In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however, that the relative concentration of public debt on bank balance sheets is not just a result of the euro crisis, for there are strong additional incentives for banks in some countries to increase their sovereign.

Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions.

In most EU member states, the business services industry has booked no productivity growth during the last two decades. The industry’s performance in the other member states was weaker than that of its US counterparts. Exploring what may be causing this productivity stagnation, this policy brief reports that weak competition has contributed to the continuing malaise in European business services. The study analyzed the persistence (over time) of firm-level inefficiencies. The evidence further suggests that competition between small firms and large firms in business services is weak.

While the EU has recently upgraded its external democracy promotion policies through a number of different initiatives, there is one challenge that it has not yet addressed: what exactly does it aim to support?

This policy brief illustrates that both the conceptualisation of democracy and the means to achieve it remain vague, and explains why this is problematic. It points out the risks that stem from a lack of clear understanding about how human rights, governance, civil society and socio-economic development relate to democratisation.

As an alternative to the present system of intermediation of the German savings surplus, this paper suggests that the risk-adjusted rate of return could be improved by creating a sovereign wealth fund for Germany (designated DESWF), which could invest excess German savings globally. Such a DESWF would offer German savers a secure vehicle paying a guaranteed positive minimum real interest rate, with a top-up when real investment returns allowed. The vehicle would invest the funds in a portfolio that is highly diversified by geography and asset classes.

This paper reviews the causes of the ongoing crisis in the eurozone and the policies needed to restore stability in financial markets and reassure a bewildered public. Its main message is that the EU will not overcome the crisis until it has a comprehensive and convincing set of policies in place; able to address simultaneously budgetary discipline and the sovereign debt crisis, the banking crisis, adequate liquidity provision by the ECB and dismal growth.

Different economic and financial structures require different crisis responses. Different crises also require different tools and resources. The first ‘stage’ of the financial crisis (2007-09) was similar on both sides of the Atlantic, and the response was also quite similar. The second stage of the crisis is unique to the euro area. Increasing financial disintegration within the region has forced the ECB to become the central counterparty for the entire cross-border banking market and to intervene in the sovereign bond market of some stressed countries.

In the run-up to the emergency European Council meeting at the end of June, Stefano Micossi outlines in this Policy Brief the main elements of a realistic and yet incisive policy package, capable of reassuring financial markets and a bewildered public opinion. It is more than Germany has been willing to accept so far but much less than many of the demands it will confront at the Council meeting. More importantly, it only requires a minimum of additional disbursements by the member states, while strengthening risk-sharing for sovereign and banking risks.

The eurozone countries are currently sitting on an aggregate exposure to Greece exceeding €300 billion. If the country were to exit the eurozone, it would certainly not be able to service its debt in the short run when the exchange rate overshoots.

This CEPS Policy Brief looks at the ways in which the euro crisis has impacted the successful functioning of the internal market of the EU and the state of play with respect to the creation of a common consolidated corporate tax base in corporate taxation.

H. Onno Ruding, is Chairman of the CEPS Board of Directors, former Minister of Finance of The Netherlands and Member of the Board of IBFD (International Bureau of Fiscal Documentation) in Amsterdam.

The analysis in this Commentary provides strong evidence showing that the burden of the adjustments to the imbalances in the eurozone between the surplus and the deficit countries is borne almost exclusively by the deficit countries in the periphery.

Spain faces high unemployment and slow growth. This paper focuses on an important source of those problems, namely its housing market. While some adjustment has occurred since Spain's housing bubble burst in 2008, the authors find that house prices and construction need to decrease more to slow Spain's unsustainable accumulation of foreign debt.

Cinzia Alcidi is LUISS Research Fellow at CEPS, and Daniel Gros is Director of CEPS.

This Policy Brief argues that pursuing the renewables objective could contribute to the completion of the internal electricity market, help overcome opposition to transmission projects and decrease the market power of incumbents. Conversely, an integrated internal electricity market means less price volatility in specific regional markets, which allows for more efficient deployment and grid integration of renewables. Three sets of recommendations are proposed.

Jonas Teusch is Research Assistant at the Centre for European Policy Studies.

From 2006 to 2011, the Asia-Pacific Partnership on Clean Development and Climate (APP) provided a non-legally binding framework based on a public-private partnership to support projects towards clean development and climate objectives in seven countries in the region. The seven partner countries concluded that the APP activities were successful and could lead to other successes in similar initiatives with similar working formats.