In focus

Boosting Online Entrepreneurship in Europe

Europe is trailing behind the United States in online entrepreneurship and venture capital investments in that sector. While the U.S. can offer a market climate in California that would be hard to match for Europe, one way for Europe to reduce the gap to the U.S. in the area of online innovation is to reform regulations in areas such as data protection and copyrights. In a new paper, Fredrik Erixon reports views from U.S.-based venture capitalists on Europe and the policy climate for online entrepreneurship in the EU. While appreciative in some aspects, many investors view policy in Europe as difficult to understand and inhospitable to many new online businesses. Policy improvements, however, could give Europe a chance to increase investments and provide entrepreneurs with an interesting value proposition.  

Reforming the European Central Bank

How should the actions of the European Central Bank before and during the Eurozone crisis be judged? It is important that central banks are held accountable, writes Fredrik Erixon in a new Occasional Paper, arguing that the ECB has been a source of monetary disorder in the Eurozone. The ECB was complicit in creating a huge asset bubble and growing current account imbalances in the Eurozone in the pre-crisis years. It has also been complicit in creating the drawn-out recession in the Eurozone in the past years. Its failure stems from a misguided monetary policy based on pure inflation targeting and a progressive downgrade of the role of money in monetary policy. For the ECB to become a source of macroeconomic stability, its policy, targets as well as the operation of its instruments should be changed. The ECB should explore alternatives to the current monetary policy regime, without abandoning the objective of assuring price stability.  

What Does the WTO Need From its Next Director General?

In a new online discussion about the race for next Director General of WTO Patrick Messerlin argues that the role of "middle powers" in the WTO should become more distinct as they typically represent forward-looking views on multilateral trade liberalisation. For the WTO to recover its role as a "bazaar" for trade negotiations, Ambassadors should play a more significant role in the negotiations, says Messerlin. In the same Forum, Fredrik Erixon argues that reviving the mechanics of effective mercantilism is necessary for WTO to deliver results. Focusing on how the current situation is, rather than how it ought to be, Erixon argues that while the WTO is in a bad shape, it is not about to be extinct, and it can come back if it figures out how to construct negotiation agendas that reflect today's economic relations in the world.

French and German perspectives on transatlantic trade relations

Significant economic opportunities and political challenges lie ahead for France and Germany as the EU and the U.S. are likely to enter into negotiations on a Transatlantic Trade and Investment Partnership, writes Lisa Brandt in a chapter in Transatlantic Relations in a multipolar world (Genshagen Papier). Both France and Germany have close ties to the U.S. economy, illustrated by intense intra-industry and intra-firm trade. Traditionally strong in manufacturing of knowledge-intensive products, they both face increasing competition from emerging economies. France in particular is struggling with a large trade deficit and needs to improve the competitiveness of its economy. Closer transatlantic economic integration including regulatory cooperation could notably boost the services sectors in both the French and German economies. 

New Biofuels Reform Reinforces Discrimination

The Renewable Energy Directive (RED) in 2009 ushered Europe into the world of biofuels. But the policy was driven as much by protectionist purposes as by green ambitions. In a new reform proposal, the EU will worsen discrimination in its biofuels policy by introducing so-called ILUC factors in reporting requirements. ILUC, says Fredrik Erixon in a new brief, is a flawed and impossible concept, and it increases the risk that the World Trade Organisation will rule against Europe’s biofuels policy.