EU Monitor

The interest for higher democratic accountability in the EU is stronger than ever. Indeed, there is scope for action for stronger involvement of national legislatures at EU level. Within the time frame of the eighth legislative period of the European Parliament (2014-2019), an interinstitutional agreement is a viable option. This could lay down a working definition of subsidiarity, enhance interparliamentary cooperation, and structure the use of ‘yellow cards’. In the medium term, a stronger role for national parliaments would require outright treaty revision. [more]

The future of the British EU membership has become one of the most pressing concerns for the EU. The EU-British relationship has always been one of special character but a number of recent developments have led to a ‘Brexit’ gaining momentum. Only the UK itself will be able to rationalise the domestic debate on EU membership. Economically, Britain and the EU are inextricably linked. Realistic estimates predict losses in the range of 1 to 3% of British GDP in case of a Brexit. Likewise, the Single Market would shrink by 15%. [more]

Sub-sovereign bonds are a segment that has attracted little attention to date. Bonds are the dominant form of funding for Germany's Länder, though, and they also play an important role for the regions in Spain. While the Länder benefit from Germany’s excellent sovereign rating, only those Spanish regions not forced to request financial assistance from the central government at the height of the debt crisis have recently been able to obtain financing via the capital market. In France the issuance by the municipalities is likely to increase due to the newly established Agence France Locale. A local authority finance agency is also in the process of being introduced in the United Kingdom. The importance of the sub-sovereign bond market crucially depends on country-specific institutional arrangements. [more]

Migration patterns within the eurozone have changed fundamentally. While prior to the crisis many citizens from Central and Eastern European EU countries migrated to Spain and other peripheral countries, the westward migration is now primarily directed to the core. The crisis has also triggered increasing migration from the periphery to the core. Eurozone migration acts as a sensible adjustment mechanism in the labour markets. In Germany it contributes to the reduction of bottlenecks in the market for qualified labour, whereas in the GIPS it functions like a safety value. Migration also fosters growth in the host countries, while the impact on the GIPS is ambiguous. Emigration reduces persistent structural unemployment especially in problem sectors like construction. It also helps to rein in public spending. However, the huge swing in the migration balance, especially in Spain, weighs on domestic demand. Higher remittances would be helpful to mitigate the shock from the outflow of purchasing power. While fears of a brain drain are overstated, lasting migration deficits would accelerate population ageing in the periphery. [more]

The transatlantic integration of financial markets has suffered a serious setback since the crisis of 2007. Since then, the countries affected have fundamentally overhauled the regulatory framework governing financial markets. However, this stricter regulation has led to regulatory divergence: Divergent rules on capital, liquidity, derivatives and banking structures are threatening to fragment the financial markets. Slightly divergent national policy preferences, the institutional framework and the relevant partners' differing ideas on reform have been the main factors driving this unfortunate trend. The proposed Transatlantic Trade and Investment Partnership (TTIP) provides a good opportunity to lay strong institutional foundations for regulatory cooperation on financial services as well. Responsibility for creating internationally harmonised rules on financial market regulation rests with the G20 leaders. [more]

The adoption of the proposal to extend the Savings Taxation Directive is another important stepping-stone towards comprehensive, universal automatic exchange of information at the EU level. The current schedule is very optimistic. But given the international developments over the past year it may be assumed that nothing will be able to stop the march of automatic exchange of information even beyond the EU's borders on a medium-term horizon. It remains to be seen to what extent it will actually be possible to coordinate the multitude of international initiatives with one another and ensure adequate data protection. [more]

In mainland Europe, the financial position of many institutions for occupational retirement provision (IORPs), which offer defined benefit pension plans, has markedly improved in recent years. Nonetheless, the market conditions facing pension funds remain tough. The main challenges here are the persistently low yields on high-quality bonds and the beneficiaries' rising life expectancy. New regulatory requirements, such as those contained in the recently published draft revision of the EU Directive on Institutions for Occupational Retirement Provision ('IORP II'), are also likely to pose a challenge for many IORPs. [more]

On May 1, 2004, eight CEE countries joined the European Union, followed by Bulgaria and Romania in January 2007. Strong trade, investment and monetary integration with the EU have been the cornerstone of the successful economic catch-up story of those economies which started much earlier than actual accession. Ten years and a textbook boom-bust cycle later, the CEE-10 have witnessed not only the benefits but also the drawbacks of such strong trade and financial integration. Still, we expect high and rising trade openness and strong integration in European manufacturing value chains will continue to support the CEE-10 industry-based growth model. [more]

As a consequence of the eurozone crisis nearly all the EMU countries have seen aggregate company numbers fall over the past few years. The crisis has hit small and medium-sized enterprises on the eurozone's periphery particularly hard. The low demand triggered a sharp drop in the number of firms, mainly in Ireland and Spain but also in Portugal and Italy. As the crisis progressed, the funding conditions for enterprises in these countries gradually worsened and the differences in lending conditions between small and large companies increased. Apart from better funding access for SMEs also the elimination of structural obstacles to growth ought to be on the political agenda. [more]

The European elections will be held in late May. The share of the vote gained by eurosceptics could increase. Using national election surveys as a basis we have modelled three potential scenarios of the outcome. Even under extreme assumptions the eurosceptics remain far short of attaining working majorities. However, in the run-up to national elections government positions on European policy could be influenced by how well the respective eurosceptics fare on polling day. Thus, the eurosceptics' indirect influence will probably be of relevance both before and after the European elections. [more]