European Economics2026-06-08

The paper examines the European Union's efforts to promote economic and social integration. Despite significant convergence across EU member states, regional inequalities persist, particularly between urban centers and lagging rural areas, fueling Euroscepticism and political polarization. To counter these issues, the paper proposes a three-pronged strategy to strengthen social integration. The European Social Fund+, a vital component of Cohesion Policies, could focus on targeted social assistance programs, such as the Guaranteed Minimum Income (GMI), and combine them with “case management, ” enhancing the effectiveness of social policies in addressing the challenges faced by vulnerable groups. Second, administrative capacities at the local level should be enhanced to ensure an efficient use of Cohesion Policy funds. Finally, the paper recommends fostering policy innovation and rigorous evaluation to adapt social policies to evolving economic challenges, including population aging, technological shifts, and the green transition. This approach could maximize the impact of EU social policies, addressing rising disparities within and between regions to promote a more inclusive and resilient Union.de Hoyos, RafaelRutkowski, Michal2026-01-12This paper analyses the extensive and intensive margins of demand for a retail digital euro. We conducted a representative survey in France, Germany and Italy in November–December 2023. We find that 52–62% of respondents are willing to hold a digital euro, depending on the interest rate spread, with a higher share in Italy than in France or Germany. Design features (cash-like vs deposit-like) appear to play only a very limited role. Average demand depends on the hypothetical interest rate spread relative to current accounts and ranges from EUR 700 to EUR 1, 100, implying an aggregate demand of 1.5–2.5% of GDP. Willingness to hold a digital euro is associated with socio-demographic factors, trust in the ECB and the EU, digitalisation and payment behaviour. Negative interest rate spreads relative to current accounts reduce willingness to hold the digital euro more strongly than positive spreads increase it. Behavioural characteristics tend to be correlated with the likelihood of adoption, whereas economic factors, particularly income and interest rates, are mainly related to the level of demand. This distinction becomes more pronounced when conditioning on positive demand, suggesting that socio-demographic factors primarily influence participation decisions rather than quantities demanded.Bernd HayoMatthias NeuenkirchManuel WalzCBDC demand, Digital euro, ECB, Household survey, Monetary policy2026The capacity of the tax-benefit system to smooth the impact of large economic shocks on household income represents a cornerstone of welfare state performance. In the aftermath of the financial crisis and the Covid-19 pandemic, EU Member States were put under a stress test that resulted in different outcomes depending on the policies in place. In the present paper, we stress-test the tax-benefit systems of all 27 EU Member States under hypothetical unemployment shocks using EUROMOD microsimulations. In addition, we provide results on poverty and fiscal costs, and we extend the analysis to look at the evolution over the periods 2014, 2019 and 2025 to test temporal stability. We find that tax-benefit systems absorb approximately 44% of the market-income loss in the EU, with variation from 17% in Bulgaria to 61% in Belgium. The coefficient is flat across shock magnitude and across the working-age income distribution. However, the flat profile conceals an inversion of the instrument mix along the income distribution. Income taxation provides most of the stabilisation at the top quintile, whereas unemployment benefits and social assistance contribute the most to the stabilisation at the bottom. On average, taxes and social security contributions account for 70% of the total stabilisation at the EU-27 level, while benefit-side instruments account for 30%. Our results also suggest that although the aggregate coefficient has not changed significantly over the decade, its composition has shifted, observing an average decline in unemployment benefits and a rise in social assistance and housing benefits. The findings point at Member States with minimal benefit-side stabilisation presenting the most acute vulnerability.Bornukova KaterynaRiera Mallol Gemma2026-05This paper analyzes the determinants of the EU budget bargaining process across different expenditure sections for each EU member state. The central hypothesis is that the countries may accept lower allocations in one budget section in exchange for higher shares in others. To explore this, we first develop a theoretical bargaining model that captures member states’ preferences across budgetary items. We then empirically test the model using an unbalanced panel dataset covering EU member states from 1976 to 2020, estimating the marginal rate of substitution between different types of expenditure. The results reveal significant trade-offs among certain budgetary items. On average, structural funds emerged as the most valued expenditure category, followed by agricultural and natural resources policies.Balado-Naves, RobertoGarcia-Valinas, MarianZaporozhets, VeraEU budget; bargaining; agricultural policy; structural funds2026-06We examine recent changes in stock market participation using newly available survey data from eleven euro area countries over the period 2020–2024. The evidence points to substantial turnover, with around 10% of non-stockholders entering the market each year, and more than 20% of stockholders exiting. New entrants tend to have lower education, income, financial literacy, and risk tolerance than established investors, indicating a shift in the composition of market participants. We also highlight the growing importance of cryptocurrency investments among retail investors. Overall, these findings shed new light on evolving household financial behavior and its implications for market participation and financial stability. JEL Classification: D14, E21, G51Christelis, DimitrisGeorgarakos, DimitrisJappelli, TullioKenny, GeoffMeyer, Justusconsumer expectations survey, crypto assets, household finance, mutual funds, stocks2026-05A well-integrated agricultural market is a precondition for the sustainability of agri-food systems since it contributes to optimal resource and product allocation and encourages specialization according to comparative advantage. The aim of the paper is to assess the processes of spatial price transmission in the milk market of Central European countries. This paper extends previous studies on the spatial integration of the milk market by providing a regional analysis of four Central European countries by examining the effects of distance, borders, and specialization on price transmission. Germany as the main milk producer in the European Union (EU) and the original member of the EU represents the base country for our analysis. The econometric analysis of the regional monthly raw milk prices reveals that the German regions, with the leading position in milk prices formation in Central Europe, together with the Czech and Slovak regions, can be regarded as a single milk market where prices tend to converge in the long run. In contrast, the Polish regions are still poorly integrated internally and externally. The perishability of the commodity coupled with the small size of the Polish farms means that farmers cannot easily switch to other, e.g., foreign buyers. This hinders price adjustment and is reflected in the economics of Polish dairy farms, whose profitability is low. Policymakers should, therefore, aim to equalize the market powers of agricultural producers and milk processors, e.g., by supporting the integration of dairy farms into producer organizations and sales cooperatives.Roman, MonikaŽáková Kroupová, ZdeňkaTrnková, GabrielaAgribusiness, Dairy Production/Industries2024-12-23The return of inflation in Western economies has fueled the debate on its main drivers, bringing sector-specific shocks and supply chain bottlenecks to the forefront. Building on the seminal approach of Weber et al. (2024), this paper develops a method to assess the degree of exposure to these shocks in EU countries. Using inter-country input-output data stemming from the FIGARO database, we identify systemically significant sectors in four regions within the EU: Core, Southern Periphery, Eastern Periphery, and financial hubs. We also analyze exposure to foreign shocks. Two main conclusions can be drawn: on the one hand, periphery countries are more exposed to shocks originating in the EU core than the other way around; on the other hand, all EU regions are considerably exposed to price shocks originating from non-EU countries, namely Russia and China. The strategic dependencies of the block pose challenges for price stability and require targeted policies.Vicente FerreiraJoão Pedro FerreiraDario GuarascioFrancesco ZezzaInflation, Supply chain shocks, Input-Output, Core-periphery2024-11Fragmentation in the European Union's R&I system is increasingly acknowledged as a major hindrance to its performance. However, theoretical frameworks and empirical evidence remain scarce. This paper introduces a novel complexity-based approach to analyse the competitiveness costs of R&I fragmentation, focusing specifically on hub connectivity as a key metric. Using a comprehensive dataset combining patent records (OECD REGPAT) and scientific publications (OpenAlex) from 2000 to 2023, we examine R&I networks across multiple spatial levels and technological domains. Our analysis identifies three critical findings. First, the European R&I system is much more fragmented compared to the US, with major European hubs showing notably weaker interconnectivity than their US counterparts. Second, we demonstrate that hub connectivity becomes particularly crucial for complex technologies and scientific fields. Third, we find that there is an efficiency gap between the US and Europe in all domains, but it is most pronounced in complex ones, resulting in a substantial competitive disadvantage in strategic sectors. These findings have significant implications for European innovation policy and suggest the urgent need for targeted interventions to enhance cross- regional R&I collaboration in complex technological and scientific domains.Pierre-Alexandre BALLANDValentina DI GIROLAMOFlorence BENOITJulien RAVETAlexandr HOBZAResearch Fragmentation, Economic Complexity, Inter-Regional Connectivity, Innovation Networks, EU Competitiveness2026-05The European Union’s proposed Savings and Investments Union seeks to address a longstanding paradox: Europe has abundant private savings but struggles to channel them into productive, long-term and risk-bearing investment. This article argues that the SIU will succeed only if it avoids treating capital-market development as an alternative to banking integration. Europe remains a bank-centered financial system, especially in financing small and medium-sized enterprises, and its capital markets can realistically develop only through the active participation of stronger, larger, and more cross-border banks. The article proposes four mutually reinforcing lines of action: creating a country-blind regulatory framework for cross-border banking groups; resisting national political interference in banking consolidation; developing simple and portable savings and pension instruments that mobilize household wealth for risk capital; and reviving securitization through standardization, sound regulation, and market-making support. The central message is that the SIU can become more than another European policy slogan only if it connects Banking Union and Capital Markets Union in a practical institutional strategy: using banks as the bridge between European savings and European investment needs.Ignazio AngeloniMarco PaganoSavings and Investments Union, Banking Union, Capital Markets Union, financial Integration, cross-border banking; household savings, securitization, bank consolidation2026-05-19This paper examines how tax-benefit systems relate to subjective well-being in European countries using both micro- and macro-level data. At the micro level, net transfers are strongly and positively associated with life satisfaction among the bottom half of the income distribution, while net taxes have only weak or slightly negative associations for the top income quintile. At the aggregate level, the tax burden is negatively associated with life satisfaction, but this relationship is weaker, or even offset, in countries with high government effectiveness. Overall, inclusive tax-benefit systems can enhance subjective well-being when combined with good governance.OECDgovernance, income distribution, life satisfaction, redistribution, subjective well-being, tax benefit system2026-06-01