News Archive

Under the pressure of the 2008 crisis serious flaws have emerged in the design of the European Economic and Monetary Union (EMU) as a supranational architecture which aims at generating and distributing collective benefits from integration among highly interdependent countries. If we agree that more Europe is needed, we shall urgently ask "Which Europe?". Economists Luciano Andreozzi and Roberto Tamborini from EconPol Europe network partner Università di Trento introduce here an interesting policy game setup of two interdependent countries where each sovereign government seeks to optimise its own welfare function reflecting social preferences over policy options and their outcomes. Read here why the strategy of further integration by an extended system of binding rules enforced by technocratic agencies may be unsuccessful and which consequences should be drawn.

Spanish cohesion is currently facing a severe test in the chaotic conflict surrounding the referendum on Catalan independence. Of particular importance is the fiscal dimension of the issue. A highly influential argument of the independence movement is pointed to the financial burden placed on the region combined with Catalonia’s limited budgetary autonomy. EconPol network member Friedrich Heinemann/Centre for European Economic Research (ZEW) shows: This is an experience that Europe should pay extremely close attention to, given the ambitious reform proposals currently discussed for the EU and the euro area many of which point to greater centralisation.

Juncker’s proposals on the euro area are lacking in substance and coherence. His starting point was that the euro should be considered the currency of the Union, not just the currency of some Member States. From a formal point of view this is correct, as the euro is indeed designated in the European Treaties as the currency of the Union. The countries that are not part of the euro area are considered to have a temporary derogation. Network member David Gros, Director of CEPS, says that the reality is, however, different and explains why small, concrete steps aimed at strengthening financial stability would have been more useful.

The Common Agricultural Policy (CAP) was set up in a time when the memory about post-war food shortage was fresh, Europe was a large net importer of agricultural products, agricultural production was highly labour-intensive and significant shares of the work-force received their major income from the agricultural sector. Today, agricultural production is capital-intensive with a low share of total labour employed and food spending. Read in this paper by network member Friedrich Heinemann/ZEW why CAP in its current size is still part of the problem and which conclusions should be urgently drawn.

Finnish VATT Institute for Economic Research scientists Jarkko Harju, Ilpo Kauppinen and Olli Ropponen have studied the interesting effects of an interest barrier that was introduced in Finland to restrict the profit-shifting opportunities of multinational enterprises (MNEs). Our Nordic EconPol Europe Partners found that Finnish MNEs responded to the interest barrier by decreasing their financial expenses, but not only.