Should a common central bank in a heterogeneous monetary union base its decisions on EU-wide averages of economic variables or on national welfare losses? A central bank that minimizes the sum of national welfare losses reacts less to common shocks. Under certain parameter constellations this...

The paper analyzes the importance of credible institutions in the process of trade liberalization. It combines aspects of credible policy announcements with adjustment costs. We show that if industries' profits are subject to adjustment costs, a dynamic link between periods arises that creates...

It is widely assumed that a common currency makes it desirable to have also a common fiscal policy. However, if fiscal policy is a source of shocks, independent national fiscal policies are generally preferable because they allow for risk diversification

The European Commission awarded a contract in November 2005 to a consortium composed of the TARKI Social Research Institute (Hungary), CASE, Center for Social and Economic Research (Poland) and CEPS to analyse the socio-economic developments and the process of structural reforms in what were...

In the absence of unforeseen major shocks, the EU institutions should now be less engaged in crisis management and more able to pursue a long-term strategic agenda. The President-elect of the European Commission has also set out her overall programme, which is highly ambitious in many respects,...

Ahead of the 2019 institutional reconfiguration of the EU is a fitting moment to take stock of the European integration process and decide which priorities should define the strategic agenda of the next generation of incumbents.While acknowledging that the entire EU collective is concerned –...

This paper makes the case for full euroization of the Balkans. It argues that the full adoption of the new currency, including the use of euro notes and coins, would bring important benefits for the countries in south east Europe. The key benefit of euroization would be the opportunity it would...

The system for financing the EU today is on its last legs. Indeed, with the EU budget being predominantly financed by national contributions, member states attach great importance to what they get in return, which in the end affects the European principle of solidarity and makes every budgetary...

As EU leaders muddle through the Eurozone crisis, the debate about its root causes continues. CEPS Director Daniel Gros argues in this Policy Brief that the debate is important if we are to understand how to prevent future crises. In his view, external debt is the key to the turmoil in European...

This paper describes four key drivers behind the adjustment difficulties in the periphery of the eurozone: • The adjustment will be particularly difficult for Greece and Portugal, as two relatively closed economies with low savings rates. Both of these countries combine high external debt...