Pubaffairs news & debates

Understanding China-EU relations in the context of the Belt and Road initiative | Europp LSE Blog

In December, the EU unveiled a new ‘Global Gateway’ project that has been widely viewed as an attempt to challenge the influence of China’s Belt and Road initiative. Catherine Jones assesses what the future might hold for China-EU relations.

Changes are coming thick and fast in relations between China, the EU, and EU member states. The presence of China as a significant – but strained – international actor is exacerbating existing fissures in relations among ‘western states’ that will make coordinated international action more difficult. In the context of China’s relations with the EU (as an institution) and the member states these tensions are already apparent.

As eastern and southern member states leverage the opportunity of China’s Belt and Road initiative (BRI), and as northern states become more concerned about human rights violations, these pressures will only increase. Economic and political drivers of EU policies in relation to China are on a collision course. In July 2021, Pepjin Bergsen described this as an ‘unsustainable policy’. I would take this analysis one step further by highlighting the potential impotence of the EU in being able to address the new nature of China as a global actor.

Bergsen’s analysis succinctly argues that “the EU’s approach to the economic challenge from China, as well as to broader geopolitical and geo-economic issues, has been to pursue ‘strategic autonomy’”. This argument is, however, rapidly developing. In recent months, Lithuania has sought to extend ties with Taiwan, leading to a trade dispute between China and Lithuania.

Stuart Lau and Barbara Moens argue that China’s response is aimed at preventing any further recognition of Taiwan by EU members. Lithuania may only be a small state, but the significance to the rest of the EU is worthy of note, as German car manufacturers have had parts stopped at Chinese ports because they were manufactured in Lithuania. The EU response has been muted and limited to recourse to the trade department or the World Trade Organization (WTO).

This example is indicative of a wider problem for the EU that is expertly outlined in a range of recent books. To date, the EU has tried to strike a balance in relations with China, engaging in some areas and becoming a competitor in others. Yet, implementing this balance depends on the approach of individual member states, as well as coordination with arms of EU policy that are directly under the control of the Commission. The problem – as a 2019 Commission report notes – is that to pursue this model, the EU “requires a flexible and pragmatic whole-of-EU approach enabling a principled defence of interests and values”. The example of Lithuania seems to aptly demonstrate the problems that come with this approach.

The change in power in Germany may also affect this balance – offering some potential hope or new fears. Under Angela Merkel’s leadership, an engagement policy was pursued which appeared to be in line with the EU approach. However, with the advent of the traffic light coalition, and Green Party control of the foreign ministry under the leadership Annalena Baerbock – a noted China critic – Germany’s approach towards China may pivot. In the words of one Bundestag official, “I think you will see a quick shift, possibly even a drastic one”.

This may offer hope to some that the EU can coalesce around a new approach towards China that can be more consistently followed. A new German approach that has less concern for large industrialists and more concern for political issues including the Uighurs, Hong Kong and Taiwan, might help to tighten the ties between member states. Similarly, a new approach from Germany may bring the preferences of France and Germany closer together. As Francois Nicolas noted in February 2020, despite the ‘strategic partnership between the two states’, France is likely to begin to implement a ‘firmer’ line with respect to China.

The EU’s counteroffer to the Belt and Road initiative, the ‘Global Gateway’, may also support this positive view. The global gateway is a 300 billion euro plan for infrastructure investment, aimed at supporting global supply chains, pursuing values including respect for law and transparent agreements, and ensuring some future-proofing of the projects undertaken in relation to climate change and building in resilience. The announcement of the global gateway may be seen as the EU backing up its new rivalry with China with significant funding, which will grease the wheels of member state coordination and cooperation.

A more pessimistic reading suggests recent developments will realign differences rather than reduce them. Differences on China among EU member states are about more than the preferences of Germany or outward facing development assistance. According to the Economist, eastern bloc EU members seem to see a potential ‘ideological friend’ in Taiwan, despite the backlash from China. Southern member states needing investment can seek engagement with China through the Belt and Road initiative and use those negotiations to leverage more funding from the Commission. These difficulties will take time to overcome and may depend on how Germany’s new foreign minister pursues a China policy, and the outcome of the 2022 French elections.

 

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[DE] INVITATION | Revision of the Vertical Block Exemption Regulation (VBER): A game changer for digital commerce and the future of retail? (February 2)

We are delighted to invite you to an event which will be held on Wednesday, 2nd of February at 15.00.

The event will consist of an afternoon discussion on whether the revision of the Vertical Block Exemption Regulation (VBER) will be a game changer for digital commerce and the future of retail, with our distinguished speakers:

  • Dr Christian Stempel, Head of Unit, German and European Antitrust Law, German Competition Authority – Bundeskartellamt;
  • Dr Johannes Holzwarth, Case Handler Officer, DG Competition, European Commission;
  • Dr Gregor Schroll, Senior Legal Counsel, Antitrust & Distribution Law, Zalando;
  • Ms Alien Mulyk, Public Affairs Manager, Europe & International, BEVH.

The event will be moderated by Axel Kallmayer, Advisor, German and EU Competition Law Expert, Kapellmann LLP.

This event will be held in German. Please find here the version of the invitation in German.

This is a public event and it will be held on line.

This event is organised in partnership with

About the debate

The competition and retail landscape has evolved during the past ten years. Retail without e-commerce is no longer imaginable. Therefore, the European Commission’s update of the VBER is focusing on the increasing importance of e-commerce and will have a significant impact on the retail sector. Within this context, the European Union is in the process of overhauling its competition law rules which have been regulating the relations between manufacturers, brands, importers, distributors and retailers and it is doing so through the revision of the Vertical Block Exemption Regulation (VBER) and its accompanying Vertical Guidelines (VGL). The current version of the VBER was adopted in 2010 and European policymakers are now reviewing this piece of legislation in order to either prolong or replace its norms for a further ten-year period taking the developments in the market into account.

As a result of public consultations and impact assessment studies, the EU executive body has been willing to engage with the exponential growth of online sales by putting forward a draft legislative proposal which will entail substantial modifications of the current rules governing all types of vertical relationships within Europe’s supply chain. The governing principles of EU competition law and practices are enshrined in Article 101 of the Treaty of the Functioning of the European Union (TFEU) which prohibits “all agreements between undertakings, decisions by associations of undertakings and concerted practices […] which have as their object or effect the prevention, restriction or distortion of competition within the internal market”. Although the draft guidelines rightly maintain in this context the prohibition of any restrictions “having the objective to prevent distributors from effectively using the internet” as a sales channel, the updated rules risk de facto to undermine this principle with negative impacts for the further digitalisation of retail.

The debate has been carried out so far prevalently at a highly technical legal level, while the perspective of retailers, SMEs and consumers, notably busy coping with the impact of the pandemic, has passed, for several reasons, under the radar of public discussions. Against this background, some commentators have pointed out that the new legislation would not be fit for purpose in order to tackle the challenges of a fast-growing internet economy. Indeed, with regard to the general impacts of the upcoming Regulation, it has been pointed out that e-commerce has valuably contributed to the enhancement of product and price transparency for European end-consumers, while making it possible for SMEs, the backbone of the EU economy, to enter the market and expand their reach. In addition, several other concerns have emerged, such as dual pricing, removal of equivalence criteria between the online and offline sales channels or the fact that manufacturers and brands would receive more tools to effectively make online reselling less attractive, as well as the new status of both brick-and-mortar retailers and online marketplaces, amongst others.

Given digitisation is one of the priorities of the European Commission, a VBER fit for an omnichannel world for the benefit of both the EU economy and consumers is of great importance and needs to be put at the centre of the debate on EU digital policies. While there is still time to adjust, the updated VBER and its guidelines are to come into force when the current one expires at the end of May 2022.

The event will commence at 15.00 and it will be held in streaming.

The audience will be able to ask questions during both the discussion and the Q&A session through sli.do #VBER

#VBER

#CompetitionLaw

#Ecommerce

#RetailSector

We look forward to hosting you at 15.00 on the 2nd of February 2022.

A role for the Recovery and Resilience Facility in a new fiscal framework | Bruegel

Discussions on reforming European Union fiscal rules must consider a more permanent but targeted role for the Recovery and Resilience fund to meet climate ambitions.

EU countries used fiscal policy to deal with the health crisis and contain the economic fallout that followed. But the EU collectively has also provided a recovery plan with the creation of the Recovery and Resilience Facility (RRF).

A temporary suspension of the EU’s fiscal rules, known as the Maastricht rules, and the European Central Banks’s quantitative easing program that kept the cost of borrowing low, allowed all countries to access the markets, borrow and finance the very much needed stimulus.

But this cannot last forever. The Maastricht rules cannot remain suspended for much longer, nor can fiscal policy be used with quite the same freedom as it did since 2020. The European Commission has announced that the rules will be reinstated at the start of 2023.

Many now agree that while the rationale of the rules is crucial and still valid, they have not served their purpose well.  Fiscal policy has been underused in economic downturns, when it is actually needed the most, and similarly it has been overused in economic booms, when it is the time to build up buffers.

At the same time, the most obvious victim of fiscal consolidation has been public investment. In hard times when fiscal spending is cut, it is politically impossible to cut things like social security or health and education expenditure. It is much easier to cut public investments, the benefits of which are not visible for many years, a phenomenon known as the ‘tragedy of the horizons’.  So, investment has taken a big hit in the past 20 years, with especially highly indebted countries seeing a significant drop.

2022 offers an opportunity to reform the rules in order to correct this procyclical character of fiscal policy, without jeopardising the future level of welfare by postponing investment.

But countries do not start with a clean slate, as many have high levels of debt. Even if future rules differentiate between current expenditures and investments, not all countries will be able to make the necessary investments at the speed and scale required. Delays and under-investments will be detrimental for the countries themselves but will also undermine the EU’s collective green ambitions.

This is where the RRF can make a difference. Indeed, this problem is not visible for the next five years while funds finance green and digital investments. The objective and scope of this instrument was precisely to help countries keep up a minimum level of ambition that is common to all and consistent with EU objectives, while allowing national funds to manage the pandemic.

But when the fund ends, national debts will become a real constraint. And it will be just as important then to continue with investments without risking fiscal sustainability for anyone.

The RRF offers a good template for ensuring that the EU’s green and digital investments advance at a minimum pace that is high enough but also feasible for all. It thus helps avoid the tragedy of the horizons for those countries that will face constraints.  Additionally, as it is centrally monitored, it can reduce incentives to pass all investments as green (and hence not be subject to fiscal rules), known as greenwashing. Admittedly, the fund is currently in the process of being tested. But it has passed a big first political economy obstacle: that of being accepted as an instrument for sharing risks when it comes to European public goods.

The coming year offers an opportunity to rethink not only the fiscal rules but the broader fiscal framework. The EU can do that without having to invent new tools or structures but simply apply what is already available and in force in ways that are consistent with its ambitions.

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EVENT HIGHLIGHTS | Digital Markets Act Trilogue: Protecting the Consumer Interest

On the 15th of December 2021, PubAffairs Bruxelles organised an afternoon session to discuss the trilogue negotiations regarding the Digital Markets Act (DMA) and the question of protecting the interest of European consumers with Prof Annabelle Gawer, Chaired Professor in Digital Economy, University of Surrey, Mr Gareth Shier, Economist and Principal of Oxera, Mr Kayvan Hazemi-Jebelli, Competition Counsel, Computer & Communications Industry Association – CCIA Europe. Ms Lea Zuber, Team Leader, Task Force on Digital Markets Act, DG COMP, European Commission, was unable to participate in the discussion.

The event was moderated by Lewis Crofts, Editor-In-Chief at MLex

Watch the event video highlights here

Watch the full event video full event video here

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HIGHLIGHTS & FULL EVENT VIDEO | Digital Markets Act Trilogue: Protecting the Consumer Interest

The video highlights and the full event PubAffairs Bruxelles organised in collaboration with CCIA Europe on the 15th of December 2021 to discuss the trilogue negotiations on the Digital Markets Act (DMA) and the question of protecting the interest of European consumers are both available now.

The panel participants included Prof Annabelle Gawer, Chaired Professor in Digital Economy, University of Surrey, Gareth Shier, Economist and Principal of Oxera and Kayvan Hazemi-Jebelli, Competition Counsel, Computer & Communications Industry Association – CCIA Europe, as speakers, and Lewis Crofts, Editor-In-Chief at MLex, as moderator.

Read the full event highlights here

Watch the event video in full here below or on our YouTube channel:

How serious is Europe’s natural gas storage shortfall? | Bruegel

Europe may not have enough natural gas in storage for the coming winter; close monitoring of the situation will be essential.

Europe’s natural gas position is uncertain heading into 2022. Strong demand in the first half of 2021 did not allow for a significant build-up of gas reserves in storage facilities prior to the winter period. As a result, Europe has become particularly dependent on imports. Russian reluctance to increase exports and tight liquefied natural gas (LNG) markets have led to concerns that Europe may face an energy crisis this winter, which will see what gas is in storage depleting rapidly. Figure 1 compares gas storage in 2021 with average values between 2016 and 2020. In January, the volume of stored gas was slightly above that average, but by October it had fallen significantly below the average. The figure shows how demand, imports and production have contributed to this change.

Source: Bruegel based on Eurostat.

As of December 2021, storage levels are below the minimum volume recorded for this time of the year in any of the previous five years. In mid-December 2021, Europe had 690 TWh of gas in storage. On average from 2016 to 2020, it took until the third week of January for reserves to drop this low.

To provide a deeper understanding of the situation Europe is in, we explore hypothetical scenarios for this winter, starting from the actual storage volume on 1 December 2021, which was 744 terawatt hours (TWh). Figure 3 uses static assumptions for each of the scenarios to project the evolution of stored gas.

Scenarios for this winter

Our analysis is intentionally simplistic (see details below) but offers an insight into two factors: a colder than usual winter will be very bad news for Europe, and imports must remain at minimum at the average level of the previous five years. As our analysis is static it does not take into account the fact that prices act as a balancing mechanism between demand and supply. The interpretation is therefore that in scenarios with negative or low storage, extremely high prices would remain on European markets in order to force demand off-grid (be it from industry or final consumers) or encourage higher imports. Very high prices since September shows that demand is resistant to price increases, ie demand for natural gas is highly inelastic.

Storage projection

Increased winter demand for gas must be met by stored gas, gas produced domestically and imported gas. In other terms:

This equation offers a close approximation of the evolution of gas storage over a few periods (see appendix). We use this equation to calculate the evolution of stored gas shown in Figure 3. Below we explain the assumptions underpinning this analysis.

Domestic production

European gas production has decreased in the last few years because of the closure of gas fields. This has reduced production capacity. Moreover, domestic gas fields were used for ‘swing production’ which meant ramping up supply during winter months to meet higher demand, and their absence is therefore felt more strongly in winter months. So far, production in 2021 has closely mirrored that in 2020 and we assume that this will continue to be the case for the coming winter.

The evolution of imports and demand is less certain.

Imports

Bruegel has compiled a database of European natural gas imports, based on data from the European Network of Transmission System Operators for Gas (ENTSOG). Using the last five years, we estimate scenarios for average imports, low imports (low imports corresponds to the minimum imported value each month over the last five years) and very low imports (implying no gas exported from Russia).

Simple demand model

Beyond prices, fluctuations in demand will be driven largely by temperature differences. The figures below show this strong correlation[1]. In other words, European gas demand will be high by historic standards if the winter is particularly cold.

To make simple demand forecasts, based on temperature assumptions, we fit monthly demand to a linear regression with an explanatory variable of heating degree days (HDD) and monthly dummies.

This allows us to estimate average and higher demand for the coming winter based on assumptions of the average or highest number of heating degree days (HDDs, see footnote 1) over the previous five years.

There is some elasticity to reduce demand by switching gas-fired power generation to coal-fired. On average around 75 TWh of gas is used each month between December and March for power generation (Ember, 45 TWh power generation at 60% gas turbine efficiency, 2018-2021).

Conclusions

Europe’s natural gas supply balance needs to be monitored closely in the next months as it is already very tight, and it might be difficult to compensate for additional adverse shocks from the demand, domestic production and/or import side. If it becomes obvious that – contrary to current expectations – high market prices will not bring in sufficient new supplies and/or encourage sufficient gas demand reduction to ensure meeting essential demand in a cold winter, policymakers will need enough time to act. We will continue to update our database tracking gas imports and storage and provide an update to this blogpost at the start of each month.

BY:  AND 

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Policy coordination failures in the euro area: not just an outcome, but by design | Bruegel

The rationale behind the Maastricht fiscal criteria was to prevent excessive spending (driven by uncoordinated fiscal policies) in response to external shocks.  Excessive spending would in turn put market pressure on those ‘undisciplined’ fiscal authorities and compromise the long-term stability of the monetary union.

In reality, fiscal policy was too loose during economic booms, when it ought to have aimed to build up buffers and too restrictive in recessions, when it ought to have cushioned shocks. Fiscal policy in the euro area on average has therefore been procyclical.

Additionally, monetary policy, through the European Central Bank (ECB), has had to do a lot more than envisaged in order to compensate for the fiscal inaction during recessions. Now at the zero-lower bound, the ECB has less room for manoeuvre by conventional means and has built up an unprecedented balance sheet position. We still need to understand what this means for the real economy, monetary policy effectiveness and the independence of the central bank.

We argue that the procyclical nature of fiscal policy in the euro area and the subsequent overuse of monetary policy are not just outcomes. Rather, they are a failure of the fiscal framework to recognise (even unintentionally) that there are strategic interactions that, if not appropriately accounted for, lead to such outcomes.

A setup that aimed to prevent negative spillovers produced a strategic environment where, in the face of a negative shock, all countries ended up being more restrictive than they ought to. This prolonged the recessionary period caused by the negative shock and forced monetary policy from its first best.

By contrast, explicit cooperation between fiscal authorities can help improve outcomes for all. Fiscal authorities will be playing a bigger role to address the shocks, without ignoring the negative externalities in place. Also, monetary policy will not be as active so that macroeconomics management achieves better outcomes. The non-cooperative versus cooperative outcomes comparison serves as a good way of contrasting the overall macro response in the financial crisis to that in the pandemic crisis in the EU.

The Maastricht criteria were never a good tool for fiscal coordination

We describe this strategic interaction in the context of European monetary union based on the Hamada diagram (see here).

Consider the fiscal policy game between two countries in a monetary union, one with high levels of debt (country A) and one with low levels of debt (country B), that face a common negative shock. If the high debt country uses fiscal policy to counteract the shock, it will induce an increase in its spreads, which will damage not only itself but also the other country. This is the ‘fear’ behind the Maastricht criteria. On the other hand, when the low debt country uses its fiscal policy to counteract the shock, it benefits both itself as well as the other country, in a way that it would when countries are closely integrated.

The high debt country therefore imposes a negative externality on the Union when it uses its fiscal policy, whereas the low debt country imposes a positive one.

This asymmetry is reflected in the opposite slopes of their reaction functions (RFs) in Figure 1. Faced with a negative shock, the high debt country can benefit from the other country’s fiscal expansion and therefore reduce the pressure on its own budget (negative slope RF). The low debt country on the other hand will have to respond with a stronger fiscal response to counteract the negative spill over effect of the high debt country (hence positive sloped RF).

Points A and B reflect the optimal response to the shock for the two countries, absent any strategic interaction. There is a deficit bias in the high debt country Ab and a preference for fiscal stability in the low debt country (ie it wants the high debt country to do nothing, so point B is on the x-axis at value Bb).

Point N reflects the uncooperative outcome, when both players have accounted for each other’s actions, the Nash equilibrium of this policy game. The overall fiscal response to the external shock is too small (Anash+Bnash), and certainly by comparison to the cumulative response of both countries absent of the strategic interaction (Ab+ Bb, identified at respective bliss points). The high debt country’s response to the shock is actually pro-cyclical, as it ends up having a surplus.

Figure 1: Uncoordinated fiscal policies lead to the wrong fiscal policy

This shows that in response to a negative shock, the absence of explicit fiscal coordination between the two countries leads to a response that is much less expansionary than would be optimal and even procyclical for the high debt country. This is the result of each country using fiscal policy independently, but within a framework where there are interdependencies.[1]

[1] If fiscal policy response is linear, such that its size is the same irrespective of whether the shock is positive or negative (and of course opposite in sign), then the picture is entirely symmetric across both axes, for a positive shock. Graph available upon request.

The contract curve tracks the pairs of fiscal responses when policies are coordinated (with different weights). There exists a coordinated fiscal policy response, like at point C in Figure 2, where both do better in welfare terms by comparison to Nash (indifference curves that go through C are closer to respective bliss points). The fiscal response of the high debt country is now counter-cyclical but not as big as it would have been, had the country not considered the negative spill overs it imposes.

Figure 2: If we coordinate, we can do better

Exactly where C will lie in the F1F2 part of the contract curve (where both countries do better than Nash) will depend on the bargaining power of the two players (and is known as the area of feasible policy bargain).

Monetary policy does most of the work

Next, we discuss how the lack of cooperation between the independent fiscal authorities affects monetary policy. The suboptimal fiscal policy outcome captured by the Nash equilibrium, point N in Figure 1, is conditional on monetary policy, in other words for a given interest rate level.

For a higher interest rate, both fiscal authorities would wish to have a more expansionary fiscal position (ie higher fiscal deficit) to counteract the contractionary effect coming from monetary policy. This means that both actors’ reaction functions move to the right as interest rates increase and so the respective Nash equilibria move north east, as shown in Figure 3. The collection of all Nash equilibria depicts the aggregate European fiscal reaction function to the common monetary policy.

Figure 3: Fiscal policy expands as monetary policy contracts

But we can also derive the equivalent aggregate EU fiscal reaction function to monetary policy when fiscal policies are coordinated, equivalent to the collection of all coordinated equilibria captured by the dashed green line. This line moves upwards and the coordinated equilibria move to the north-east of the Nash equilibria equivalent shown in Figure 2.

We can now consider the fiscal-monetary policy game in their respective instrument space, interest rate and deficits (Figure 4), for a given negative shock.

The ECB’s reaction function and the collective fiscal response are positively sloped. For any fiscal expansion, the ECB will increase the interest rate and similarly fiscal policy will be more expansionary the more contractionary monetary policy is.

Point A indicates the pair of values for the interest rate and deficit preferred by the ECB to deal with the shock (bliss point). In this graph we do not have a bliss point for the fiscal authorities as the fiscal reaction function is the set of equilibria for different levels of the interest rate. This also means that we cannot have a cooperative solution between the ECB and fiscal authorities (ie, we cannot have a contract curve) unless we first identify a cooperative solution among fiscal authorities that defines European wide fiscal preferences.

When monetary and fiscal policy are decided independently of each other, then the only credible outcome is the Nash equilibrium, point N(EU). We have shown that fiscal policy is underused in response to the shock, and it is now monetary policy that is having to be more expansionary (lower interest rate) than it would have been otherwise.

Figure 4: Monetary policy bears the cost of adjustment

Even if we assume that the monetary authority is a Stackelberg leader where the ECB autonomously decides its policy having taken into consideration the aggregate fiscal response, (point S in Figure 4), monetary policy is still more expansionary than the shock would dictate (at point A).

Had fiscal authorities been able to strike a bargain and coordinate, then fiscal policy would be more active. The ECB would have had to react by less therefore, shown by the points NC(EU) and SC for the Nash and Stackelberg game respectively, which are moved in a north-easterly direction.

Figures 1-4 show that the lack of coordination between fiscal authorities induces an aggregate outcome where the instrument is underused and monetary policy is too expansionary. So, for monetary policy to be able to do less, there must be greater fiscal cooperation between countries and an appreciation of the fact that monetary union imposes strategic interdependencies that need to be dealt with.

These are the types of failures that discussions on the fiscal framework should aim to correct with a view to promoting more cooperative outcomes.

This blog post was part of a lecture we gave at the Scottish Economic Society Annual Conference on 26 April 2021, in honour of Professor Andrew Hughes Hallett. We thank Peter McAdam for inviting us to the session.

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How emotions shape debates in the European Parliament | Europp LSE Blog

Over the last decade, an emerging body of research has sought to uncover the role that emotions play in politics. Drawing on two new studies, Rosa M. Sanchez Salgado assesses the impact emotions have on debates in the European Parliament and the wider EU policy process.

EU officials and representatives are usually pictured as technocratic and rational individuals. There is a general expectation that emotions – which are traditionally viewed as standing in opposition to rationality and objectivity – will have little impact on their decision-making process. Indeed, when emotions appear in discursive practices and deliberation, there is often significant pressure to put them to one side.

Yet, recent research I have conducted on the role of emotions in the European Parliament and the reform of the Dublin System shows that emotions play a central role in policymaking: they affect perceptions and shape subjectivity, which also has consequences for action. This raises the question of how we can better understand the impact that emotions have on policy outcomes.

Emotions in policymaking

Emotions are fascinating as a scientific concept because they bind together the activation of key body systems and socially constructed values and rules. Emotions can be studied both as neural impulses that move an organism to action (as a survival mechanism) and as social constructions that are learned through socialisation processes.

Perception based on emotions should not be seen as standing in opposition to rational or reasoned perception. It is now widely acknowledged that emotional processing is part of cognition itself and that so-called ‘rational processing’ is inseparable from ‘emotional processing’. Emotions therefore play a role in giving rise to thoughts and supporting values and beliefs. This means they have a programmatic or constitutive function that is key in policymaking. Scholars have shown that emotions become institutionalised in politics and that they bring with them specific constitutional solutions. In this constitutive role, emotions cannot be judged as intrinsically good or bad, and they certainly cannot be excluded from the policy process.

Emotions play a key role in framing processes and in shaping power dynamics. The way a situation is perceived (framing) has important consequences for the policy process, with the specific diagnosis of a problem leading to specific solutions. Emotions that support particular perceptions also have consequences in terms of policy solutions.

This is important because emotions have been connected to specific behaviours. For example, fear tends to lead to the perception that negative events are unpredictable. This can result in policymakers placing less focus on mechanisms of control or individual responsibility. In contrast, anger tends to lead to the perception that negative events are predictable and are under human control. This can result in policymakers focusing to a greater extent on punishment and regulation.

Emotions also play a relevant role in power dynamics. Policymakers learn the behavioural expectations that are attached to their roles and are motivated to meet these expectations to gain approval and rewards. Emotional expectations and skills are also distributed differently in accordance with an individual’s social status. Only particular kinds of emotions that are expressed in certain ways by certain kinds of people are accepted.

An example of this is the distinction between established, traditional politicians, and those who challenge the system from a position of opposition. While the former are expected to behave in a restrained manner, the latter are expected to use emotions as a tool for social change and resistance. The emotions that are considered to be appropriate in a given political context can therefore have an important impact on outcomes and the suppression of particular emotions can prevent certain actors from playing a decisive role in politics.

Emotions in Europe’s economic and migration crises

The economic crisis that began in 2008 and the migration crisis of 2015 provide two illustrative examples of the impact of emotions on EU policymaking. I have conducted an analysis of discussions in the European Parliament surrounding each of these two crises. This analysis revealed that emotions played a key role in policy framing.

During debates over the migration crisis, there was competition between two different frames that corresponded to different emotions: a frame based on fear (a security frame) and a frame based on compassion (a solidarity frame). Both approaches led to support for different policy solutions. The perspective built on fear and a concern for security was associated with support for stronger border controls and the repatriation of refugees. The frame based on compassion and solidarity, in contrast, was associated with support for solutions such as safe pathways to migration and a relocation system.

During the economic crisis, in contrast, fear alone stood out as the dominant emotion. Fear helped shape the perceptions of Commission officials and MEPs, with their policy solutions being primarily oriented toward the neutralisation of a perceived danger. The precise fears that were expressed within these debates varied. Mainstream political parties primarily feared the collapse of the euro and the EU, while populists and Eurosceptics articulated fears about public disorder and the quality of democracy.

These debates were characterised by the absence of other emotions that may have been appropriate, such as compassion and anger. Since anger tends to lead to the perception of negative events as being under human control, it may have resulted in a greater focus on policy solutions such as regulation or punishment against those deemed responsible for the crisis.

Understanding the role of emotions

Europe’s migration and economic crises illustrate why the emotions that are deemed appropriate in debates can shape the policy process. During the migration crisis, the expression of emotions such as indignation and compassion was considered to be appropriate because defending refugees was viewed as morally right. The debates in the European Parliament were often characterised by attempts to shame those who opposed taking action to protect refugees. These arguments were put forward not only by left-wing politicians, but also by many mainstream MEPs who wished to challenge the status quo.

The expression of fear, in contrast, was deemed less acceptable. Populist politicians were accused of fearmongering for portraying refugees as potential terrorists or ‘welfare tourists’. The explicit use of fear in this way was not viewed as appropriate in the European Parliament and these voices were not taken into account in the Parliament’s common position.

The fact that many MEPs challenged the status quo was reflected in the common position the European Parliament took on reform of the Dublin System in November 2017, which was interpreted as a proposal for substantial reform. Despite this ambitious common position, the absence of a common position in the Council led to the withdrawal of the proposed reform and the submission of a new proposal, the New Pact on Migration and Asylum.

During the economic crisis, strategies based on emotions such as shaming or fearmongering were far less common. The main challenge to the prevailing views in the European Parliament came from Eurosceptic groups, who had little opportunity to form a majority of MEPs or influence mainstream actors. Left-wing voices expressing criticism of austerity were not prominent in debates.

Mainstream political parties that could have joined left-wing challengers in their arguments against austerity endorsed instead a position aimed at reinforcing the EU and giving more competences to the Commission. The extent to which mainstream actors feared the collapse of the Union left little space for emotions such as compassion and anger. These emotions do not appear to have been viewed as appropriate. The prevalence of fear goes some way toward explaining the Council’s preference for budgetary discipline, which was apparent in the way the crisis was managed.

Emotions as an integral part of the policy process

Emotions and cognition are highly interconnected processes which accompany any human activity. Regardless of whether particular emotions are judged to be right or wrong within a given policy debate, or whether they are deemed to be appropriate or inappropriate in different political contexts, they are an integral part of the policy process.

Indeed, the role that emotions play is crucial. If emotions are suppressed then the beliefs, values and perceptions supported by these emotions will ultimately be excluded from the process. In the case of the migration crisis, the fact that emotions such as anger and indignation were deemed to be inappropriate in the European Parliament resulted in support for a reform built on solidarity between member states. In the case of the economic crisis, the prevalence of fear among MEPs contributed to support for measures focused on budgetary discipline. Without a full understanding of the emotions that framed these debates, it is impossible to build a complete picture of the policy outcomes produced by the Parliament.

 

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Policy Insight | Limitations on human mobility in response to COVID-19 | CEPS

This report provides a mapping of measures adopted by the European Union and 10 selected Member States to restrict human mobility in order to tackle the spread of COVID-19. It also investigates the impact of the enforcement of mobility restrictions and border controls introduced since the outbreak of the pandemic on the individual rights and freedoms of EU citizens and third-country nationals. It does so by looking at the ways and extents to which different types of restrictions have been implemented and enforced over the 11-month period from the beginning of March 2020 until the end of January 2021.

First, the report identifies and categorises the different typologies of border and mobility restrictions introduced at different levels of governance (EU, international, national and subnational) to contain the spread of COVID-19. Second, the report scrutinises the rationale used to justify the introduction of such measures, looks at the procedures followed for their adoption and implementation, and examines the compatibility of the different categories of intervention with the principles of legality, necessity and proportionality enshrined in EU law. Third, the report looks at the impact of the application of such restrictions on the coherent application of the system of norms and standards currently governing intra-EU mobility, and the management of migration and asylum at the EU’s external borders.

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Policy Insight | Russia’s threat to invade Ukraine and Europe’s soft power | CEPS

Vladimir Putin’s threat to invade Ukraine forces all parties to make their calculations with three fundamental variables. The first two have dominated public debate so far: the preparedness of Russia to go to war, and the possible impact of Western sanctions in reply. But there is third variable, arguably the most important of all, namely how Ukraine – its leadership and population – see their future, and within that the key role of the EU.

Putin’s overarching objectives are clear: for Ukraine to fail in its Westernisation and Europeanisation, and to obtain guarantees against its accession to NATO. His tactics on the other hand are deliberately unclear, manifestly threatening war while denying it. Why now, the urgency of scaling up the threat? Is he bluffing? Putin is obsessed by his ambition to regain Ukraine, sees that with time his chances of doing so will decline as Ukraine pivots West and towards Europe, and that with Joe Biden prioritising confrontation with China, now is his best opportunity. He would of course prefer to secure his objectives without war. The current military build-up serves in any case to get a clearer view of the US’s bottom line over war, and to gain leverage in possible negotiations over a revised European security order. Thus far, Putin is getting results, namely Biden’s statement that the US will not go to war, and that he is willing to discuss Russia’s concerns over NATO.

However, the threat of war remains, but probably limited in two respects – territorially and conditionally. Least implausibly, one can imagine the Kremlin planners eyeing a lightning strike first to take Mariupol and then to advance further down the coast of the Azov Sea, taking Berdiansk and Melitopol to join up with Crimea – then back to Novorossiya. The territorial gains might extend inland to the banks of the Dnipro River, so to gain control of the North Crimea Canal, currently blocked by Ukraine, and restore badly needed water supplies for Crimea. Pulling the trigger would depend on whether Ukraine can be provoked into an ill-judged action, sufficient to serve as pretext for such a military campaign. This would be drawing on the model of the 2008 war with Georgia, to which Sergei Lavrov even referred explicitly in recent days saying that the territorial gains would be much bigger.

What might be the sanctions of the US and EU in reply? Qualitatively, the language is about them being devastating, but the specifics are not that clear or that threatening for the Kremlin. Nord Stream 2 is mentioned. But there is still Nord Stream 1 and gas pipelines going through Ukraine. A total blockage of Russian gas by the EU would hurt Russia a lot, and the EU could accelerate plans and investments to prepare for this. Still, this can only be a medium-term plan, not for this winter in current gas-market conditions. There is also talk of cutting Russia out of SWIFT financial transactions, which would be inconvenient but hardly devastating. Russia would be cast as a pariah state by the G7, but it is virtually so already for the West, and can count on support from China. Overall Russia is relatively well placed to survive the probable enhanced sanctions.

This leaves the third variable, which is where Ukraine as a state and society has got to over the last decade or so, and where it is heading and notably with the EU. Russia’s main fear has to be that its threats only increase the alienation of Ukrainian society, 72% of which, according to a recent poll, already consider Russia to be a hostile power. A limited military invasion is unlikely to produce a pro-Russian coup d’état in Kyiv, and a wholesale military conquest is not plausible for the Kremlin’s realistic planning.

Ukraine nonetheless remains a fragile state, with European orientations of uncertain strength, seeking membership prospects from the EU but not getting them. The EU is in no condition to suddenly switch into EU pre-accession mode with Ukraine. But decisive steps could be taken to credibly upgrade Ukraine’s deepening economic, political and societal integration with the EU. The stakes are so high now with the Russian threats that a step change, or change of gear, is warranted and feasible. The EU has the instruments in its hands and the framework conditions governing EU-Ukraine relations are in place. Two examples can illustrate this.

First is the already established ‘more for more’ principle, in which financial assistance would be increased on condition that policy criteria are met. The problem is that today this is still too vague to be a major driver of policy reform. Yet it could be transformed as a matter now of geopolitical priority. The two parties should sit down together to work out a big plan.

This leads to a second concrete opportunity, namely to persuade Ukraine to join in the EU’s Green Deal, which could have an even bigger transformative impact on Ukraine than for the EU itself. A high-level joint task force is already at work asking the right questions, with the EU ready to create a ‘financing platform’, together with others, meaning the US and international financial institutions. The EU and US could together create a 2+1 overarching strategic platform with Ukraine, embracing both the Green Deal and other policy dimensions, and also a wider G7+1 platform.

These propositions would be entirely consistent with the conclusions of the Eastern Partnership summit of 15 December, but converted in the case of Ukraine into a strategic and concrete reality.

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