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On 14 March 2023, the European Commission proposed a reform of the EU electricity market, with the aim of reducing price volatility for consumers and creating favourable conditions for investors in low-carbon energy. The reform includes two legislative proposals – one on electricity market design (EMD) and the other on protection against wholesale energy market manipulation (REMIT). The reform would improve consumer protection by offering more fixed-price contracts and enhancing supplier obligations ...

Any greening of monetary policy is likely to have at best a marginal effect on emissions given the very small spreads on the yields of green bonds and the cap on emissions inherent in the EU’s emissions trading system. Trying to limit the supply of capital to brown industries could backfire as these industries are those most in need of financing for capital-intensive decarbonisation. These arguments apply both to the tilting of investments under the corporate sector purchase programme (CSPP) towards ...

Better regulation in the EU

Staidéar 20-10-2023

This collection of studies, prepared by the Policy Department C at the request of European Parliament's JURI Committee, indicates that better EU legislation and regulation can deliver gains to the European economy of over EUR 2,200 billion, while even selected sectorial legislation can deliver EUR 575 billon in case of free movement of goods and customs union, EUR 389 billon in case of free movement of services and EUR 177 billion in case of the Digital Single Market, annually. At the same time ...

As monetary policy continues to tighten and excess liquidity is gradually drained from the banking system, the European Central Bank (ECB) is confronted with a decision on which liquidity provision framework the Eurosystem should adopt going forward. Three papers were prepared by the ECON Committee’s Monetary Expert Panel, discussing the relative advantages and disadvantages of the ample reserves/floor system versus the scarce reserves/corridor system. This document was provided by the Economic ...

This paper analyses the operational frameworks adopted by the ECB and the consequences of a shift from the floor to the corridor system. The concept of excess liquidity in the euro area is examined, alongside discussions on market liquidity and funding liquidity. The paper emphasises the need to evaluate the implications for monetary policy effectiveness and financial stability of the different frameworks, shedding light on the role of liquidity in maintaining well-functioning financial markets. ...

Following recent episodes of stress in the banking sector in the US and Switzerland, the ECB’s role in safeguarding financial stability is under scrutiny. The ECB has claimed that no trade-off exists between its primary mandate on maintaining price stability and safeguarding financial stability. Furthermore, the 2021 monetary policy strategy review confirmed that financial stability is a pre-condition for financial stability, and vice-versa. Yet, further interest rate hikes may still give lead to ...

We argue that a hard stagflation scenario is still possible. This would have the potential to create a conflict between price stability and financial stability. We therefore address four questions. Why should central banks be concerned with financial stability? What financial imbalances should central banks be worried about? Are monetary policy and macroprudential regulation two tools for two goals? Is the ECB poised to face the price stability vs. financial stability trade-off?

The ECB is now planning to run down its vast bond holdings acquired under the asset purchase programme ----- a ‘‘quantitative tightening’’. However, the ECB is not contemplating selling any bonds, only not reinvesting part of what is coming due. Under this approach, the continuing expansionary effect of keeping vast holdings remains large and is likely to complicate the fight against inflation. The ECB currently has two, fungible, policy instruments (policy rates and balance sheet operations), which ...

Part of a broader revision targeting the EU emissions trading system (ETS), the European Commission proposal to revise the market stability reserve (MSR) for the ETS would prolong its current parameters. Under the current rules, the percentage of allowances put into the MSR, and the minimum allowances placed in the reserve, have been doubled until end-2023, to allow for a quick removal of surplus EU ETS allowances. The proposal aims to maintain the current doubled intake rate (24 %) and minimum number ...

The study conceptualises personal pricing, distinguishing different forms including individual prices and group prices. It summarises empirical insights on the occurrence of personal pricing in practice and related consumer attitudes. In its legal part, it analyses whether and how current EU law deals with this phenomenon and identifies regulatory gaps and legal uncertainty, on the basis of which recommendations for future regulation of personalised pricing are presented. This document was provided ...