Ramon Marimon's picture
Affiliation: 
European University institute and UPF-BarcelonaGSE
Credentials: 
Professor of Economics
Pierre Werner Chair

Voting history

Effects of an embargo on Russian gas

Question 3: By how much would an immediate EU-wide import ban on Russian gas reduce EU GDP growth per annum in 2022-3, in percentage points (pp), absent other policies?

Answer:
Between 1pp and 3pp
Confidence level:
Not confident
Comment:
The impact to the EU GDP growth will be lower than to Germany (I think there is consensus on this), but, as with Germany, the timing of the ban is crucial. In particular, since we are now referring to disruptions of Global Value Chains (predominant within the EU) which costs are substantially lower if the GVC have time to restructure.

Question 2: By how much would an immediate EU-wide import ban on Russian gas reduce German GDP growth per annum in 2022-3, in percentage points (pp), if the government offset the costs with a well-targeted fiscal policy?

Answer:
Between 1pp and 3pp
Confidence level:
Not confident
Comment:
Again, I think can be more important the timing of the ban than the 'well-targeted fiscal policies'. In particular, both elements are complementary. It is very difficult to reduce the cost to an immediate abrupt EU-wide import ban with fiscal policies than to reduce it when it is a well designed gradual path towards a full ban. "Well targeted transfer policies can reduce the social cost and support needed investments, but such policies take time to be properly implemented and are more effective when they are perceived as lasting policies as long as they are needed. In sum, I am very skeptical on 'well-targeted fiscal policies' to reduce the costs of an abrupt EU-wide import ban.

Question 1: By how much would an immediate EU-wide import ban on Russian gas reduce German GDP growth per annum in 2022-3, in percentage points (pp), absent other policies?

Answer:
Between 3pp and 5pp
Confidence level:
Not confident
Comment:
Confidence is low not only because different studies rely on different aspects of the ban but also because how it is implemented -- in particular, the timing -- is crucial. An immediate abrupt EU-wide can easily be much more costly (than 5pp) but it is also less credible. However, as a drastic sanction to Russia what is important is to have a clear commitment to a path towards a full ban, as long Russian invasion prevails (i.e. not just war stops), with gradual measures that show it is not procrastinating but also finding the way to reach 'gas independence' from Russia. Costs then could be lower than 3pp. and financial markets will anticipate the costs for Russia (Asia and Africa are not easy substitutes for EU).

Fiscal Rules in the European Monetary Union

Question 2: Which of the following is the one reform you would choose to improve fiscal rules?

Answer:
Expansion of EU level fiscal capacity for expanded mutual insurance
Confidence level:
Very confident
Comment:
The EU and the euro area have changed after the euro and Covid-19 crises (and Brexit), the ECB has played a leading role with a monetary and fiscal mixed, with some shortcomings similar to the role the the FRB and the US Treasury have played in the financial and Covid-19 crises, with the difference that the ECB had to do it on its own; well together with ESM as crisis resolution mechanism. In any case, an excessive burden. Now the European Commission is, in practice, creating a 'temporary EU Treasury' to fund NGEU, and will issue eurobonds to this end. Meanwhile, the Eurosystem holds more than 20% (close to 30% counting lasts purchases? the limit is 33%!). In sum, euro area debt (national and EU) will play a very different role in the aftermath of the Covid-19 crisis, as to think that a --say, simplified -- SGP can be the center of the EU and EA fiscal policy. There is a need for a unified EU\EA fiscal policy, and for the corresponding institutional development, since the fiscal stakes at the EU\EA level are high and new permanent instruments can be developed without changing Treaties (e.g. EU automatic stabilisers, as a 'permanent SURE, or state-contingent debt), even if to a large extent fiscal policy will remain in the hands of the MS. For them a revised/simplified SGP can be a complement to the new & more powerful EU/EA fiscal instruments that can act, again, as a carrot.

Proposition 1: The existing fiscal rules for European Monetary Union members require revision.

Answer:
Strongly agree
Confidence level:
Extremely confident
Comment:
The SGP debt/deficit targets are meaningless if the Escape Clause is deactivated within the incoming years (now the eurogroup says 2023). But there are two, possibly more important reasons. First, as the European Commission has recognised, the ad-hoc 'flexibility' introduced since the euro crisis has made the SGP too complex to be an accountability rule, not only because it's more difficult to assess compliance, but also because makes the SGP even less credible: with a new twist compliance can be achieved! Second, the attempt to enforce the SGP with sanctions has proved, as expected, futile. Yet, NGEU has shown, once more, that EU carrots work, much more than non-credible sticks. When the Maastricht targets were introduced, there was a big carrot ahead for countries which didn't have the entrance in the incoming European Monetary Union guaranteed and most of them comply (well, not all, as it's known).

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