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As a major element on the new reform agenda for Greece stipulated at the latest eurozone summit in Brussels privatisation has become an important issue for the southern European country. However, privatisation should be a topic for other governments in the euro area, too. Privatisation can generate substantial receipts for the public purse, and it opens up the prospect of increased efficiency in the economy. In several countries the potential for privatisations is by no means exhausted.
On Tuesday the European Court of Justice (ECJ) has presented its final decision on the question whether Outright Monetary Transactions (OMT) by the European Central Bank (ECB) are legally compatible with the EU treaties. The judgment is a reaction to a request for preliminary ruling by the German Constitutional Court (GCC) dating from February 2014. The judgment of the ECJ will have implications for the final ruling of the GCC on the OMT case which we will expect for the second half of the year.
The long-awaited European Fund for Strategic Investments, Mr. Juncker´s key economic priority, has successfully passed the final stage of negotiations in the ordinary legislative procedure and is expected to be approved in the ECOFIN on 19 June and in the EP on 24 June. In response to a still cumbersome economic recovery the Juncker Commission proposed the EFSI as a cornerstone of its investment plan to stimulate underperforming investment in Europe. The EFSI sets out to mobilise EUR 315bn in public and private investment via leveraging an initial endowment of EUR 21bn with a multiplier of up to 1:15. The initial funds will be provided in the form of a EUR 16bn guarantee from the EU, of which 50% or EUR 8bn will be backed up with a standing EU guarantee fund, and EUR 5bn from the European Investment Bank.
Populist parties are gaining momentum in countries across Europe. Their profiles may be fundamentally different, but they are united in rejection of further steps towards European integration. Despite successes at national level, no noteworthy influence has been wielded by Eurosceptic parties at the European level to date. However, populist parties could shape European politics in the future by blocking progress in political areas that require broad consensus in particular. Established parties could then be forced to follow a course aligned more strongly with putative national interests. This could mean that reforms are not implemented on time or in full, thus preventing the required further development of the institutions of the eurozone.
In the EU there is ongoing debate about so-called "social benefit tourism". Not only supporters of populist parties, but also broader sections of the population say that the current rules on free movement and coordination of social security systems virtually invite people from southern, central and eastern Europe to migrate into the social security systems of more prosperous partner countries and thus overstrain these systems. Reforms should, at the very least, aim at making the current law less contestable and easier for national authorities to apply. Much argues in favour of taking a generally more restrictive approach. The closer coordination of the social security systems sought in various quarters is not suitable as a driver of European integration.
With the independence referendum in Scotland and unofficial polls in Catalonia and Veneto, separatist aspirations in Europe were recently given a boost. In regions seeking greater self-determination or even full secession, not only emotional and cultural aspects play a role but also concrete financial motives. Nearly all the regions seeking greater autonomy are among the wealthiest in their respective countries and far outstrip the national average in terms of per capita income. Moreover, some of them are substantial net contributors in regional redistribution systems.
The introduction of a common European unemployment insurance scheme would be a conceivable option to increase the eurozone's resistance to severe asymmetric shocks. This would provide relief in the short term to countries facing cyclically induced higher unemployment. In principle, such a solution could function without redistribution between countries, but its practical implementation would be a complex undertaking. One alternative proposal would be a type of insurance for "catastrophic" shocks that only provides financial support in the event of a very strong surge in unemployment.