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2. Mispricing of Sovereign Risk and Multiple Equilibria in the Eurozone
- Author:
- Paul De Grauwe and Yuemei Ji
- Publication Date:
- 01-2012
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies
- Abstract:
- This paper finds evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios, and was the result of negative market sentiments that became very strong since the end of 2010.
- Topic:
- Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe, Greece, Spain, Portugal, and Ireland
3. Liquidity in times of crisis: Even the ESM needs it
- Author:
- Daniel Gros and Thomas Mayer
- Publication Date:
- 03-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- This paper argues that the new permanent European rescue fund, the European Stability Mechanism (ESM), should be provided with a liquidity backstop by having it registered as a bank – and be treated as such by the European Central Bank. If the crisis were to become acute again, the ESM would stand ready to intervene in secondary markets, potentially with almost unlimited amounts of funding. Access to central bank financing will be crucial in a future crisis, because in such a crisis risk aversion is likely to be extreme, and even the ESM might not be able to raise at very short notice the huge sums that might be required to prevent a breakdown of the financial system. Hundreds of billions of euro might be needed just to top up the programmes for Greece, Ireland and Portugal – and Spain and Italy may require more than a thousand billion euro. Sums of this order of magnitude cannot be raised quickly by a new institution. Simply increasing the headline size of the ESM might thus be of little use.
- Topic:
- Debt, Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- Greece, Spain, Italy, Portugal, and Ireland
4. In Search of Symmetry in the Eurozone
- Author:
- Paul De Grauwe
- Publication Date:
- 05-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- One of the major problems of the eurozone is the divergence of the competitive positions that have built up since the early 2000s. This divergence has led to major imbalances in the eurozone where the countries that have seen their competitive positions deteriorate (mainly the so - called ' PIIGS ' – Portugal, Ireland, Italy, Greece and Spain ) have accumulated large current account deficits and thus external indebtedness, matched by current account surpluses of the countries that have improved their competitive positions (mainly Germany).
- Topic:
- Economics, Markets, Regional Cooperation, Global Recession, and Financial Crisis
- Political Geography:
- Europe, Greece, Germany, Spain, Italy, Portugal, and Ireland
5. Inward FDI in Portugal and its policy context, 2011
- Author:
- Vitor Corado Simões and Rui Manuel Cartaxo
- Publication Date:
- 06-2011
- Content Type:
- Working Paper
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- Portugal's performance in attracting inward foreign direct investment (IFDI) during the economic and financial crisis in 2009 was poor, below the low figures that it had already recorded in the previous couple of years, although Portugal did not record negative FDI inflows like competing countries such as Ireland (in 2008) and Hungary (in 2009). The country's difficulties in attracting IFDI are, however, structural. The “golden” years of the early 1990s, when Portugal emerged as an attractive and fashionable location, are past. The country's IFDI performance throughout the first decade of the 21st century was, in general, weak. In 2009, Spain, France and Brazil were the main sources of I FDI in Portugal. In spite of the Government's commitment to attracting IFDI, policy design and implementation have fallen short in the increasingly fierce competition for international investment.
- Topic:
- Economics and Financial Crisis
- Political Geography:
- Hungary, Portugal, and Ireland
6. Can Europe's Divided House Stand?
- Author:
- Hugo Nixon
- Publication Date:
- 11-2011
- Content Type:
- Journal Article
- Journal:
- Foreign Affairs
- Institution:
- Council on Foreign Relations
- Abstract:
- Conventional wisdom has it that the eurozone cannot have a monetary union without also having a fiscal union. Euro-enthusiasts see the single currency as the first steppingstone toward a broader economic union, which is their dream. Euroskeptics do, too, but they see that endgame as hell -- and would prefer the single currency to be dismantled. The euro crisis has, for many observers, validated these notions. Both camps argue that the eurozone countries' lopsided efforts to construct a monetary union without a fiscal counterpart explain why the union has become such a mess. Many of the enthusiasts say that the way forward is for the 17 eurozone countries to issue euro bonds, which they would all guarantee (one of several variations on the fiscal-union theme). Even the German government, which is reluctant to bail out economies weaker than its own, thinks that some sort of pooling of budgets may be needed once the current debt problems have been solved. A fiscal union would not come anytime soon, and certainly not soon enough to solve the current crisis. It would require a new treaty, and that would require unanimous approval. It is difficult to imagine how such an agreement could be reached quickly given the fierce opposition from politicians and the public in the eurozone's relatively healthy economies (led by Finland, Germany, and the Netherlands) to repeated bailouts of their weaker brethren (Greece, Ireland, Italy, Portugal, and Spain). Moreover, once the crisis is solved, the enthusiasm for a fiscal union may wane. Even if Germany is still prepared to pool some budgetary functions, it will insist on imposing strict discipline on what other countries can spend and borrow. The weaker countries, meanwhile, may not wish to submit to a Teutonic straitjacket once the immediate fear of going bust has passed.
- Topic:
- Economics and Government
- Political Geography:
- Europe, Finland, Greece, Germany, Spain, Italy, Netherlands, Portugal, and Ireland
7. Adjustment Difficulties in the GIPSY Club
- Author:
- Daniel Gros
- Publication Date:
- 03-2010
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies
- Abstract:
- This paper describes the key economic variables and mechanisms that will determine the adjustment process in those euro area countries now under financial market pressure. (Greece, Ireland, Portugal, Spain and Italy = GIPSY) The key finding is that the adjustment will be particularly difficult for Greece (and Portugal) because these are two relatively closed economies with low savings rates. Both of these countries are facing a solvency problem because they combine high debt levels with low growth and high interest rates. Fiscal and external adjustment is thus required for sustainability, not just to satisfy the Stability Pact. By contrast, Ireland and Spain face more of a liquidity than a solvency problem. Italy seems to have a much better starting position on all accounts. Fiscal adjustment alone will not be sufficient to ensure sustainability. Without significant reductions in labour costs, these economies will face years of stagnation at best. Especially in the case of Greece, it is imperative that the cuts in public sector wages are transmitted to the entire economy in order to restore competitiveness, and thus ensure that export growth can become a vital safety valve. Without an adjustment of wages in the private sector, the adjustment will become so difficult that failure cannot be excluded.
- Topic:
- Debt, Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe, Greece, Spain, Italy, Portugal, and Ireland
8. Broken Promises, Postponed Commitments
- Author:
- Rui Graça Feijó
- Publication Date:
- 05-2010
- Content Type:
- Working Paper
- Institution:
- Institute of European Studies
- Abstract:
- The First Republic was a short period in Portuguese History which, nevertheless, left deep marks on the social and political tissue of the country. It was marred by instability. The political elite of the time recanted on their defense of "universal suffrage" and thus deprived the regime of a much needed popular base of support. The Second Republic that emerged from the Carnation Revolution instituted a democratic regime based on universal suffrage, and enshrined in its Constitution provisions for popular participation in a much wider scale than it has effectively offered up to the present. This manifests itself in the absence of an effective Regional level of power as well as in poorly endowed municipalities, and is reflected in the lowering of popular confidence in Portuguese Democracy shown in consecutive surveys. The capacity of the Second Republic to develop the principles of democratic participation granted in the Constitution is a test to the present decade, failing what a Third Republic may be looming in the horizon.
- Topic:
- Economics, Political Economy, and Politics
- Political Geography:
- Europe, Dominican Republic, and Portugal
9. EU-India strategic partnership: Taking the stock
- Author:
- Alok Rashmi Mukhopadhyay
- Publication Date:
- 08-2010
- Content Type:
- Working Paper
- Institution:
- Institute of Foreign Policy Studies, University of Calcutta
- Abstract:
- The prevalent perception of the European Union (EU) in India is predominantly constructed by the British and American media. At the time of a global economic downturn, its ripple effects on the continent especially on the 'PIIGS' (Portugal, Ireland, Italy, Greece and Spain) and an imminent crack in the Eurozone have been the debate of the day. In a recent article in The National Interest, James Joyner, has however examined this genre of 'Europe's obituary'. Making a comparison with EU's transatlantic sibling, he identifies three errors in this type of analyses, 'treating the EU as if it were a nation-state, regarding anything less than utopia as a failure, and projecting short-term trends long into the future'. However Joyner is also right when he describes the EU as 'a confusing array of overlapping treaty commitments'.
- Topic:
- Foreign Policy, Diplomacy, Economics, International Trade and Finance, and Bilateral Relations
- Political Geography:
- United Kingdom, America, Europe, India, Greece, Spain, Italy, Portugal, and Ireland
10. Economic Survey of Portugal, 2006
- Publication Date:
- 03-2006
- Content Type:
- Policy Brief
- Institution:
- The Organisation for Economic Co-operation and Development
- Abstract:
- Portugal's economic performance has deteriorated markedly since 2000, with the slowdown turning out to be more severe and prolonged than in most other OECD countries. This lack of resilience reveals structural weaknesses. Meanwhile, with low growth and weak control of public expenditure, the fiscal deficit has remained at unsustainably high levels, reaching close to 6% of GDP in 2005. Despite the existence of a large output gap, the high fiscal deficit leaves no room to stimulate demand. The government has embarked on a strategy that aims at consolidating public finances and enhancing growth and it is important to strengthen these efforts. Without more wage restraint and higher productivity growth, there is a clear risk that Portugal's competitiveness continues to deteriorate and the income gap vis-à-vis the OECD average widens further.
- Topic:
- Development, Economics, International Organization, and International Trade and Finance
- Political Geography:
- Portugal