Documents Bruegel, Brussels 175 results

"Over the last decade, Europe has suffered from the decay of the post-war international order, economic coercion from both China and the United States, and aggression from Russia. This contribution puts these changes into a historical context, examines their short-term consequences, develops scenarios for 2030-2035 and uses these to draw out the policy implications for the next one to five years.

The short-term output impact of tariff and policy uncertainty since the beginning of the second Trump Presidency is expected to be moderate. However, Europe faces very high risks. Plausible short-term dangers include: a collapse of the US bond market; escalation of Russian military aggression against Ukraine or the European Union directly; a fiscal crisis triggered by a populist election victory in a high-debt euro-area member; or a trade shock triggered by increasing tensions between the US and China and/or hostile Chinese actions in East Asia.

We develop three benchmark scenarios for the world in 2035, all of which involve continued US-China rivalry and greater multipolarity than in the past:

A further retreat from, or dismantling of, international cooperation, with continuing protectionism in the US and minimal global public goods.

A three-bloc world involving China- and US-led blocs alongside a non-aligned set of countries, with the provision of international public goods within, and partially between blocs.

A new multilateral order, with international cooperation over the provision of global public goods.

Actual outcomes could consist of combinations of these scenarios or variants of them. Scenario 1 would be least desirable for the EU, most countries individually and countries collectively, while scenario 3 would be most desirable. In scenario 2, Europe's decision to align with the US or to choose non-alignment would depend on whether the US acts in a benevolent or coercive manner.

Short-to medium term policy must both prepare Europe for adverse future scenarios and contribute to greater international stability and cooperation. This requires policies that increase Europe's strategic autonomy from the two superpowers, both for its protection and to increase its bargaining power. The policy focus should include much greater defence, tech and financial autonomy from the US, a far more resilient and integrated energy system, secure access to critical minerals and a fiscal framework that gives greater flexibility to low-risk countries. Internationally, Europe should defend and promote the reform of the rules-based international order by forming coalitions with other countries from the Global North and some from the Global South. The two priority areas should be trade policy and climate policy. "

"GDP contractions are typically associated with within-country income inequality increases. While official income inequality data for 2020 will not be available for about two years, the already available employment data for 2020 shows that the difference between highly-educated and low-educated people in terms of job losses is correlated with the economic shock from the COVID-19 pandemic, suggesting that the depth of the economic recession is related to the increase in within-country income inequality in 2020. Scenarios based on historical patterns of recessions and within-country income inequality increases suggest relatively small increases in global income inequality in 2020.

Factors mitigating global inequality increases in 2020 include larger GDP per-capita declines in richer advanced countries than in poorer emerging and developing countries, and the positive GDP growth of China, which suggests that within-country inequality in the world's most populous country might have not changed much in 2020. In contrast, it is quite likely there was a significant increase in European Union income inequality in 2020, partly reversing the decline during the previous decades."

"Even in the early days of COVID-19, the European Union signalled its commitment to make its post-pandemic recovery green. The disruption caused by the pandemic would require significant rebuilding of the economy, offering an opportunity to accelerate green investment in the context of the European Green Deal. But pursuing a green recovery is not as straightforward as it might seem. Complex trade-offs must be negotiated between the need for short-term stimulus and the need to address the long-term challenge posed by global warming.

To support policymakers in this difficult endeavour, Bruegel launched in 2020 the Bruegel Green Recovery Group, an initiative supported by the European Climate Foundation. Its aim was to be a platform for dialogue between high-level EU policymakers and academics on green recovery, in Europe and beyond. This Blueprint compiles some of the work of prominent voices of the Group, on issues that will touch the lives of all Europeans."

"We examine the challenge entrepreneurial companies face in going beyond the start-up phase and growing into large successful companies. We examine the long-term financing of these so-called scale-up companies, focusing on the United States, Europe and Canada. We first provide a conceptual framework for understanding the challenges of financing scale-ups. We then show some data about the various aspects of financing scale-ups in the US, Europe and Canada. Finally we raise the question of long-term public policies to support the creation of a better scale-up environment."

"Legal and political issues left the management of the 2015-16 refugee crisis mostly in the hands of national governments, but this is incompatible with an integrated economic area that has largely abolished internal borders. It is also incompatible with some founding European Union principles, such as the existence of a common European policy on the mobility of people.

A greater role for European institutions and policies is needed both for policing the common borders and imposing common welcome policy standards for refugees, based on best practices. EU measures are also required to face the long-term problems related to immigration, as it is very likely that economic and demographic differences between the EU and neighbouring countries will lead to further crises in the future. Planning for this requires ample and dedicated resources, and a long-term strategy based on agreements with immigrants' countries of origin, a task that no EU country can pursue alone.

Some progress has been made to strengthen the role of the EU, with the adoption of new directives, such as the Asylum Procedures Directive, and the establishment of the European Border and Coast Guard Agency. However, the situation is still far from satisfactory. There are major differences in refugee welcome and integration policies in EU countries, as shown by differences in asylum request outcomes in different countries and the different integration processes. There is also a serious lack of information about the skills and competences of refugees in different countries. This is a problem because this information is a necessary first step for an integrated welcome policy that might transform a challenge into an opportunity for aging European economies.

Such differences between EU countries are not only inequitable but also inefficient. They lead to massive distortions in the functioning of European labour markets and create incentives for refugees to seek asylum in specific countries. Moreover, the promise made by EU institutions of a refugee relocation programme is presently not being kept, leaving the countries of first entry to carry disproportionate burdens. Legal procedures are part of the problem because the Dublin Regulation, approved under different circumstances, obliges the first-entry country to examine asylum requests. However, political obstacles play the main role. EU countries are very different in terms of their cultural attitudes towards immigration and it is difficult to impose a common solution on them. Practical solutions, based on the countries that do not want refugees making compensation payments, are probably the most realistic avenues to follow."

"This paper applies the info-gap approach to the unconventional monetary policy of the Eurosystem and so takes into account the fundamental uncertainty on inflation shocks and the transmission mechanism. The outcomes show that a more demanding monetary strategy, in terms of lower tolerance for output and inflation gaps, entails less robustness against uncertainty, particularly if financial variables are taken into account.
Augmenting the Taylor rule with a financial variable leads to a smaller loss of robustness than taking into account the effect of financial imbalances on the economy. However, in some situations, the augmented model is more robust than the baseline model. A conclusion from our framework is that including financial imbalances in the monetary policy objective does not necessarily increase policy robustness, and may even decrease it."