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51. Sovereign Debtors in Distress: Are Our Institutions Up to the Challenge?

Author:
Susan Schadler
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Global economic developments over the past two years have dashed hopes that the risks of sovereign debt crises have been tamed. The turmoil in Europe has, of course, been the most acute of these developments, but growing national fiscal imbalances, anemic prospects for growth and the expanding reach of private financial markets to newly emerging economies are potent, if less immediately threatening, signs of the risks ahead. After lying dormant for almost a decade, pressing questions about whether global institutions are capable of containing the costs of debt crises are again being raised.
Topic:
Debt, Economics, Globalization, Political Economy, Financial Crisis, and Governance
Political Geography:
Europe

52. Can Italy and Spain survive rates of 6-7%?

Author:
Daniel Gros
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The sentiment that the euro is now in real danger is based in large part on the widespread conviction that interest rates of 6-7% are simply unsustainable for both Italy and Spain., After taking a closer look at the fundamentals, however, Daniel Gros concludes in this new Policy Brief that both countries should be able to live with this level of interest rates for quite some time, but only if they mobilize domestic savings, which remain strong in both countries. For Spain, some debt/equity swaps are also needed.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe, Spain, and Italy

53. Unholy compromise in the eurozone and how to right it

Author:
Stefano Micossi
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Two years after the first Greek rescue in May 2010, crisis management in the eurozone has still failed to restore confidence. A vivid picture of the situation can be found in Figure 1: the constellation of spreads on ten-year sovereign debts over the Bund in the eurozone is wider than it was before monetary union, as though financial markets had already discounted its breakdown. Temporary respites, notably in the early part of 2012, have not interrupted the trend of increasing divergence that risks undermining the credibility of adjustment efforts under way.
Topic:
Debt, Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

54. Central Banks in Times of Crisis: The FED vs. the ECB

Author:
Daniel Gros, Cinzia Alcidi, and Alessandro Giovannini
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Different economic and financial structures require different crisis responses. Different crises also require different tools and resources. The first 'stage' of the financial crisis (2007-09) was similar on both sides of the Atlantic, and the response was also quite similar. The second stage of the crisis is unique to the euro area. Increasing financial disintegration within the region has forced the ECB to become the central counterparty for the entire cross-border banking market and to intervene in the sovereign bond market of some stressed countries. The actions undertaken by the European Central Bank (ECB), however, have not always represented the best response, in terms of effectiveness, consistency and transparency. This is especially true for the Securities Markets Programme (SMP): by de facto imposing its absolute seniority during the Greek PSI (private sector involvement), the ECB has probably killed its future effectiveness.
Topic:
Debt, Economics, International Trade and Finance, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

55. Greek Entrepreneurs to the Rescue: How to Reinvent the Greek Economy after the Sovereign Debt Crisis

Author:
Nasos Mihalakas
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
The Diplomatic Courier
Abstract:
The Greek dimension of the EU sovereign debt crisis is by now well known to all. Investor anxiety over excessive national debt throughout the EU led to demands for higher interest rates from several governments with higher debt levels and current account deficits. This in turn made it difficult for some governments to finance further budget deficits and service existing debt. Unable to pay for its public debt, the Greek government turned to the EU for financial assistance. The first bailout package was approved on May 2010, which provided the Greek government with a three-year, €110 billion loan. In February 2012, the lending troika (EU, IMF, and ECB) eventually agreed to provide a second bailout package worth €130 billion. This second package included an agreement with banks to "voluntarily" accept a 53.5 percent write-off of some Greek debt, the equivalent of €100 billion, to reduce the country's debt level from €340 billion to €240 billion – or 120.5 percent of GDP – by 2020. So far, all the reforms forced upon Greece centers on how to reduce the government budget. These reforms include reducing the minimum wage for public (and therefore, also private) sector employees by 22 percent, cutting benefits to pensioners and health-care recipients, reducing the government payroll by laying off 150,000 public sector employees by 2015, privatizing government companies, and opening up some industries that were closed to competition. For now, Greece has been brought back from the brink of bankruptcy. Though safe for now, the country could find itself struggling to meet the strict conditions outlined in the second bailout agreement if key structural reforms don’t take place. It is not too late for the crisis to serve as an opportunity.
Topic:
Debt, Financial Crisis, European Union, and IMF
Political Geography:
Europe and Greece

56. The Reform of European Economic Governance : Towards a Sustainable Monetary Union?

Author:
Stijn Verhelst
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
The euro is a rather unusual currency as it is shared by a union of largely independent states. This results in a single supranational monetary union, while most 'economic' matters are decided on a national level. A key challenge in such a system is to ensure that the different levels of decision-making do not undermine the advantages of the common currency. For this reason, the European monetary union has been buttressed by economic integration, resulting in the Economic and Monetary Union (EMU).
Topic:
Debt, Economics, Monetary Policy, Financial Crisis, and Governance
Political Geography:
Europe

57. Renewed Financial Supervision in Europe – Final or transitory?

Author:
Stijn Verhelst
Publication Date:
03-2011
Content Type:
Working Paper
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
In order to obtain financial sector stability, adequate financial regulation and supervision are paramount. Despite their crucial role, both failed to prevent or at least mitigate the financial crisis. While financial regulation strives to impose a set of rules that ensure a safe and resilient financial sector, it has proven to contain too many gaps and loopholes.
Topic:
Debt, Economics, Markets, Monetary Policy, Financial Crisis, and Governance
Political Geography:
Europe

58. External versus Domestic Debt in the Euro Crisis

Author:
Daniel Gros
Publication Date:
05-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
As EU leaders muddle through the eurozone crisis, the debate about its root causes continues. CEPS Director Daniel Gros argues in this Policy Brief that the debate is important if we are to understand how to prevent future crises. In his view, external debt is the key to the turmoil in European economies and that the focus on total public debt is therefore misleading.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Europe

59. The EU's Response to the Financial Crisis: A mid-term review

Author:
Karel Lannoo
Publication Date:
04-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Two years after the London G-20, CEPS Chief Executive Karel Lannoo finds that the EU is well advanced in delivering on the commitments made for the 2013 target date. Important steps have been taken on the institutional side, and regulatory changes are moving ahead. On some issues, in fact, such as remuneration, the EU has made even greater headway than the US. But certain key sensitive matters remain, such as bank resolution or structural changes.
Topic:
Debt, Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
United States, Europe, and London

60. Can the eurozone countries still live together happily ever after?

Author:
Marcello Messori
Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
After the Greek public debt crisis and the bilateral loans to Greece from the other members of the European Monetary Union (EMU), in May 2010 the Ecofin Council launched the European Financial Stabilization Mechanism (EFSM). In June of the same year the EMU countries instituted the European Financial Stability Facility (EFSF). These two mechanisms, which are charged with providing support to EMU countries in “exceptional difficulty”, received their baptism of fire with Ireland in January 2011 and successfully made their first bond issue on the market.
Topic:
Debt, Economics, and Monetary Policy
Political Geography:
Europe and Greece