The European Union is the world's largest economic entity, yet its ability to design and implement effective economic policies is not commensurate with its size. It is lagging, for example, in terms of effective policies promoting productivity, growth, scientific research or technological innovation. The Eurozone debt crisis has provided a sharp and painful reminder that the European Union must adopt a new approach to designing its economic policies and coordinating them with the policies of its Member States.

At the same time, while the field of economics in Europe has seen impressive growth in terms of global impact, and in the number of researchers and funding, Europe still lags behind the US in terms of research productivity, and European research remains fragmented across its Member States. According to recent research, the share of articles in the top economics journals published by European researchers represents 34 per cent of the total production of articles in the world, while the US amounts to 53.5 per cent.1 The contrast is even sharper when the citation impact of these publications is taken into account. In terms of share of citations, the US represents 70.8 per cent while the EU share is 28.4 per cent, which illustrates the considerably higher impact of US research in economics.

Developing a competitive and open European research area is essential for growth and to the progress of European integration, because research is a key factor of growth, and competition among researchers provide them with incentives for cooperating across borders. However, different languages, a diversity of academic traditions and a variety of informal barriers often inhibit the free flow of research funding, the mobility of academic talent and, as a result, the efficient allocation of research and development funding. In times of financial restraint the latter becomes particularly important. In this context, research grants, especially if they are allocated across national borders (e.g., by the European Research Council, ERC), can provide valuable tools to circumvent limits to integration and consequently to enhance the exchange of ideas. In fact, the relationship between openness and successful research funding is reciprocal and internationalization can benefit national and regional funding, by, for example, permitting the inflow of foreign resources.