomène contemporain. En premier lieu, il importe de le replacer dans une perspective historique longue, pour faire ressortir les similitudes entre la période actuelle et les précédents épisodes de mondialisation. Nous passons ensuite en revue les facteurs qui, selon nous, constituent les principaux moteurs de la mondialisation : avantages comparatifs et spécialisation, économies d’échelle et de gamme, goût des consommateurs riches pour la variété, abaissement des coûts de transport et de communication, et libéralisation et ouverture des marchés. La mondialisation qui résulte de la combinaison de ces facteurs procure des gains économiques indéniables, gains mutuels de l’échange, gains de la spécialisation et diffusion internationale des technologies, qui sont susceptibles d’engendrer, à très long terme, une tendance au rattrapage des pays les plus riches par les plus pauvres, donc une certaine convergence économique mondiale. Toutefois, la mondialisation économique et financière comporte aussi des coûts et des inconvénients, notamment en raison des restructurations qu’elle impose, de l’instabilité macroéconomique et financière qu’elle favorise en l’absence de régulations adéquates, et des inégalités qu’elle creuse entre gagnants et perdants, au sein des économies nationales et, dans certaines conditions, entre économies nationales. La dernière partie de l’article aborde la question de la gouvernance de l’économie mondialisée, en évoquant successivement les modalités de la régulation mondiale par les institutions internationales telles que le FMI et l’OMC, et les potentialités offertes par les processus d’intégration régionale, et notamment l’expérience européenne d’union économique et monétaire