Overview publications

The Covid-19 crisis has led to a common European fiscal response in the form of the €750 billion Next Generation EU (NGEU) package agreed by EU leaders in July 2020. One important novelty of this package is that it will involve, for the first time, the issuance of substantial common European debt - Daniel Gros explains what this means for the EU and its Member States.

Public procurement officials make substantial decisions for public good provision, and their decisions have widespread welfare implications. Yet despite the importance of these decisions, there can be a lot of discretion applied by the individuals awarding public sector contracts. EconPol network member Sebastian Blesse (ZEW) and co-authors Janne Tukiainen, Albrecht Bohne, Leonardo Giuffrida, Jan Jääskeläinen, Ari Luukinen and Antti Sieppi investigated the decisions made by public procurement officials in contracting bureaus in government offices of various types across states, regions and municipalities in Finland, Germany and Italy to examine the level of discretion they were able to apply.

Recent evidence suggests that individual traits such as social capital are key determinants of how well the Covid-19 pandemic can be contained. It has been widely argued that the success of governments’ policies will be determined by trust and, at the same time, the pandemic itself is likely to affect trust, attitudes towards institutions and solidarity. This experimental study by Cevat Giray Aksoy (European Bank for Reconstruction and Development and King’s College London), Antonio Cabrales (EconPol Europe, Universidad Carlos III de Madrid), Mathias Dolls (EconPol Europe, ifo Institute) and Lisa Windsteiger (Max Planck Institute for Tax Law and Public Finance) into the impact of Covid-19 looks at levels of trust among people and public institutions across Europe. The authors surveyed people in France, Germany, Greece, Hungary, Italy, the Netherlands, Poland, Spain and Sweden to examine the effects of the virus on social trust, reciprocity, solidarity and institutional trust. The results reveal an overall increased sense of solidarity among people, but lower levels of trust in government in countries hit hardest by the virus.

Global authorities have longstanding worries about the impact of financial contagion on the economy: the domino effect of a failing bank can have severe repercussions, as the 2008 financial crash illustrated. To deal with these potential shocks, regulators and financial institutions have implemented risk management systems and processes designed to minimize the likelihood that such an event will be able to destroy the economy again. However, while these new frameworks and increased capital reserves go a long way to protecting financial institutions, according to economist Antonio Cabrales there is one area that is being overlooked: the link between financial systems and climate change.

An  e-procurement system launched by the central government in Ukraine in 2016 reduces collusion and leads to better market outcomes, according to research carried out by Bruno Baranek, Leon Musolff and Vitezslav Titl. The system allows members of the public to leave reviews on public procurement processes – and there’s little evidence of it being used to sabotage rival businesses. This research exploits a unique setting in Ukraine and illustrates that online public monitoring of procurement markets can eliminate collusion and improve market outcomes. The 2016 reform allows citizens to observe complete information about procurement contracts and comment, review, monitor, and submit abuse reports.

The European Commission has set one of its key climate and energy targets as achieving a share of at least 32% for renewable energy over total energy consumed by 2030. But despite such a large share up for grabs, the methods by which renewable energy is bought and sold are far from clear. Renewable energy auctions have been implemented globally; they’re currently taking place in most countries in Europe and beyond 100 countries around the world. But, says Natalia Fabra of EconPol Europe and Universidad Carlos III de Madrid, there’s no uniformity about the way the auctions are being run, with each country using their own system.

The decision of the UK to leave the EU imposes a key challenge for trade relations; regardless of the outcome of trade talks, trade costs are set to increase with the resulting shocks more severe for goods that are highly dependent on few suppliers. In the worst case scenario, say Lisandra Flach (EconPol Europe, LMU Munich and ifo Institute) and Feodora Teti (EconPol Europe, LMU Munich and ifo Institute), these shocks will cause significant supply chain disruptions that will have a much harsher impact on the UK than any EU member state.These product dependencies, they say, emphasize the need for a trade agreement that minimizes the costs of Brexit for both sides and reduces the uncertainty in international relations.

The decision of the UK to leave the EU imposes a key challenge for trade relations and, depending on the outcome of the ongoing Brexit negotiations, will cause severe increases in bilateral trade costs. The experience from former crises has shown that disruptions caused by negative shocks are more severe in case of highly dependent goods, which are sourced from few suppliers. This report provides an overview on product dependencies between EU27 and the UK and uncovers several stylized facts. It shows that, whereas for most of the EU27 countries less than 10% of the highly dependent goods are sourced from the UK, the majority of UK’s imports of highly dependent goods are sourced from countries in the EU27. However, for both, the UK and the EU27, Brexit imposes challenges for supply chains, as in both cases most of these goods are classified as intermediate goods, which are used as input for final production in the destination country. For those goods, uncertainty and rising costs due to Brexit may cause an additional distress on supply chains.

As the economy and our daily life return to a “new-normal” in the midst of Covid-19, the possibility of a second wave leaves lots of uncertainty about future developments. To understand indications about the impact of the pandemic on economic performance in different countries across the world, we conducted a survey among 950 economic experts in 110 countries. This report gives an overview of the most important results of the survey and compares them in different world regions and countries. An extra focus is placed on the European Union’s strategy to combat the crisis and how experts from member states assess the different policy measures.

The functioning of the Eurozone was irreversibly transformed by the European debt crisis and now, as a consequence of the Covid-19 pandemic, a new and even more devastating crisis has hit the EU. German Chancellor Angela Merkel has abandoned her opposition to substantial intercountry transfers and any form of debt mutualization, a turnaround motivated by the exceptional circumstances brought about by the pandemic. The risk that Italy’s fragile financial, economic and political situation, exacerbated by the current crisis, could destabilize the entire Eurozone in the absence of sizeable external assistance was probably one of the main determinants of the German government’s policy shift. In this policy report, Luigi Bonatti and Andrea Fracasso argue that this move will be insufficient to drive Italy into a sustainable and satisfactory growth path, and it will need further financial support from EU institutions and member states. Should they agree to provide financial assistance to the Eurozone's most vulnerable countries and make permanent what was supposed to be temporary, or expose the zone to a possible implosion?