July/August 2011

Thinking ahead for Europe

EDiToRiAL
The future of nuclear energy in Europe
Arno Behrens, CEPS fellow one day after the german governments decision to phase out nuclear power by 2022, CEPS hosted a meeting on may 31st on the issue of nuclear energy and safety in Europe. germany was criticised for taking its decision without informing or consulting its neighbours. Such abrupt policy changes can jolt neighbouring countries and markets, triggering short-term disruptions that markets can only address in the medium to long term. This kind of reaction by an EU member state to the tragic events in fukushima illustrates the shortcomings of the current EU energy policy framework, where national preferences can quickly trump EU considerations. in an increasingly interconnected European electricity market, a common approach should instead be sought to safeguard the security of European electricity supplies and to deal with potential rises in electricity and carbon prices across the EU. however, with the choice between different energy sources remaining in the hands of the member states, EU energy policy will need to address the risk of cross-border externalities related to potential nuclear accidents. Since any large-scale nuclear accident in Europe would have Europe-wide consequences, there needs to be a consistent and binding approach to setting the highest nuclear safety standards across all EU member states. This is an EU issue in line with the subsidiarity principle laid out in Article 5(3) TEU. The voluntary stress tests for Europes nuclear power plants are thus not an adequate solution. Especially since there is no guarantee that negative stress-test results will have any consequences because decisions on individual installations remain a national responsibility. in the longer term, however, the fallout from fukushima may offer the chance to introduce more transparency into current nuclear safety arrangements, to increase EU competence in this area and to raise nuclear safety standards. This process could start with a revision of the Euratom Treaty to strengthen the focus on binding Europe-wide safety standards, but also to eliminate legal inconsistencies with the new legislative structure of the EU. for example, the European Parliament might be given codecision powers on related matters. in addition, there may now be mounting pressure to raise safety standards as laid out in the Nuclear Safety Directive, and at least to make the iAEA fundamental Safety Principles mandatory at the European level (and in neighbouring countries). Consideration may even be given to establishing a European regulatory body responsible for setting, implementing and enforcing EU safety standards. if European energy policy is to have any meaning in the future, it will need to address the risk of cross-border externality of radioactive fallout from a nuclear reactor, including measures to be taken in the event of an accident and compensation across borders. otherwise, clauses on solidarity will sound empty and will hinder EU energy policy development. in the absence of any consensus on nuclear energy in the EU, these are the minimum measures that the EU must take.

CEPS welcomes new corporate members:

fRANCE TELECom & DTCC

A Europe without farmers?

Harvey, Swinnen, Hulot & Polakova

most of the debate around the 2013 reform of the Common Agricultural Policy (CAP) has focused to date on budgetary and redistributive issues. Namely, what share of the EU budget should be allocated to the CAP and what criteria should define the distribution of the Single farm Payment. on the occasion of the CEPS seminar held on June 20th, Jo Swinnen (CEPS) took a very different perspective. As it is increasingly clear that government support is not effective in maintaining agricultural employment, farmers in Europe should concentrate on the farming activities that are likely to be successful in the economy of the 21st century. As Swinnen explained, a potential growth path for European agriculture is the so-called experience economy, where consumers are prepared to pay premium prices for various experiences (e.g. perceived authenticity, emotions), in addition to the commodity and service contributions. The presentations, given by David harvey (University of Newcastle upon Tyne, Editor in Chief, Journal of Agricultural Economics) and Jean-franois hulot (head of Unit organic farming, European Commission), illustrated further the growth potential of this phenomenon for agriculture by citing recent successes, such as the rapid growth in the sales of fair-trade and organic products, and discussed other demand-driven trends within the agricultural sector. finally, the open debate with the audience explored the extent to which the development of experience farming might be stimulated by the post-2013 CAP.

CEPS Activities Report 2010-11

is now published and can be downloaded at

www.ceps.eu
page 1

page 2

RECENT & foRThComiNg EVENTS

The role of the budget and delivery tools in achieving Europes R&D objectives
A new CEPS report, commissioned by the Swedish think tank SiEPS, DHooge, Jerneck, Nez Ferrer & Figuera finds that there are strong theoretical and practical arguments for giving financial support to R&D at the EU level. Entitled Achieving Europes R&D Objectives: What role for the EU budget and what delivery tools?, the study describes the role played by the various financial instruments, ranging from grants allocated from the EU budget and the blending of grants and loans from the European investment Bank (EiB), to pure private financing. The authors Jorge Nez Ferrer (CEPS) and filippa figueira (University College London) conclude that there is a need to modestly increase the budgetary allocation to R&D by the EU, but that it also needs to be linked to EiB lending instruments to generate a large multiplier effect. They launched the report at a CEPS meeting on June 21st at which marc Dhooge, Deputy head of Division in the European investment Bank, also spoke about the EiBs instruments that focus specifically on R&D.
Download report at www.sieps.se/en/publikationer/achieving-europes-rdobjectives-delivery-tools-and-role-for-the-eu-budget-20116

how to govern a fragile eurozone

in collaboration with gianni Pittella, MEP and first Vice-President of the European Parliament, Gros, De Grauwe & Pittella CEPS has been organising a series of pre-European Council dialogues on economic policy issues between its experts and senior mEPs. in the second of these events, on may 25th, Paul De grauwe (CEPS) presented his latest research on governance of the eurozone. his main thesis was that the nature of a countrys sovereign debt is fundamentally changed when it joins a monetary union in that it ceases to have control over the currency in which its debt is issued. As a result, financial markets can force these countries sovereigns into default. in this sense, member countries of a monetary union are downgraded to the status of emerging economies, which makes the monetary union fragile and vulnerable to changing market sentiments. it also makes it possible that self-fulfilling multiple equilibria arise. The implications of this fragility for the governance of the eurozone are far-reaching. De Grauwe finds that the new governance structure of the eurozone (the European Stability Mechanism) does not sufficiently recognise this fragility, and warns that some of the features of the new financial assistance are likely to increase this fragility. in addition, he foresees that it is likely to prevent member countries from using the automatic stabilisers during a recession, which represents a step backwards in the long history of social progress in Europe. in De grauwes view, a different approach to deal with these problems is called for.
Download from www.ceps.eu: The Governance of a Fragile Eurozone, Paul De Grauwe, CEPS Working Document No. 346, May 2011

A different credit rating industry for Europe?

The overreliance of investors on external ratings is an issue that has come under scrutiny since the financial Drevon, Lannoo & Bangert crisis, where it emerged as a source of systemic risk. This risk is difficult to mitigate, other than by increasing transparency and encouraging due diligence on the part of investors. At the same time, rating agencies are in a difficult position in the context of the eurozone crisis, with legal challenges being mounted in several member states. A joint CEPS-ECmi event on this topic took place at CEPS may 25th, when Karel Lannoo (CEPS) discussed with frdric Drevon (EmEA head of moodys) and michael Bangert, (Vice President of E.oN) how this industry could better serve markets. While participants agreed that regulation should not favour reliance on credit ratings as the final arbiters of risk, the debate pinpointed the inordinate amount of influence that rating agencies have on investors anyway. The conflicts of interest faced by these agencies should invite regulators to reconsider current business models and competition in the market place.

Kick-off seminar for BELDEBT project

The inaugural seminar of the BELDEBT project, which aims to analyse the sustainability of Belgiums public finances with funding from the Belgian Science Office, was held at CEPS on June 15th. Robin Boadway, Queens University (Canada), opened the discussion with a broad overview of fiscal federalism. Willem Sas (KULeuven) focused on Belgium and emphasised the linkages between fiscal federalism and debt sustainability, while Xavier Flawinne (University of Liege) and Pieter Vanleenhove (KULeuven) presented evidence of a generational accounting analysis for Belgium, in which demographical changes are used to assess the sustainability of public finances. Ralph Setzer, economist at the European Commission, and Cinzia Alcidi (CEPS), brought a European perspective to the debate by shedding light on the determinants of borrowing costs for euro area governments. The seminar closed with a contribution by Roberto Tamborini, Professor at the University of Trento, who stressed the role of conditions for fiscal consolidation within the Stability and growth Pact.

Launch of 3rd Think global Act European

The third edition of the Think Global Act European (TgAE) report was launched in Brussels on June 15th, focusing on the Polish, Danish and Cypriot trio presidency, which will run from July 2011 to December 2012. Researchers from 16 European think tanks, including CEPS, contributed to the report. During the first session of the event, senior diplomats from Poland, Denmark, Cyprus and the EEAS looked at the changing role of the rotating presidency and how it relates to the new Lisbon institutions. Claus grube, Secretary of State, Danish Foreign Ministry, identified the EUs long-term budget and the single market as particularly important areas for close cooperation among the rotating presidencies. The second session focused on growth and the eurozone crisis, with stimulating input from panellists representing the European Parliament, the german federal foreign office and the European Commission.

Conference to showcase new CEPS report

A new book by CEPS researchers Sergio Carrera and Anas faure Atger will be presented at a conference on July 6th organised by CEPS, together with the European Economic and Social Committee and the Committee of the Regions. The book examines the potential of the principle of integration as a two-way process of mutual accommodation between migrants and their receiving societies. The authors identify ways to enhance the use and oversight of European funding for the development of integration policies at the national, regional and local levels.
Register for event (see back page) Download report as of July 6th at www.ceps.eu/books Event info: anais.faure.atger@ceps.eu

TASK FORCE NEWS

Rethinking Asset management
The third meeting of the Rethinking Asset management Task force took place on June 10th, when members discussed the contribution of asset management to the economy. The group looked at the operational principles of socially responsible investment (SRi) and considered ways to implement these principles across the industry. Participants agreed that environmental, social and governance criteria are useful tools to manage risks and boost returns over the long term. Yet, it was felt that much of the responsibility now falls upon institutional investors rather than asset managers, who nevertheless can play an important role by offering SRi vehicles to retail clients. initiatives to foster long-term investment via dedicated pan-European vehicles were addressed, including a proposal to introduce a long-term UCi (Undertaking Collective investment) for retail investors. The role of hedge funds and other sophisticated investors in the economy was also discussed, alongside private equity and venture capital.
Info: mirzha.demanuel@ceps.eu

CEPS NEWS

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TASK foRCE AgENDA

1. A New Mortgage Retail Credit Regime for Europe: Setting the Right Priorities Chair: Rosa-Maria Gelpi, former Vice-President of BNP Paribas Personal Finance Report published and launched on 23 June 2. Securing European Energy Supplies: Making the Right Choices Chair Knud Pedersen, Vice President, DONG Energy Report under preparation 3. The Carbon Market after Copenhagen: Challenges and the way forward for the EU Chair: Benot Leguet, Chair of the JI Supervisory Committee and Vice President for Research, CDC Climat Report under preparation 4. Aligning the EU Budget with the Europe 2020 Competitiveness and Growth Objectives Chair Daniel Tarschys, Professor Emeritus in Political Science and Public Administration, Stockholm University 3rd meeting 7 September 5. Price Formation in Commodities Spot and Future Markets Chair Ann Berg, Senior Consultant to the UN - FAO 1st meeting 19 September 6. Rethinking Asset Management Chair: Jean-Baptiste de Franssu, CEO of Invesco Europe 4th meeting in September 7. Transport and Climate Change Chair Arie van Bleijenberg, Manager of Business Unit Mobility and Logistics, TNO Netherlands 4th and final meeting in September

Task force on the EU budget faults EP report

in opening the second meeting of the CEPS Task force on the EU budget on June 22nd, Chairman Daniel Tarschys expressed concern about the lack of appropriate responses in the recent report by the Policy Challenges Committee (SURE), set up in July 2010 by the European Parliament to flesh out the priorities for the next multiannual financial framework and to propose how the EU budget should be financed in the future. The report effectively Tarschys (Chair) highlights the challenges, but fails to present a restructuring of the budget that would address the identified weaknesses. These remarks were followed by a presentation by Eric Pere, Associate Director of the institutional Affairs Department of the European investment Bank, on the Banks enhanced future role to complement the EU budget. Two prominent mEPs, Danuta hbner and gran frm, each presented their views on the budget, with ms hbner focusing more on cohesion policy. Both voiced strong concerns over the misguided and shortsighted views of those member states seeking cuts in the EU budget, as it could lead to important losses in the long-term economic potential of the EU rather than benefits.

NEW!

international cooperation on clean development

The Asia-Pacific Partnership on Clean Development and Climate (APP) provided a framework Campbell, Drexhage, Forrister, Kyte, Sole-Mena, for supportKobayashi, Fujiwara ing international cooperation among seven countries Australia, Canada, China, india, Japan, Republic of Korea and the US to meet development, energy, environment and climate change objectives for the period 200611. As the end of the period approaches, CEPS was asked by Dg Enterprise of the European Commission to report on the lessons learned and to analyse their implications for the EUs participation in a similar partnership. At a side event organised on the margins of the UN climate talks in Bonn on June 7th, Noriko fujiwara (CEPS) presented the interim findings of the study. Drawing on her results she reported that the initiative has fostered a new appreciation among the participating countries for data sharing and collection management and capacitybuilding. The event was chaired by Nick Campbell (Business Europe) and introduced by Anna Sole-mena (Dg Enterprise). izuru Kobayashi (government of Japan) showed the intended transition from the APP to the global Superior Energy Performance Partnership (gSEP), followed by comments from Bill Kyte (international Electricity Partnership), Dirk forrister (forrister Advisory) and John Drexhage (international Council on mining & metals). 8. Basel III in Europe: What future for the banking industry? 1st meeting September (tbc)

NEW!

CEPS CoRPoRATE BREAKfAST

Spectrum policy, roaming and the digital agenda
The future of spectrum policy and the digital single market were the topics of a lively Digital forum debate at CEPS on June 21st. mEP gunnar hkmark expressed his wish to continue cooperation with the CEPS Digital forum to Hkmark inform future positions of the European Parliament, especially concerning the development of pan-European licenses and pan-European operators in a seamless and wireless broadband space. Andrea Renda, CEPS, announced two papers that will shape the discussion in working groups on Building a Sustainable internet model and Spectrum Policies along with two other working documents for discussion on Critical infrastructure Protection and Cloud Computing, to be ready in July. The CEPS Digital Forum aims to present the main findings of these working groups in a conference organised with the international Telecommunications Society at the end of october in Brussels, with leading academics from all over the world. Staffan Jerneck, CEPS, chaired the event.
For more information visit www.digitalforum.eu

Jorges Musings... Jorges Musings...

Let me introduce you to the European Commissions latest tool, the MMFGenerator. We feed it a concoction of various new resolutions and objectives, and then in a couple of years it creates a revolutionary new budget that does the same things as the previous one.

RECENT EVENT
The EU Central Asia Strategy reviewed @4 years
four years following the launch of the Central Asia Strategy, representatives from EU institutions, the Ngo community and diplomatic corps convened to assess the progress the EU has made in the Axyonova, Emerson (CEPS), Perkauskiene & Hale field of EU-Central Asia relations. The roundtable on June 9th at CEPS had two specific focal points: the promotion of human rights and democracy and the security and development challenge. Jacqueline hale, Senior Policy Analyst, open Society institute in Brussels, argued that conditionality should be applied when dealing with Central Asias greatest laggards, contemplating the suspension of the human Rights Dialogue to encourage improvements in the human rights domain. in the second part of the event, Pierre Borgoltz, Cooperation Coordinator, Central Asia Division of the European External Action Service offered examples of tangible EU successes, dismissing Ngo criticism of EU incoherence in its policy implementation. The event was also an opportunity to discuss two recent EUCAm Policy Briefs (see below) and to receive feedback on their content and methodology.
Download from www.ceps.eu: Is the EU-Central Asia Strategy running out of steam?, by Jos Boonstra and Michael Denison and The EU-Central Asia Human Rights Dialogues: Making a Difference?, by Vera Axyonova.

LATEST TiTLES fRom CEPS

CEPS Policy Briefs
No. 246 The general Affairs Council: the Key to Political Influence of Rotating Presidencies, Piotr Maciej Kaczyski and Andrew Byrne, June No. 245 Space observation Systems: An underutilised element for EU and global climate change policy?, monica Alessi and Christian Egenhofer, June No. 244 EU-Russia: Divergent Logics of Communication, Andrei makarychev and Alexander Sergunin, June

CEPS Commentaries
Debt reduction without (a messy) default, Daniel gros and Thomas mayer, 23 June Privatisation is no salvation, Daniel gros, 23 June 2011 Review of the Review of the European Neighbourhood Policy, michael Emerson, 8 June The EU budget needs fundamental reform: An open letter to the European Council, the Council, the European Parliament and the European Commission, CEPS Task force on Aligning the EU Budget with the Europe 2020 Competitiveness and growth objectives, 8 June
Download all titles for free at ww.ceps.eu/books

CEPS mEmBERShiP mEETiNgS

13.15 14.30

4 July 6 July

The Priorities of the Polish Presidency of the Council of the EU

H.E. Jan Tombinski, Permanent Representative of Poland to the EU

9.00 13.15

Integration as a Two-Way Process in the EU? - Enhancing EU support to a process of mutual accommodation between Migrants and the Receiving Society (with the EIF) - Launch of a CEPS report
Gerhard Stahl, Committee of the Regions; Thomas Huddleston, migration Policy group Stefano Signore, Dg home Affairs, European Commission Venue: European Economic & Social Committee; Register by July 4th via www.ceps.eu/events Contact person: anais.faure-atger@ceps.eu

13.15 14.30

7 July

Europe United: Power Politics and the Making of the European Community
In cooperation with the Leuven Centre for Global Governance Studies

Speaker: Sebastian Rosato, Notre Dame University; Discussant: Stephan Keukeleire, Jean-monnet Chair in European foreign Policy and Total Chair of EU foreign Policy, College of Europe (Bruges/Natolin)

13.15 14.30

8 July

The World Financial System: Options for Reform

Presentation of the interim report of the Independent Commission on Banking

Martin Wolf, member of the independent Commission on Banking and Chief Economics Commentator, financial Times

13.15 14.30

12 July

European Standards: Simpler, more voice and fast track?

Mattia Pellegrini, member of Cabinet of Commission Vice-President Tajani; Elena Santiago, Secretary general, CEN/ CENELEC; Jacques Pelkmans, CEPS; Edvard Kounk, mEP and Rapporteur on the future of standardisation Paul Coebergh van den Braak, Chairman, free movement Committee, BUSiNESSEURoPE

13.15 14.30

13 July

Interculturalism - Europe and its Muslims searching for sound societal models
Launch of a new CEPS paperback

Zeynep Yanasmayan, CEPS and ULB, Brussels; Joanna Parkin, CEPS; Discussant: Claude Moraes, mEP (tbc)
Attendance at CEPS Membership Meetings is a benefit of membership. Non-members may be admitted for 50 per session, paid in cash at registration. if not otherwise stated, meetings are held at CEPS. Please check our website (www.ceps.eu) regularly for updates. An informal sandwich lunch is served at 12.30 (or half an hour) before lunchtime meetings (6). For organisational reasons, we cannot accept telephone registrations. page 4 Registration: Please register via www.ceps.eu, or contact Anne-marie Boudou by e-mail: amboudou@ceps.eu or fax: +32 (0)2 201 46 89.