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on European Economics |
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Issue of 2026–11–02
thirteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Fungáčová, Zuzana; Kerola, Eeva; Weill, Laurent |
| Abstract: | We investigate the existence of calendar effects in the interest rate pass-through in the euro area by examining how changes in the money market rate are transmitted to bank lending rates within quarters. Using monthly data on the interest rates of new loans for a large sample of euro area banks from January 2010 to April 2024, we find that this short-term pass-through to non-financial corporation and consumption lending rates is weaker in the fourth quarter of the year during periods of policy tightening. We obtain limited evidence that the pass-through is stronger in the fourth quarter for housing and consumption loans during periods of policy easing. We interpret these findings as consistent with trade loading behavior, whereby banks inflate their loan volumes at the end of the year to meet annual targets. Our work highlights the importance of considering seasonal effects when assessing interest rate pass-through in the euro area. |
| Keywords: | bank, monetary policy, monetary transmission mechanism, calendar effects, euro area |
| JEL: | E52 G21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofrdp:344221 |
| By: | De Grauwe, Paul; Ji, Yuemei |
| Abstract: | We show first that the dominance of the dollar as the world currency is bound to decline. Second, there is no other currency today capable of taking over the dollar. The euro is handicapped by a fast decline of the economic importance of the euro area countries in the world. Even a Capital Markets Union will not compensate this, because a Capital Markets Union by itself does not create a safe asset. The latter is necessary as a benchmark to price the myriad of financial assets that make capital markets interesting for investors. Only a political union in which a federal European government has the authority to issue a common debt can achieve this. The most likely scenario, therefore, is that the world monetary system develops into a multi-polar currency system, where a limited number of currencies achieve a strong regional importance without any of them achieving the status of the dominant currency, in a way that the dollar has done in the post-war period. That seems to be the future for the euro, a future that can become a reality faster by developing a euro payment system alternative to the dollar and by creating a full-fledged digital euro. |
| Keywords: | global currency;international payment systems;euro;capital markets union;rule of law |
| JEL: | J1 F3 G3 |
| Date: | 2026–10–26 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141657 |
| By: | Ketan Ahuja; Karan Daryanani (Harvard's Growth Lab); Marie Jugé; Ben McWilliams; Simone Tagliapietra |
| Abstract: | Though Europeans have pioneered many green technologies, Europe is currently losing some competitiveness in the production of those technologies. This slowdown affects different countries and regions differently. Boosting competitiveness at the aggregate level should therefore involve approaches that take into account diverse regional industrial capabilities. In this paper, we evaluate Europe’s positioning in green technologies and identify opportunities for Europe to translate its industrial capabilities into leadership of green value chains. We use two datasets – the Greenplexity dataset from the Harvard Growth Lab, and the European Clean Tech Tracker from Bruegel (Growth Lab, 2025; Bruegel Dataset, 2025) – to explore trends at national and regional levels. We identify the sectors and regions in which Europe can strengthen its position, build competitiveness in new industries and generate economic growth through the energy transition. We conclude with policy priorities for guiding clean-technology investments, arguing that policymakers should use the feasibility and attractiveness of industrial clusters to target investment support at the regional level. This paper is also published as a Bruegel Working Paper. Issue number 28/2026, available at https://doi.org/10.64153/ZYKB9779. |
| Keywords: | competitiveness, trade policy, decarbonization, industrial policy, investment |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:glh:wpfacu:275 |
| By: | Enriques, Luca; Nigro, Casimiro A.; Tröger, Tobias |
| Abstract: | The European Commission's proposal for EU Inc., the company-law cornerstone of the "28th regime", promises an optional European company form with fully digital incorporation within 48 hours and at a maximum cost of EUR 100. Its practical value for innovative startups, however, depends less on fast registration than on whether the financing and governance arrangements agreed by founders and investors have the same legal effect throughout the Union. The Council's first compromise text of 17 July 2026 keeps the welcome features of the proposal but leaves national law much more room to determine whether, and how, such arrangements are given effect. An EU Inc. could thus end up governed by 27 versions of national mandatory rules, reproducing the very fragmentation it was meant to overcome. This paper proposes six recommendations that ring-fence a self-contained European corporate core, protect standard financing documents, make negotiated rights over cash flows, control and exit effective as written, align liability, distribution and employee-equity rules with startup needs, and guarantee cross-border equivalence and uniform interpretation. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewh:344220 |
| By: | Román Arjona (Directorate-General Internal Market, Industry, Entrepreneurship and SMEs European Commission); Frank Vandermeeren (Directorate-General Internal Market, Industry, Entrepreneurship and SMEs European Commission) |
| Abstract: | This contribution examines both the headwinds and springboards facing EU industry, amidst a fast-moving geopolitical and geo-economic landscape. Cost pressures, strategic dependencies and investment gaps risk widening Europe’s competitiveness differential with other major economies. Yet, opportunities lie ahead to overcome these constraints, including pushing forward the integration of the EU Single Market, exploiting the catalytic effect of strengthened economic security policies and a refocused European long-term budget, and ensuring that EU-level industrial initiatives build on the EU’s competitive advantages to turn technological and commercial strengths into long-term strategic gains. These springboards should support the effective reallocation of capital towards more productive industrial activities, strengthening Europe’s industrial competitiveness base, and accelerate the development of clean and more resilient supply chains and production capabilities. |
| Keywords: | EU industry; EU single market; industrial policy; competitiveness; global value chains; GVCs; GVC analysis |
| JEL: | L52 O52 F62 |
| Date: | 2026–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:023843 |
| By: | Milad Abbasiharofteh; Pascal Grouiez; Frans Hermans |
| Abstract: | This paper examines the evolution of biogas plant manufacturing markets across European regions over a 25-year period (1996–2020), using a mixed-methods approach that combines trademark data with qualitative interviews in Germany. We use trademarks as a proxy for market-oriented activities and identify three regional trajectories of market formation: 1) first-comer regions, which initiated and commercialized the technology, 2) latecomer regions, which fostered path diversification and niche markets, and 3) non-entry regions, where technology was explored but failed to take root. Rather than establishing causal relationships, the paper reconstructs and interprets these trajectories in relation to policy environments, actor networks, and place-specific industrial structures. Our findings suggest that market formation in emerging green industries is heterogeneous rather than uniform. Each trajectory is embedded in broader innovation system dynamics, including policy mixes that acknowledge multiple rationales for green innovation and actor networks connecting first- and latecomer regions. Furthermore, the mobilization of place-specific capabilities and industrial heritage, particularly in Germany, appears to have shaped regional opportunities for market development. Sustained market formation emerged as the exception rather than the norm, as most European regions did not develop durable biogas manufacturing specializations. |
| Keywords: | Green innovation, biogas, trademark, market formation, regional path development, archetypal analysis |
| JEL: | R11 O33 O34 Q42 R58 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2626 |
| By: | George Alogoskoufis; Vasilki Dimakopoulou; George Economides; Apostolis Philippopoulos |
| Abstract: | This paper provides a quantitative study of the prospects of the Greek macroeconomy in the medium and long term. The vehicle of analysis is a medium-scale dynamic general equilibrium model calibrated to Greek data. The model includes the main sectors: households, private firms, private banks, the National Central Bank in the Eurosystem and the public sector. We work in three steps. First, we solve the model when policy and other exogenous variables are set as in the most recent data. This solution serves as a departure point for the simulations that follow next. In the second step, we study the transition path of this economy when dynamics are driven by the repayment of the official loans taken from EU institutions since Greece's sovereign debt crisis in the previous decade. Our simulations show that this repayment, other things equal, will have long-lasting recessionary implications and will require systematic primary fiscal surpluses. Third, we search for structural and policy reforms that can mitigate, and hopefully more than offset, these recessionary effects. Following the literature on policy reforms, we change structural parameters and policy variables so as to reduce the gap between Greece and best practice in the EU in key areas. We close with policy takeaways. |
| Keywords: | international loans, structural reforms, macroeconomic policy |
| JEL: | F34 E62 E42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13083 |
| By: | d'Artis Kancs |
| Abstract: | This study develops a country-level measure of the economic-industrial capacity of European NATO Allies to mobilise, replenish, maintain, and sustain military capability under strategic stress. The measure comprises four components: macroeconomic capacity, sectoral resilience, defence-industrial capability, and logistics and sustainment. The analysis covers 28 European Allies and evaluates a balanced baseline against five geoeconomic stress scenarios. The results distinguish baseline capacity from stress vulnerability and provide an assessment framework for identifying the economic-industrial bottlenecks that can constrain sustained military readiness. Baseline scores vary materially across countries, with a sample mean of 0.610 and a range from 0.471 to 0.759. The calibrated geoeconomic shocks reduce effective capacity in every scenario, though the effects are highly heterogeneous. The combined-stress scenario has the largest average effect, lowering the sample mean to 0.491, a decline of 19.5 per cent relative to baseline. TRS and PR operate mainly through defence-industrial and replenishment constraints; supply-chain fragmentation is driven primarily by sectoral exposure and substitutability; and external-support reduction operates through allied access and sustainment. Our results suggest shifting attention from expenditure targets alone towards the capacity to convert resources into usable military capability: the key issue is not only how much is spent, but also which bottlenecks limit the conversion of resources into capability. |
| Keywords: | Defence economics, readiness, geoeconomic fragmentation, supply chains, defence-industrial base, Europe, strategic stockpiling, procurement. |
| JEL: | F51 F52 H56 L64 O25 R11 |
| Date: | 2026–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2026_09 |
| By: | María Alejandra Amado Garfias (Banco de España); João Amador (Banco de Portugal); Sónia Félix (Banco de Portugal); Joana M. Garcia (Banco de Portugal); Vanda Geraldes da Cunha (Banco de Portugal); Corinna Ghirelli (Banco de España); Ángel Luis Gómez Jiménez (Banco de España); Eduardo Gutiérrez Chacón (Banco de España); Cristina Manteu (Banco de Portugal); Luis Molina Sánchez (Banco de España); Enrique Moral-Benito (Banco de España); Sergio Puente Díaz (Banco de España); Javier Quintana González (Banco de España); Martín Saldías (Banco de Portugal); Sharmin Sazedj (Banco de Portugal); Sofia Terlica (Banco de Portugal); Jacopo Timini (Banco de España) |
| Abstract: | This paper examines the functioning of the European Single Market through the experience of Spain and Portugal, two economies whose geographical proximity, shared border and joint EU membership since 1986 make them a particularly informative case study. Organizing the analysis around the Single Market’s four freedoms, the paper combines descriptive indicators, structural-gravity estimates, a multi-country general-equilibrium trade model, price-convergence and electricity-coupling measures, administrative labour-market data, survival analysis and granular investment and banking data to assess integration in trade, energy, labour mobility and capital markets. The findings show that Iberian integration is substantial but markedly uneven across dimensions. Trade in goods and production network linkages have deepened considerably since accession, and wholesale electricity markets are exceptionally well integrated, reflecting strong complementarities between Spanish solar and Portuguese hydropower generation. By contrast, services trade, labour mobility and non-bank financial investment remain comparatively underdeveloped. These results show that the legal framework of the Single Market has generated deep integration in some markets while leaving others fragmented, and that closing the remaining gaps requires more effective implementation, regulatory cooperation and mutual recognition, supported by infrastructure investment and interoperable administrative systems. |
| Keywords: | Iberian economic integration, international trade, energy, migration, capital markets |
| JEL: | F15 F14 F22 F36 Q43 O52 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2621e |
| By: | Cindy Justo; Antonio Navas; Enrico Vanino |
| Abstract: | This paper studies the heterogeneous effects of trade in services barriers on firm-level exports, focusing on the consequences of the UK withdrawal from the European Union and the introduction of the EU–UK Trade and Cooperation Agreement (TCA). Using detailed firm-level transaction data on UK services exports combined with sectoral measures of regulatory restrictiveness, we show that UK services exports to the EU declined significantly following both the Brexit referendum and the implementation of the TCA, with substantially larger effects after regulatory barriers were formally reintroduced. The effects are highly heterogeneous across firms, following an inverted U-shaped pattern with small and large firms more negatively affected, and are particularly pronounced for foreign-owned firms using the UK as an export platform. Crucially, we show that barriers related to foreign entry are the primary drivers of the observed decline, while other regulatory dimensions play a limited role. These findings highlight the importance of firm heterogeneity and regulatory alignment in shaping services trade outcomes. |
| Keywords: | trade in services, Brexit, trade and cooperation agreement, firm heterogeneity, services trade barriers, trade policy uncertainty |
| JEL: | D22 F13 F14 F15 F23 L80 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13084 |
| By: | Mellace, Federico; Nishikawa, Taro; Trebesch, Christoph; Frey, Nathanael; Goffi, Ettore |
| Abstract: | * There is growing confusion about how much help the German government has given to Ukraine. To support the public debate, this report presents a comprehensive summary of the available information on German aid to Ukraine. * Germany's total bilateral aid to Ukraine 2022-2026 ranges between EUR 31 and EUR 42 billion, depending on the source and measurement approach. The large range between these estimates stems from limited transparency in Germany's reporting. The EUR 31 billion estimate is based on detailed, verifiable aid data that is reliable enough for international comparisons. The EUR 42 billion is instead based on aggregated government numbers, which are increasingly difficult to verify, because Germany has stopped reporting detailed aid numbers. About 80 per cent of German aid is military. Aid flows were lowest in 2024 and more than doubled in 2025/26. * In addition to bilateral aid, Germany has supported Ukraine via the European Union, which has provided large-scale loans to Ukraine. Germany's share in these EU contributions adds up to another EUR 22.7 billion. * The widely circulated figure of EUR 100 billion for German aid to Ukraine is misleading. It is wrongly reported as "bilateral aid", since only about 40 per cent of this sum actually went to Ukraine. A closer look at the government figures shows that EUR 22 billion consists of future aid promises, which may or may not materialise. Moreover, EUR 35.9 billion was spent domestically in Germany, primarily on social welfare ("Bürgergeld") for Ukrainian refugees. * Compared with domestic spending priorities, Germany's bilateral aid to Ukraine is relatively modest. For example, Germany spent far more on "Mütterrente", a pension add-on for mothers that keeps on expanding (ca. EUR 64 billion over 2022-26). The government also spent far more on domestic energy subsidies introduced after Russia decided to halt its gas deliveries in 2022. The 2022/23 "Doppelwumms" alone cost around EUR 51 billion, more than total bilateral Ukraine aid in five years (even when using the upper-bound aid figure of EUR 42 billion). In addition to that, the government launched several new transport and energy subsidies for households since 2022 (Tankrabatt, Deutschlandticket, Energiepreispauschalen etc.) at a total cost of around EUR 37 billion, almost as much as bilateral aid to Ukraine since 2022. * In international comparison, Germany has become the largest individual donor country in absolute terms in 2025 and 2026. The US has provided more than three times as much in total, but new US aid dropped by 99 per cent since 2024. Also the four Nordic countries together have given more than Germany, even though they total only a third of Germany's population. Relative to GDP, Germany's support ranks twelfth, close to the EU average. * Better German aid reporting is both essential and easily possible. We provide concrete recommendations for the government based on international best practice. |
| Keywords: | Fiscal Policy & National Budgets, Germany, Ukraine, War, Finanzpolitik und Staatshaushalte, Deutschland, Krieg |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:344217 |
| By: | Nagler, Paula (Institute for Housing and Urban Development Studies, Erasmus University Rotterdam); Schuller, Emanuel (Institute for Housing and Urban Development Studies, Erasmus University Rotterdam) |
| Abstract: | The emergence of the knowledge economy has transformed European labour markets and the political economy of social policy. Yet, despite the growing use of statutory minimum wages (SMWs) in Europe, their relationship to the knowledge economy has not been comprehensively analysed. This paper examines how knowledge-economy development is associated with the presence and levels of SMWs in 21 European countries from 1995 to 2021. Using probit models and fixed-effects panel regressions, we find that SMW outcomes depend more on the specific knowledge-economy trajectory than on its overall degree. While the knowledge economy index is weakly associated with SMW outcomes, its service- and manufacturing-oriented dimensions show opposing relationships with SMW presence and levels. Random forest analyses indicate that knowledge-economy proxies are among the strongest predictors of SMW outcomes. |
| Keywords: | comparative political economy, knowledge economy, labour market politics, minimum wages |
| JEL: | J3 J38 O33 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18993 |
| By: | Stamegna, Marco; D’Alessandro, Simone; Heydenreich, Till; Morlin, Guilherme |
| Abstract: | This paper uses the Eurogreen+ macrosimulation model to assess the macroeconomic effects of the increase in Italy’s military expenditure needed to meet the NATO target for core defence requirements adopted in 2025. Eurogreen+ is a stock-flow consistent model of the Italian economy, grounded in post-Keynesian theory and featuring a dynamic input-output structure (Cano Ortiz et al., 2026). The analysis simulates the effects of a 1.5-percentage-point increase in military expenditure over a five-year horizon under alternative fiscal and monetary policy stances. The results indicate that a deficit-financed increase in military expenditure raises GDP and employment while lowering the debt-to-GDP ratio, but at the cost of a significant deterioration in the trade balance. By contrast, when the increase in military expenditure is financed through proportional cuts to other components of public expenditure, the effects become strongly contractionary, reducing GDP and employment, increasing the debt-to-GDP ratio, and crowding out social expenditure. These findings suggest that military expenditure exhibits a lower fiscal multiplier than the civilian expenditures it displaces. Finally, a more accommodative monetary policy partly offsets the adverse effects on the debt-to-GDP ratio but leaves the negative effects on GDP, employment, social expenditure, and the trade balance largely unchanged. |
| Keywords: | Military expenditure; fiscal multipliers; input-output; dynamic macrosimulation |
| JEL: | E17 E62 H50 H56 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:130923 |