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21. The IMF's Preferred Creditor Status: Does It Still Make Sense After the Euro Crisis?

Author:
Susan Schadler
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Throughout the history of IMF lending, the institution has had PCS — that is, distressed countries borrowing from the IMF are expected to give priority to meeting their obligations to the IMF over those to other (private or official) creditors. This status is a defining characteristic of the IMF's role in financial crises: it provides a high degree of confidence that IMF resources are safe even when other creditors of the distressed country face substantial uncertainty about whether they will be repaid in full. In other words, the IMF, which lends to some of the riskiest countries in the world, faces minimal risk that its resources could be compromised by a debtor country's difficulties in servicing its debt. It does so, however, with the confidence that comes from its role in helping to formulate and monitor a program of policies that are strongly expected to return the country to stability.
Topic:
Debt, Economics, International Monetary Fund, Monetary Policy, and Financial Crisis
Political Geography:
Europe

22. The EMS Crisis of the 1990s: Parallels with the present crisis?

Author:
Daniel Gros
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The EMS crisis of the 1990 s illustrated the importance of a lack of confidence in price or exchange rate stability, whereas the present crisis illustrates the importance of a lack of confidence in fiscal sustainability. Theoretically the difference between the two should be minor since, in terms of the real return to an investor, the loss of purchasing power can be the same when inflation is unexpectedly high, or when the nominal value of government debt is cut in a formal default. Experience has shown, however, that expropriation via a formal default is much more disruptive than via inflation.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Italy

23. Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries

Author:
Ansgar Belke, Anne Oeking, and Ralph Setzer
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The significant gains in export market shares made in a number of vulnerable euro-area crisis countries have not been accompanied by an appropriate improvement in price competitiveness. This paper argues that, under certain conditions, firms consider export activity as a substitute for serving domestic demand. The strength of the link between domestic demand and exports is dependent on capacity constraints. Our econometric model for six euro-area countries suggests domestic demand pressure and capacity-constraint restrictions as additional variables of a properly specified export equation. As an innovation to the literature, we assess the empirical significance through the logistic and the exponential variant of the non-linear smooth transition regression model. We find that domestic demand developments are relevant for the short-run dynamics of exports in particular during more extreme stages of the business cycle. A strong substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade.
Topic:
Economics, Human Rights, International Trade and Finance, and Financial Crisis
Political Geography:
Europe

24. Beyond the Euro Crisis: European constitutional dilemmas and Treaty amendments

Author:
Janne Salminen and Päivi Leino
Publication Date:
05-2014
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
The actual need for Treaty amendments is open to interpretation, for example in relation to the inclusion of the recent euro crisis-related international agreements in EU law. These questions are partly political in nature, and linked to the wider legitimacy of the EU and the integrity and clarity of its legal system. The full realization of the Commission's vision for the future of the EMU would require Treaty changes in order to revise the nature of competence in the area of economic policy and the general framework of cooperation. The recent discussion on the euro crisis measures has demonstrated that many member states have constitutional 'red lines' relating, for example, to the exercise of budgetary powers or sovereignty. It seems unlikely that these hurdles will be overcome in the short term.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
Europe

25. Is the EMU ready for future shocks? An overview of available backstops

Author:
Xavier Vanden Bosch
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
In recent years much has been accomplished to make the EMU more resilient to banking crises, sovereign-debt crises or balance-of-payment crises. Several 'backstops' or financial safety nets were progressively put in place to absorb the shocks that could have otherwise broken the EMU as a system. These substantial advances reflected a gradual, trial-and-error approach rather than a grand design that would have completely overhauled the EMU architecture. While flexibility and realism have advantages, complacency is a clear risk. With no roadmap to follow, efforts to complete the architecture of the EMU may fade with time. Maintaining a sense of direction is crucial while potential vulnerabilities remain.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
Europe

26. What future for the eurozone? Combining discipline, solidarity and institutional reforms

Author:
Stijn Verhelst and Xavier Vanden Bosch
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
This Policy Brief discusses the challenges that await policymakers in reforming the EMU. A balance between discipline and solidarity will have to be found, while institutional reforms should improve the eurozone's legitimacy and efficiency. The key decisions on EMU reforms will have to be made during the 2014-2019 parliamentary term, as the window of opportunity for major reforms is likely to be closed afterwards.
Topic:
Economics, Monetary Policy, Financial Crisis, and Reform
Political Geography:
Europe

27. No Exit from the Euro-rescuing Trap?

Author:
Fritz W. Scharpf
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
This paper attempts a normative assessment of the input and output-oriented legitimacy of the present euro-rescuing regime on the basis of policy analyses examining the causes of present crises, the available policy options, and the impact of the policies actually chosen. Concluding that the regime lacks input-oriented legitimacy and that its claim to output-oriented legitimacy is ambivalent at best, the paper explores potential – majoritarian or unilateral – exits from the present institutional constellation that is characterized by the synthesis of a non-democratic expertocracy and an extremely asymmetric intergovernmental bargaining system.
Topic:
Economics, Politics, Financial Crisis, and Democracy
Political Geography:
Europe

28. Monetary Disunion: The Domestic Politics of Euroland

Author:
W. Streeck and L. Elsässer
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Regional disparities within the European Union have always been perceived as an impediment to monetary integration. This is why discussions on a joint currency, from their very beginning, were linked to compensatory payments in the form of regional policy payments. Structural assistance to poor regions and member states increased sharply at the end of the 1980s. Today, however, fiscal support has to be shared with the new member states in the East. Moreover, due to the financial crisis, the cheap credit that poor EMU member countries enjoyed as a result of interest rate convergence is no longer available. We predict that in the future, some sort of financial aid will have to be provided by rich member countries to poor ones, if only to prevent a further increase in economic disparities and related political instability. We also expect long-lasting distributional conflict between payer and recipient countries far beyond current rescue packages, together with disagreement on the extent of aid required and the political control to be conceded by receiving countries to giving countries. We illustrate the dimension of the distributional conflict by comparing income gaps and relative population size between the center and the periphery of Europe on the one hand and on the other, between rich and poor regions in two European nation-states characterized by large regional disparities, Germany and Italy. While income gaps and population structures are similar in the two countries to those between Northern Europe and the Mediterranean periphery, regional redistribution is much more extensive in the two nation-states. We conclude that this presages a difficult future for the domestic politics of Euroland.
Topic:
Economics, Politics, Financial Crisis, and European Union
Political Geography:
Europe

29. The Urban Regeneration Experience of The United Kingdom: Lessons for Turkey

Author:
Fatih Eren
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
Centre for Strategic Research and Analysis (CESRAN)
Abstract:
The United Kingdom (UK) is the most experienced country regarding the theories, policies, strategies and practices of urban regenerations in the world. This study firstly outlines UK’s urban regeneration experience and then discusses how Turkey can benefit from this experience in the best way. The global financial crisis emerged in 2008 forced the UK to go a change in its national urban regeneration policy. Therefore, this paper has been divided into two parts as UK’s urban regeneration policy before and after 2010.
Topic:
Economics, International Cooperation, Financial Crisis, and Urban
Political Geography:
United Kingdom, Europe, Turkey, and Asia

30. European Banking Union: An Immediate Tool for Euro Crisis Management and a Long-Term Project for the Single Market

Author:
Giulia Rosa Maria Cavallo
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
After the adoption of a single monetary policy which commits the European Central Bank to maintaining the euro's purchasing power and price stability in the Eurozone, the European Union is facing a new, but equally fundamental challenge: the implementation in a relatively short time of the so-called "Banking Union". Its purpose is twofold: (1) breaking the link between banking and sovereign risk, with the ultimate goal of achieving full protection of EU savers in the event of a crisis; and (2) ensuring uniformity of credit conditions - which are still too fragmented - within the European banking market, to ensure greater EU integration of the financial system. Starting from the Communication in which the European Commission stressed the need for a banking union, this paper intends to explore the complex process towards its establishment by looking at the EU institutional mechanisms and the legal aspects. In particular, the analysis will be based on two building blocks: (1) the Single Supervisory Mechanism, with a single supervisor at the heart of the banking union; and (2) the Single Resolution Mechanism as a new integrated resolution framework and a resolution fund to address the failure of banking institutions. The paper then assesses the next steps for a fully fledged banking union, necessary in order for this new instrument to lay the foundations for a genuine Economic and Monetary Union, thereby fostering financial and economic stability in the euro area and in the EU as a whole.
Topic:
Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe