EU institutions

How poorer nations benefit from EU membership

Nauro F Campos, Fabrizio Coricelli, Luigi Moretti, 9 April 2014

In the wake of the recent crisis, the debate about the economic benefits from EU membership has intensified. This column presents new results about the benefits countries derive from becoming EU members, using data from the 1980s and 2004 enlargements. There are substantial positive pay-offs, with a gain in per capita GDP of approximately 12%. Despite differences across countries, the evidence shows that the benefits of EU membership outweighed the costs for most countries – except for Greece. An important research question would be to identify factors that allow countries to better exploit EU entry.

How to loosen the banks-sovereign nexus

Paolo Angelini, Giuseppe Grande, 8 April 2014

The ‘deadly embrace’ between banks and their government has strengthened with the EZ Crisis. This column argues that this has mostly been consequence rather than a cause of the Crisis. Moreover, adverse bank-sovereign negative feedback depends on the economy-wide effects of the sovereign risk, not just the banks’ direct exposure. Loosening the embrace requires sound public finances and well-capitalized, well-supervised banks – including the banking union project.

How rich nations benefit from EU membership

Nauro F Campos, Fabrizio Coricelli, Luigi Moretti, 5 April 2014

One concern with EU enlargement is that relatively poorer countries benefit more from becoming members. This column uses data from the 1973 and 1995 enlargements to show that richer countries also benefited a lot from joining the EU. Per capita incomes would have been considerably lower had these countries not joined the EU when they did. Yet, the difference between the estimated benefits for 1973 and 1995 enlargements is large, and thus, should not be attributed to differences in per capita incomes at the time of joining.

Orderly debt reduction rather than permanent mutualisation is the way to go

Vesa Vihriälä, Beatrice Weder di Mauro, 2 April 2014

The EZ debt overhang needs to be fixed. This column argues that making market discipline credible requires an orderly debt restructuring mechanism combined with a strictly regulated temporary mutualisation scheme or a well-designed debt conversion scheme. This combination could reduce the current debt overhang in an orderly fashion and cement strong incentives against over-borrowing in the future.

The Eiffel group: ‘A political community of the euro’

Agnès Benassy-Quéré, Shahin Vallee, 27 March 2014

The recent crisis has highlighted some problems in the current structure of the Eurozone, such as the lack of political integration. This column introduces the Eiffel group – a group of French experts – and its call for a ‘political community of the euro’. The economic and political rationales behind the proposal are discussed in detail. This proposal (also shared by experts in other countries) calls for a debate about the architecture and institutions underpinning the European Monetary Union.

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