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72. Beyond Coronabonds: A New Constituent for Europe
- Author:
- Nicoletta Pirozzi
- Publication Date:
- 04-2020
- Content Type:
- Commentary and Analysis
- Institution:
- Istituto Affari Internazionali
- Abstract:
- Every era has its symbols. In 1984, Mitterrand and Kohl held hands on the battlefield in Verdun, coming to symbolise the importance of peace in the pursuit of European integration. Today, in times of COVID-19, the so-called “Coronabonds” could have emerged as the symbol of a new Europe, one that is ready and able to do what it takes to collectively overcome the present crisis. Yet, what some member states consider an indispensable emblem of European solidarity, namely debt mutualisation to face an unprecedented symmetric crisis brought about by COVID-19, is regarded by others as an ultimate excuse for moral hazard. As a result, Europe could end up with a politically more digestible European Fund, as proposed by Commissioners Paolo Gentiloni and Thierry Breton, designed to issue long-term bonds.[1] Or, as outlined by the Eurogroup, a Recovery Fund that is “temporary, targeted and commensurate” to the extraordinary costs of the current crisis, helping to spread them across time.
- Topic:
- Financial Crisis, Governance, Finance, Economy, and Coronavirus
- Political Geography:
- Europe and European Union
73. The EU’s Role in Addressing Lebanon’s Multiple Crises
- Author:
- Shahin Vallée
- Publication Date:
- 09-2020
- Content Type:
- Policy Brief
- Institution:
- German Council on Foreign Relations (DGAP)
- Abstract:
- The Beirut Port blast (BPB) has revealed the fundamental failure of the Lebanese political system, but deep democratic reforms will take time and are fraught with risks. Given the US withdrawal and the extreme tensions in the region, the EU has a critical role to play in addressing the short-term humanitarian crisis, responding to the economic and financial situation, and providing a forum for civil society empowerment. If it fails to do so, the price is further geopolitical destabilization.
- Topic:
- Economics, European Union, Geopolitics, Finance, Crisis Management, and Destabilization
- Political Geography:
- Europe, Middle East, and Lebanon
74. Exploring EU Member States’ Good Practices: Incentives for More Secondment into Civilian CSDP Missions
- Author:
- Carina Böttcher
- Publication Date:
- 07-2020
- Content Type:
- Commentary and Analysis
- Institution:
- German Council on Foreign Relations (DGAP)
- Abstract:
- Civilian CSDP missions rely on EU member states to staff them with skilled experts via the instrument of secondment. But the rate of seconded personnel in missions has decreased notably over the last ten years. The key to reversing this trend is addressing obstacles at the national level that hinder the recruitment and deployment of civilian experts with specialized profiles. Targeted incentives could help overcome some of these obstacles.
- Topic:
- European Union, Finance, and Regional Integration
- Political Geography:
- Europe
75. The Privatization and Financialisation of Social Care in the UK
- Publication Date:
- 10-2020
- Content Type:
- Working Paper
- Institution:
- School of Oriental and African Studies - University of London
- Abstract:
- Even before the arrival of COVID-19, the care sector was already in long-term crisis, in large part due to insufficient funding, but the sector has also been under pressure from structural changes resulting from privatisation and financialisation.3 Social care is one of many elements of everyday life which, over the past few decades, have been repackaged to suit the needs of global capital. The process has transformed a social need into a financial issue which in turn translates into new social relations where narratives are constructed in terms of markets and efficiency. Care sector workers are treated as a financial overhead rather than integral to the quality of care provided. The financialisation of social care is an ongoing systemic process, which is accentuated in the increasingly challenging current global investment climate as investors seek alternatives to the low returns from traditional secure investments such as government bonds. This paper is concerned with the tensions resulting in the private provision of social care services. Some of the larger care providers are owned by financial investors that have earned substantial profits via opaque corporate practices. Discussion in the paper shows that while social care offers relatively low risk and high return investment opportunities, structuring care services as a private sector endeavour risks major adverse social outcomes, potentially resulting in: Extensive transfers to the world’s richest via the servicing of basic needs for some of society’s most vulnerable people, financed by taxes and lifetimes’ savings A two tier system of residential care where private providers seek to serve only self-funders Increasing strain on a largely female and minority ethnic un-unionised work force Increasing pressures on (largely female) informal carers that pick up the pieces of the failings in the care system In the inequitable practices of social care providers. However, the paper demonstrates that in the long term, tweaking the margins of regulation will not be sufficient to address the fundamental structural flaws underlying our current care system. Social care services are not competitive and the sector does not work as a conventional market. The analysis acknowledges the complexities of restructuring the care system and therefore offers both short and long term policy suggestions: • Conditions for financial support to the sector in the wake of the COVID-19 pandemic should be imposed to curtail the current extractive practices of some care providers. Tighter regulation should promote socially responsible care provision, backed up with additional financial resources and long-term political commitment. • Additional financial support is needed for local authorities to enable them to provide social care and reduce their reliance on private companies. • Consideration should be given to innovative alternative provider models that draw on international examples of good practice. The current structure of social care provision inevitably promotes inequality, while transparency and accountability are lacking. Moreover, the care system is increasingly moulded to suit the priorities of investors rather than social care needs. In the wake of the pandemic, more resources are urgently needed for social care but this is an opportunity for a radical rethink of the ways in which we support the most vulnerable in our society.
- Topic:
- Privatization, Governance, Finance, Welfare, and Social Services
- Political Geography:
- United Kingdom and Europe
76. Do Firms With Higher Energy Efficiency Have Better Access to Finance?
- Author:
- Philipp-Bastian Brutscher
- Publication Date:
- 06-2020
- Content Type:
- Working Paper
- Institution:
- Political Economy Research Institute (PERI), University of Massachusetts Amherst
- Abstract:
- Improving energy efficiency quickly is key to mitigating climate change and a large part of such improvements has to be implemented in firms. But because most energy efficiency improvements require upfront investments, good access to external finance is important. Theory suggests that information asymmetries may prevent lenders from including energy efficiency into their lending assessment, even though higher energy efficiency makes a firm more cost-competitive and its collateral worth more, especially if stringent climate change mitigation plans are implemented. Empirically, little is known about the impact of energy efficiency on access to external finance. Here we examine for the first time empirically the effect of a firm’s higher energy efficiency on their ability to obtain loans in European Union countries. We exploit a unique firm-level dataset that links a survey from the European Investment Bank on energy efficiency of firms’ building stock and on access to external finance with the ORBIS firm database for European firms. We find that energy efficiency has no effect on the ability of a firm to obtain external financing compared to other indicators on the financial or operational health of the firm. The results reveal an unexploited potential for energy efficiency policy to signal when firms are energy efficient.
- Topic:
- Climate Change, European Union, Finance, Carbon Emissions, and Energy Efficiency
- Political Geography:
- Europe
77. Covert Foreign Money: Financial Loopholes Exploited by Authoritarians to Fund Political Interference in Democracies
- Author:
- Josh Rudolph and Thomas Morley
- Publication Date:
- 08-2020
- Content Type:
- Policy Brief
- Institution:
- German Marshall Fund of the United States (GMFUS)
- Abstract:
- In addition to more widely studied tools like cyberattacks and disinformation, authoritarian regimes such as Russia and China have spent more than $300 million interfering in democratic processes more than 100 times spanning 33 countries over the past decade. The frequency of these financial attacks has accelerated aggressively from two or three annually before 2014 to 15 to 30 in each year since 2016. We call this tool of foreign interference “malign finance,” defined as “the funding of foreign political parties, candidates, campaigns, well-connected elites, or politically influential groups, often through non-transparent structures designed to obfuscate ties to a nation state or its proxies.” A typical case involves a regime-connected operative funneling $1 million to a favored political party, although buying influence in a major national election costs more like $3 million to $15 million. Rather than start our analysis by focusing on any given policy area, we review open-source reporting in 16 languages to identify malign finance cases credibly attributed to foreign governments. Finding that approximately 83 percent of the activity was enabled by legal loopholes, we catalogue the resulting caseload into the seven most exploited policy gaps. Broader than just money flowing through straw donors, shell companies, non-profits, and other conduits, malign finance includes a range of support mechanisms innovated by authoritarian regimes to interfere in democracies, from intangible gifts to media assistance. As such, policy strategies to address these vulnerabilities are not limited to campaign finance reforms, but also include greater transparency requirements around media funding, corporate ownership, campaign contacts with foreign powers, and other issues. In addition to identifying loopholes, our case study informs the scope of our recommended policy solutions, which are meant close off channels for foreign financial interference without infringing upon the speech rights of domestic political spenders or jeopardizing bipartisan support. Each of our recommendations balances these trade-offs differently based on empirical, legal, political, and administrative considerations vetted in consultation with more than 90 current and former executive branch officials, Congressional staffers from both parties, constitutional law scholars, and civil society experts. This report is organized around each of the seven U.S. legal loopholes that need to be closed, starting with the most urgent priorities, plus an eighth chapter on the need for stronger governmental coordination.
- Topic:
- Authoritarianism, Democracy, Finance, Foreign Interference, and Dark Money
- Political Geography:
- Russia, China, Europe, and United States of America
78. The Privatisation of the Polish Banking Sector
- Author:
- Hubert A. Janiszewski
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- Warsaw East European Review (WEER)
- Institution:
- Centre for East European Studies, University of Warsaw
- Abstract:
- The Polish banking sector, at the outset of the Balcerowicz reform plan, was com- posed of the central bank (NBP), 9 regional commercial banks (which had spun out from NBP back in 1988): the state savings bank – PKO BP; the state bank handling foreign com- merce – Bank Handlowy SA; the state bank handling retail foreign exchange transfers – PeKaO SA; the state bank for financing the agriculture sector – BGZ; and a number of small cooperative banks – BRE SA a bank financing export industries established in 1986; and a single private bank, albeit with equity provided by state enterprises – BIG SA. The Ministry of Finance faced a formidable task, firstly to restructure the banking sec- tor – primarily commercial banks and at a later stage privatize the whole sector in order to i.a make it market oriented, flexible and serve large chunks of the rapidly privatizing economy as well as to cater to the needs of the population. It should be stressed – to give the full description of the sector, that the percentage of bad loans in all the above-mentioned banks (except BIG, BRE and probably PKO BP) was between 30 to 50% of their portfolios! It was therefore decided by Finance Minister Leszek Balcerowicz and his key staff, that prior to their privatization, restructuring of the banks was the key for their success. The major problem with restructuring was a lack of funding, which was not available as the Polish state was bankrupt and private resources were by far too small, and politi- cally inaccessible; moreover the parliament would not allow creation of additional debt by way of equity injections to the ailing banking sector. Under those difficult conditions Balcerowicz managed to pass through parliament a set of legislation on restructuring the economy including banks, which allowed for the provision of banks with so-called restructuring bonds (a special law had been enacted called the “Law on financial restructuring of banks and enterprises”) to strengthen their balance sheets and force them to individually, over time, repay such new debts. In order to guide and help the banks with the restructuring, with the assistance of the British Government, the so-called British Know How Fund was created, whose purpose was to provide professional advice and assistance to all commercial banks. This advice was strengthened by a so-called “twinning arrangement”, under which each of the nine commercial banks was provided with a “twin partner” in the form of an established western bank. Among the banks that participated in this scheme were the Allied Irish Bank (twinned to WBK based in Poznan), ING (Bank Śląski in Katowice) and the Midland Bank (Bank Za- chodni in Wroclaw). The whole operation was launched in early 1990 and was completed by early 1993, thus most of the commercial banks were potentially ”ready” for privatization with substan- tially improved balance sheets. Parallel to the above, all the other banks embarked on the restructuring of their balance sheets, if only in order to stay competitive in the market.
- Topic:
- Privatization, Finance, State Capitalism, and Banking
- Political Geography:
- Europe, Eastern Europe, and Poland
79. Introduction to the Round Table on Building a Modern and Robust Banking System: Poland’s Experience after 1989
- Author:
- Stefan Kawalec
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- Warsaw East European Review (WEER)
- Institution:
- Centre for East European Studies, University of Warsaw
- Abstract:
- Poland was the first country of the Soviet bloc in which a non-communist government was created following the period of the cold war. This was the government of Tadeusz Mazowiecki called into being on September 12, 1989. The government announced imme- diately that the economic system would be changed. The government did not propose a third way. It said that a market economy would be introduced, based on private ownership with a freely exchangeable currency. After this transformation of the socialist economy into a capitalist economy was announced, the government acted very quickly to realize this goal. The change of the economic system entailed a great undertaking, consisting of the creation of a banking system adapted to the needs of a market economy. In the socialist economy, there was no money in the true sense of the word. Money served only a certain limited purpose related to the distribution of consumer goods, but not for all such goods. A significant portion of consumer goods were distributed through the use of ration cards, special coupons or through informal channels such as sales made under the counter. En- terprises had their inputs and outputs rationed. The simple fact that an enterprise had złotys on its account did not give the enterprise the right to buy the necessary goods, if the rights to obtain such goods were not included in the appropriate distribution list. Having złotys was also insufficient for purchasing goods from abroad. For that one needed foreign currency -- which also was rationed in accordance with the distribution lists.
- Topic:
- Communism, Democracy, Finance, and Banking
- Political Geography:
- Europe, Eastern Europe, and Poland
80. The EU’s Financial Architecture for External Investment: Progress, Challenges, and Options
- Author:
- Hannah Timmis and Mikaela Gavas
- Publication Date:
- 01-2019
- Content Type:
- Working Paper
- Institution:
- Center for Global Development (CGD)
- Abstract:
- In 2017, the EU launched an ambitious programme of investment mobilisation in Africa and the Neighbourhood: the External Investment Plan (EIP). The EIP aims to increase the scale, impact, and coherence of EU-supported external investment by introducing various innovations to the European financial architecture, including a new guarantee mechanism and a unique “three-pillar” approach to investment support. The European Commission is proposing a significant expansion of the EIP under the EU’s new long-term budget, the Multiannual Financial Framework 2021–27, replacing the current plethora of investment tools and modalities with a single framework. This paper provides a comprehensive overview of the evolution of the EU’s complex external investment architecture. Based on interviews with stakeholders, it documents lessons learned during the EIP’s first year of implementation and proposes a series of options for the design and operationalisation of the new investment framework. To increase the additionality, development effectiveness, and efficiency of EU-supported external investment, it recommends that the European Commission improve the current architecture by providing greater policy steer to investors; increasing competition among institutions for investment support; clarifying linkages between the three pillars; setting clear guidance, fee structures, and standardised contractual terms; and strengthening management of investment tools.
- Topic:
- Regional Cooperation, European Union, Finance, and Investment
- Political Geography:
- Europe