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311. Stability Bonds for the Euro Area

Author:
Angel Ubide
Publication Date:
12-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The rules and buffers created in the last few years to enable the euro area to withstand another sudden stop of credit and market-driven panic in one or more of its member states are welcome steps, but they are widely recognized as inadequate. Ubide proposes creating a system of stability bonds in the euro area, to be issued by a new European Debt Agency, to partially finance the debt of euro area countries—up to 25 percent of GDP. These stability bonds should be initially backed by tax revenues transferred from national treasuries, but ultimately by the creation of euro area–wide tax revenues, and used to fund the operations of national governments. They could also be used for euro area–wide fiscal stimulus, to complement the fiscal policies of member states. Such bonds would strengthen the euro area economic infrastructure, creating incentives for countries to reduce their deficits but not forcing them to do so when such actions would drive their economies further into a downturn. The bonds would permit the euro area to adopt a more flexible or expansionary fiscal policy during recessions.
Topic:
Economics, International Trade and Finance, Monetary Policy, and GDP
Political Geography:
Europe

312. Financing SMEs in Europe: Stylised Facts, Policies, Challenges

Author:
Daniele Ciani, Paolo Finaldi Russo, and Valerio Vacca
Publication Date:
12-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
This paper describes the main features of European SMEs’ financial behaviour and the policies recently put in place to support their funding. European SMEs are structurally more leveraged and charged with higher interest rates than large firms. Moreover, the crisis has deeply affected their fund-raising capacity, as banks reduced credit supply while non-bank funding was unavailable to most SMEs. Against this background, EU has focussed its policies on long-term investment and on a more favourable environment for SMEs financing, including through the launch of the Capital Markets Union. At the national level, most governments have provided guarantees and enhanced the role of national development banks. Nevertheless, key issues are still outstanding, such as the funding of innovative firms and the improvement of transparency and of the legal and regulatory frameworks.
Topic:
Economics, International Trade and Finance, Markets, and European Union
Political Geography:
Europe
Publication Identifier:
978-88-98650-71-2
Publication Identifier Type:
ISBN

313. China's New Silk Road Initiative

Author:
Zhao Minghao
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
The European Council has mandated the High Representative of the Union for Foreign Affairs and Security Policy, Federica Mogherini, to draft a Global Strategy by June 2016. Given Europe’s status as a global power, such a strategy must respond to Europe’s own challenges as well as to the new grand strategies of other major players in world politics, like China. To better understand the central tenets of the Chinese leadership’s strategic thinking, two keywords are most important – the “Four Comprehensives” and the “One Belt and One Road” (OBOR). As an initiative mainly focusing on promoting Eurasian integration and reshaping Chinese geo-economic advantages, the OBOR is highly consequential to China’s interactions with Europe and the rest of the world at large in the decades to come. How to take advantage of the OBOR, create new EU-China synergies, and tackle relevant challenges are questions the EU leaders should be attentive to.
Topic:
Economics, International Cooperation, International Trade and Finance, Markets, and Bilateral Relations
Political Geography:
Europe and Asia
Publication Identifier:
978-88-98650-61-3
Publication Identifier Type:
ISBN

314. WTO 'a la carte' or 'menu du jour'? Assessing the Case for More Plurilateral Agreements

Author:
Bernard M. Hoekman and Petros C. Mavroidis
Publication Date:
04-2015
Content Type:
Journal Article
Abstract:
Plurilateral agreements in the context of the World Trade Organization (WTO) allow sub-sets of countries to agree to commitments in specific policy areas that only apply to signatories and thus allow for ‘variable geometry’ in the WTO. Plurilateral agreements share a number of features with preferential trade agreements (PTAs), which are increasingly used by governments to liberalize trade in goods and services. This article discusses the current institutional framework that governs these two alternatives and distinguishes them from the general, non-discriminatory agreements that are negotiated among – and apply to – all WTO members. Current WTO rules make it much more difficult to pursue the plurilateral route than to negotiate a PTA. We review the arguments for and against making it easier for ‘issue-specific’ clubs to form in the WTO and discuss how concerns raised by some WTO members regarding the potential negative impact of plurilateral agreements on the multilateral trading system might be addressed. We take the view that action to facilitate the negotiation of plurilateral agreements in the WTO should be considered and that the potential downsides for the multilateral trading system can be managed.
Topic:
Economics, Political Economy, World Trade Organization, and Law
Political Geography:
Europe and Italy

315. The Greek “Rescue”: Where Did the Money Go?

Author:
Pablo Gabriel Bortz
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper analyses the financial assistance provided to Greece in the first two rescue packages granted by the Troika (European Union, European Central Bank and IMF). It looks particularly carefully at claims by Sinn that a third of the public credit granted to Greece financed its current account deficit, while another third funded capital flight by Greek nationals, with only the remaining third used to pay creditors. The paper shows that Sinn inflates the assistance given to Greece by mixing several different concepts in the total. It also critically reviews the claim that the assistance was used to finance the current account deficit or capital flight by Greek citizens. Realistic accounting shows that 54% of the financial assistance provided to Greece was used to repay (foreign) debt, while another 21% was used to recapitalize Greek banks (some of which were owned by foreign institutions). Other claims about the rescue package are also analysed in relation to the treatment of Greek and foreign banking exposure to sovereign debt.
Topic:
Economics, Finance, Banking, and Development Assistance
Political Geography:
Europe and Greece

316. The Cyclically Adjusted Budget: History and Exegesis of a Fateful Estimate

Author:
Orsola Costantini
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper traces the evolution of the concept of the cyclically adjusted budget from the 1930s to the present. The idea of balancing the budget over the cycle was first conceived in Sweden in the 1930s by the economists of the Stockholm School and was soon reinterpreted and incorporated into the fiscal program of the American political coalition supporting the New Deal, especially by the Committee for Economic Development during and after World War II. In the 1960s, Keynesian economists associated with the Kennedy and Johnson administrations reformulated the notion. Despite their claims at the time, their version differed only in degree from the earlier CED approach, the transformation being largely conditioned by changing political circumstances. In the 1980s, however, the concept changed substantially. Methods for calculating it transformed dramatically, as the notion became a device to limit and direct governments’ fiscal policies in a wide sense, that is, including institutional (or “structural”) reforms. The final section of the paper considers the shifting uses of the notion in the European Growth and Stability Pact.
Topic:
Economics, Budget, Economic Growth, and Fiscal Policy
Political Geography:
Europe, North America, and United States of America

317. New Energy Strategy of Ukraine Until 2020: Security, Energy Efficiency, Competition

Author:
Valeriya Klymenko and Hanna Pashkova
Publication Date:
01-2015
Content Type:
Journal Article
Journal:
Security and Defence Quarterly
Institution:
Razumkov Centre
Abstract:
The proposed “New Energy Strategy of Ukraine until 2020: Security, Energy Efficiency, Competition” (hereinafter referred to as NES 2020) is a comprehensive document for reforming the energy complex of Ukraine for the period until 2020. At the same time, NES 2020 defines, above all, the goals and algorithms for energy sector development, and thus will also remain relevant for creating further long-term strategies and sectoral programmes. Target figures mentioned in the document only demonstrate the general trajectory of energy resources demand and offer development. These figures are to have a more expanded and detailed presentation in the developed action plan of the CMU for implementation of NES 2020. Usually, a strategy, being a document that is the result of target-based programme planning and forecasting in a certain sphere of activity, covers a longer period of time – 10-20 years. However, serious challenges currently faced by Ukraine as a state, given the fact of external aggression and the burden of unresolved issues accumulated during the period of independence with reforming of the national energy complex, require a document with such status for a shorter period of time. The NES 2020 stipulates that by the end of its implementation term the restructuring of the energy complex of Ukraine will be complete, including its transition to modern market models of operation, and that the main safety and energy efficiency targets will be achieved. After 2020, Ukrainian energy sector will move on to a new level of its development – complete integration with the EU energy sector and innovative rebuilding. Thus, implementation of tasks in the energy sector after 2020, will require rather different approaches than those defined by NES 2020, which means – development of a new strategic document. During the development of NES 2020, proposals were considered regarding the content of the suggested document from such respected international organisations, as the International Energy Agency, Energy Community Secretariat, United Nations Economic Commission for Europe, World Bank, Delegation of the European Union to Ukraine, European Bank for Reconstruction and Development, etc. At the final stage of public consultations regarding NES 2020 draft, an expert discussion was organised, which involved representatives of leading scientific research institutions, companies working in the field, international organisations and NGOs, domestic and foreign experts, media, and based on results of which, the final draft of NES 2020 was created. This document was developed by the Razumkov Centre and other leading nongovernmental, public organisations and scientific research institutions of Ukraine, with support of the Verkhovna Rada of Ukraine Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety. Therefore, the draft of NES 2020 can be rightfully viewed as a result of joint effort of Ukraine’s expert community and reputable international institutions.
Topic:
Security, Economics, Politics, Strategic Competition, and Energy
Political Geography:
Europe and Ukraine

318. Prospects of Ukrainian-Russian Relations

Author:
Hanna Pashkova
Publication Date:
01-2015
Content Type:
Journal Article
Journal:
National Security and Defence
Institution:
Razumkov Centre
Abstract:
The “hybrid” war of Russia against Ukraine has continued since February 2014. To date, the multiple efforts of international diplomacy, unfortunately, have not resulted either in settlement or even in a “freeze” of the situation in eastern Ukraine. The previous Minsk Agreements adopted in September 2014 (Minsk Protocol and Minsk Memorandum) were disrupted and Russian aggression in Donbas continued. On 12 February 2015, the presidents of Ukraine, France, Germany, and Russia agreed on a new document, “Package of Measures for Implementation of the Minsk Agreements”, which envisaged conflict settlement by the end of 2015. However, implementation of these measures was postponed to 2016 and, given the course of events, has actually become a process which is difficult to forecast and which is indefinite in time.1 It should be noted that on the one hand, the situation in eastern Ukraine has not undergone significant changes for the better – hostilities are ongoing. There are persistent fundamental differences in the positions of the two sides, Ukraine and Russia, on conflict resolution. (In particular, implementation of the Minsk Agreements in line with the Russian scenario threatens to destabilise the internal situation in Ukraine and destroy its statehood.) On the other hand, the international situation is rapidly changing; we see further escalation of international terrorism (the terrorist attacks in Paris), the “migration crisis” in the EU, Russia’s military intervention in Syria, and the gaining momentum of the acute conflict of Moscow and Ankara. This dulls the perception of events in Donbas on the part of the international community, renders these events a somewhat “background” nature in the West, and urges attempts to “freeze” the situation there at any cost, including at the expense of Ukraine’s own interests. Meanwhile, Russia proceeds with military expansion in Donbas, aimed at the destruction of Ukrainian statehood, and now there is no reason to expect a change for the better in the Kremlin’s policy. Thus, the Russian-Ukrainian conflict (which has a regional and global dimension) acquires a long-term nature with recurrent escalation and unpredictable consequences. Russian aggression – the annexation of Crimea and the war in eastern Ukraine – has entailed profound changes in bilateral relations: (а) the legal framework of Kyiv and Moscow relations has been destroyed; (b) institutional mechanisms of state-to-state relations have been destroyed; (c) contacts at the highest level have become impossible, political and diplomatic relations have become confrontational; (d) Ukraine has suffered huge human, economic, and territorial losses; (e) an unprecedented curtailment of economic cooperation has taken place; (f) deep alienation between the peoples of Ukraine and Russia has emerged. The previous official ideology of “strategic partnership”, “fraternal peoples”, and “neighbourliness”, embedded in many joint agreements, has lost its sense.2 A new political-ideological reality has emerged in the relations between Russia and Ukraine. Therefore, a new assessment and review of the nature, ideology, and general institutional system of relations with Russia in key areas (politics, security, economy, energy, humanitarian sphere, etc.) is required, given that the main threat to Ukrainian statehood is the current government in place in the Russian Federation. There is a need to design a new conceptual model of coexistence with Putin’s Russia, which would reflect current realities and prospects of bilateral relations and would take into account the position of Western partner countries and international organisations. However, it is important to keep in mind at least two things. First, one should clearly distinguish the current Putin’s regime and the country of Russia as it is and its society. Second, in rebuffing Russian aggression, a strategic goal should be seen – to restore confidence and interest of the societies of both countries in peaceful coexistence and respect the right of each state to determine the state system in the country and its civilisation development vector.
Topic:
Security, Foreign Policy, Diplomacy, Economics, Energy Policy, Bilateral Relations, and Conflict
Political Geography:
Russia, Europe, and Ukraine

319. A Relationship and a Practice: On the French Sociology of Credit

Author:
Laure Lacan and Jeanne Lazarus
Publication Date:
02-2015
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
This paper aims to describe the social studies of credit developed in France over the past dozen years. We argue that this French sociology of credit, mostly centered on France, can be useful for researchers analyzing other countries, with other institutional particularities, because it proposes a specific method and a specific way to raise questions: credit is mostly understood as a result of social interactions embedded in organizational and legal structures. French researchers also deeply analyze the consequences of the organization of the credit market for inequalities, social stratification, and people’s life experiences. The first part of the paper focuses on works that have examined credit as a social test, looking at the institutional, technical, and social frameworks of money lending. Then, credit is understood as a sociological experiment: how is it integrated into household economies? How do people use forms of credit? Finally, the third part concentrates on credit failure, when a bank loan becomes a debt. This aspect is mostly framed in French sociology as “over-indebtedness,” which is an administrative and a social category. Throughout the paper, we address credit as both a relationship and a practice. This approach is heuristic, as we seek to demonstrate, because it enables us to show that credit is a social and political issue.
Topic:
Debt, Economics, Sociology, Inequality, and Credit
Political Geography:
Europe and France

320. Politics in the Interest of Capital: A Not-So-Organized Combat

Author:
Cornelia Woll
Publication Date:
07-2015
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
The rise in inequality has been explained with reference to organized groups and the lobbying of the financial sector. This article argues that the image of politics as organized combat is contradicted by empirical evidence on lobbying in the United States, and does not travel well to Europe. The power of finance does not operate through organized political influence. Rather, politics in the interest of capital unfolds as a structural feature of advanced economies over time. Tellingly, at the height of the financial crisis, one of the most promising strategies of institutions seeking government support was not organizing for combat, but collective inaction. Our challenge, then, is to explain how the power of finance has built up and is playing out in creating inequality. A more structural, less agency-focused perspective highlights how the rise of finance has been supported by actors that few would accuse of being finance-friendly, such as the European center-left parties and consumers. Reconceptualizing the power of finance has important implications for political solutions to rising inequality.
Topic:
Economics, Politics, Inequality, Finance, and Capital
Political Geography:
Europe