Monthly Archives: January 2016

How the EFSI works in practice and how it doesn’t – a case study

Gibran Watfe, 7 January 2016

More than five years after the onset of the euro area sovereign debt crisis, the EU still struggles to recover in terms of growth and employment. The most important project by the European Commission under president Jean-Claude Juncker that is supposed to boost growth is the Investment Plan for Europe. The core of the plan is the creation of the European Fund for Strategic Investments (EFSI) that is meant to mobilize private investments for viable projects across the EU, based on a guarantee backed by the EU budget. For this purpose, the European Investment Bank (EIB) is supposed to invest funds of an amount that is three times the size of the guarantee fund, generating private investments of 15 times the amount of the fund. The idea behind this setup is that the guarantee fund takes on some of the risk of a project so that private investors are attracted, as they have to bear less risk.

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End of bailing out of banks, but how accountable will the Single Resolution Board be?

Phedon Nicolaides, 4 January 2016

One of the benefits of the Christmas break is that you can catch up with the episodes of your favourite series that you have missed. In our case, we watched three seasons [about 45 episodes] of “Breaking Bad” – the hit tv series of the chemistry teacher who became a drug dealer. Yes, we too got addicted, thankfully in a different way.

Source: httphdwallpaperbackgrounds.net

Source: httphdwallpaperbackgrounds.net

But as we were watching back-to-back episodes of Breaking Bad I realised that they had managed to solve the principal-agent problem that has bedevilled the new economic governance of the European Union. As of 1 January 2016, the Single Resolution Mechanism became operational. A week earlier, on 24 December 2015, the Official Journal of the EU published the text of an “Agreement between the European Parliament and the Single Resolution Board on the Practical Modalities of the Exercise of Democratic Accountability and Oversight”. Will the European Parliament succeed to exercise effective oversight over the SRB? Before I answer this question, I want to explain how the principal-agent problem was solved in Breaking Bad. Continue reading

Commission’s Investment Plan Lacks Human Capital Component

Neglecting motivation, skills and digital literacy in work force risks losing Europe’s competitive advantage – Post originally published by Euro Insight, 18 November 2015.

The need to boost investment across Europe is undisputed and well documented. Since 2008, both private and public investment contracted: gross fixed-capital formation as a percentage of GDP fell from 22.2% in 2007 to 18.5% in 2013, and there are still no signs of recovery.

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