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2. 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
3. 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
4. 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
5. 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