Author Archives: Roxana

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.



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

Should State Aid that Is Passed on to Consumers Not be Recovered?

Phedon Nicolaides, 6 October 2015

On 5 February 2015, the General Court, in cases T-473/12, Aer Lingus v Commission and T-500/12, Ryanair v Commission, partly annulled Commission Decision 2013/199. In that decision the Commission found that a lower tax on air travel in Ireland that applied to flights that were essentially domestic was state aid. The Commission concluded that the aid was incompatible with the internal market and had to be recovered. The amount that had to be recovered was the difference between the lower and the standard rate of tax for all other flights from Ireland [which was EUR 8 per passenger] multiplied by the number of passengers who bought tickets taxed at the lower rate.

The two airlines argued that the Commission was wrong to demand recovery of the full amount of the tax difference because they had passed it on to passengers in the form of cheaper tickets. Surprisingly, the Court agreed with that point of view. It censured the Commission because “116 … inasmuch as the economic advantage resulting from the application of that reduced rate could have been, even only partially, passed on to the passengers, the Commission was not entitled to consider that the advantage enjoyed by the airlines amounted automatically, in all cases, to EUR 8 per passenger.”

When the judgment was issued I wrote an article criticising it for misinterpreting the concept of advantage and for misunderstanding how airlines could exploit the reduced tax even they could pass it on to passengers.[1] If the two airlines were passing all aid to passengers why did they bother to receive it in the first place? Surely they were not acting selflessly. Continue reading

EU Freedom of Movement and Migration

Roxana Nedelescu*, 8 September 2015

From the migration crisis born by massive influx of migrants and refugees from North Africa and the Middle East to the EU,  Member States and their political leaders should learn that a common migration and asylum policy is needed. Europe has to stand together in order to efficiently manage extra-EU migration flows and even assist in ending the conflicts in native countries that drive migration.

A closely related topic is intra-EU migration flows. It should be made clear that the freedom of movement is not the same as freedom of residence. In order to reside for more than three months, the right of residence is granted under certain conditions, i.e. sufficient economic resources as well as sickness insurance need to be guaranteed such that the EU citizen and his family do not represent a burden for the host country social services and they may need to register with the local authorities.

Numerous political discussions arose from having an incomplete labor market and partial coordination of social welfare systems, such as ongoing discussions concerning welfare system restrictions for non-nationals. Focusing on the latter problem, one must point out the demand of British Prime Minister, Mr. David Cameron, of EU treaty reforms that would restrict EU workers access to in-work benefits as well as child benefits, impose tighter restrictions on new Member States and EU job seekers as well as ban those abusing the free movement right, among other points on his treaty reform shopping list. While the claim of the abuse of the free movement of persons is reasonable and has been addressed in the UK by reforming the Habitual Residence Test,  most of his aims may be already achieved by amending national legislation, without a need for treaty reform. Still, one has to ask himself whether or not these measures are rational before taking any action.

Rather than  jumping to conclusions, let’s have a look at some facts: Continue reading

Greece’s third memorandum of understanding: the last robbery before the Grexit?

Matteo Barberi, 24 August 2015

matteoThe Greek dispute remains the main topic of the European and non-European talks and discussions. This blog does not represent an exception with several articles focusing on Greece published over the last weeks. In the last article the author Leo Hoffman-Axthelm was asking himself if we were risking the European project for a few billion euros.

More than a month after an answer arrived. On the 14th of August European and Greeks authorities agreed on a three-year ESM stability support programme for Greece up to 86 billion euros; a third bail out as the press is referring to it. Continue reading

Are we risking the European project for a few Billion Euros?

For as long as the euro’s architecture remains incomplete, Greeks get to decide whether to pay or not. It’s called sovereignty.

Greece has escalated the European debt crisis, hoping that austerity would be reduced  and debt forgiven as we approach the brink. Indeed the downside risks of a Grexit far  outweigh any imagined benefits: Creditors would lose all loaned taxpayer money, and    reverse the direction of European integration for the first time, precipitating furthercalamities down the road. But for as long as creditors resist deeper integration of theeuro area, with 19 euro members retaining their economic sovereignty, the blackmailing will go on. Not following the rules is the very essence of economic sovereignty. Greececan free-ride while weighing the costs and benefits of following the rules or not. 
The solution to this is not self-defeating austerity, and we hope European leaders willbe too risk-avers to risk Grexident. The answer must be a decisive deepening of the    single currency to render the euro sustainable. 

Continue reading

The answer to the Greek crisis is in the Treaty

Olivier Colin, Voltaire promotion, 3 July 2015

The European Union has been founded on a set of values: “respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities”. Those values are not only common to the Member States but are also considered to be “universal”, meaning that they should be applied to all human beings. As Europeans, we would interpret that as the willingness to promote and apply those values to all human societies in the world. Unfortunately, when it comes to money and power, European decision makers are not even able to apply such values at the European level. In that context, how can they pretend that our model of society is universal if we are not even able to apply it within our own borders? Continue reading

Greece Will Not Default

Phedon Nicolaides,  14 June 2015


Source: University of Illinois, 2011

As the markets are becoming increasingly convinced that Greece will soon default, here is a bold prediction: Greece will not intentionally default. The word “intentionally” is a hedge against accidental default.

Why do I even entertain the idea that I know better that the markets? The reason is simple. Until three days ago most economists had not considered how a judgment of the Court of Justice would have changed the trade-off between repayment of loans and default. Before I explain the significance of that judgment, we need first to understand the options which are open to a sovereign which contemplates defaulting on its obligations. Continue reading