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481. The Transformational Impact of EMU and the Global Financial Crisis

Author:
Francesco Paolo Mongelli
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The headwinds facing the euro area are many and substantial: there is no pretence of denial. While most attention is correctly devoted to the size of rescue packages for some countries and the terms of crisis management and resolution mechanisms, we argue that these challenges must also be met from within the euro area. We are aided by a simple framework illustrating how the benefits the euro can generate depend on the degree of openness, flexibility and income correlation among euro area countries. Sharing the euro has steadily transformed euro area economies that are now deeply interconnected. This is generating largely benign effects that represent the intrinsic value of the euro area: it is a shared asset. Yet, such integration has provided the ground for the transmission of the sovereign crisis: through financial exposure, trade linkages and cross-country asset ownership.
Topic:
Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
Europe

482. The European Council Summit and the Political Economics of the EMU Crisis

Author:
Christian Fahrholz and Cezary Wójcik
Publication Date:
11-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Roger Ailes, a former advisor to Ronald Reagan, recalls in his book an intriguing practice of the ancient Romans: when they finished building a bridge or an arch, they enforced accountability by placing the engineer in charge beneath the construction when the scaffolding was removed. If the edifice did not hold, he was the first to know. We do not follow such drastic practices these days in Europe, but with some European economies shaking and the Greek sovereign debt crisis still not over, the architecture of the euro area has been certainly come under severe stress. Unfortunately, the 28-29 October 2010 European Council Summit has not made this architecture much safer.
Topic:
Economics, Regional Cooperation, Monetary Policy, and Financial Crisis
Political Geography:
Europe

483. Five Surprises of the Great Recession

Author:
Uri Dadush and Vera Eidelman
Publication Date:
11-2010
Content Type:
Policy Brief
Institution:
Carnegie Endowment for International Peace
Abstract:
The Great Recession included five major surprises: (1) the severity of the global trade and output collapse, (2) the United States suffered a milder than expected recession, (3) Europe saw the onset of a severe sovereign debt crisis, (4) China grew at an extraordinary rate even though it's greatly dependent on exports, and (5) Latin America showed remarkable resilience.
Topic:
Economics, Globalization, Global Recession, and Financial Crisis
Political Geography:
United States, China, Europe, and Latin America

484. Rights Interests: Trade Disputes

Author:
Howard Guille
Publication Date:
06-2010
Content Type:
Journal Article
Journal:
Human Rights and Human Welfare - Review Essays
Institution:
Josef Korbel Graduate School of International Studies, University of Denver
Abstract:
The global financial crisis led to the steepest drop in global activity and trade since World War II (International Monetary Fund 2009c). Recession means unemployment of people and resources. It is a bad time to be a worker and a despondent one for worker representatives. The crisis began, publicly at least, with financial panics and ensuing bank failures in the United States in September 2008. The financial bubble of securities and derivatives burst because of “the obesity of banks and shadow banks” (Johnson 2009). However, politicians and governments had given bankers and financiers a license for excess by deregulating finance and trusting open markets. In essence, elected politicians gave small government to bankers, who in turn gave neo-liberal globalization to us.
Topic:
Globalization, Government, War, and Financial Crisis
Political Geography:
United States

485. Sovereign Bankruptcy in the European Union in the Comparative Perspective

Author:
Leszek Balcerowicz
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper distinguishes four alternative sovereign debt resolution mechanisms: pure market solutions, modified market solutions, crisis lending by the IMF and other institutions, and the proposed Sovereign Debt Restructuring Mechanism (SDRM). It is hard to find—at the general level of analysis—the unique advantages of SDRM. The assessment of the European Stabilization Mechanism will ultimately depend on its operation, especially whether it will be a tool of subsidizing countries in debt distress or an instrument of fiscal crisis lending. The present fiscal problems in the eurozone are due to the erosion of fiscal discipline and not to the lack of strong compensatory transfers within the eurozone. The right model to look at the conditions for the stability of the eurozone is not a single state but the gold standard–type system, a system of sovereign states with a (de facto) single currency. Based on this analogy and considering modern developments, three types of measures are needed to safeguard the stability of the eurozone: (1) measures that would reduce the procyclicality of the macroeconomic policies and of the economy; (2) reforms that would help the eurozone economies grow out of increased public debt; and (3) steps to increase the flexibility of the economy so that it can deal with the future shocks in a better way.
Topic:
Debt, Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

486. Why Didn't the Global Economic and Financial Crisis Have More of an Impact on International Migration?

Author:
Khalid Koser
Publication Date:
09-2010
Content Type:
Policy Brief
Institution:
The Geneva Centre for Security Policy
Abstract:
Economic and financial crises have always impacted on international migration patterns, processes, and policies. The Great Depression (1929- 33) resulted in massive repatriations of Latin Americans from the United States and the introduction of highly restrictive immigration policies in a number of industrialized countries, including France and Canada. The Oil Crisis (1973) resulted in severe restrictions on labour migration, a concomitant growth in asylum applications and irregular migration in Europe, and the emergence of new flows of labour migration to emerging industrial centres in Asia and Latin America. As a result of the Asian financial crisis (1997-99) several South-East Asian countries introduced policies of national preference and sought to expel migrant workers. The Russian financial crisis (1998) accelerated rates of emigration from Russia, in particular of Russian Jews and the highly-skilled. The gravity of the Latin American financial crisis (1998- 2002) also resulted in a significant exodus, in particular from Argentina.
Topic:
Economics, Migration, Global Recession, and Financial Crisis
Political Geography:
Russia, Asia, and Latin America

487. Russia's Strategic Choice

Author:
Graeme P. Herd
Publication Date:
05-2010
Content Type:
Policy Brief
Institution:
The Geneva Centre for Security Policy
Abstract:
In the wake of the global financial crisis, a debate over necessary policy responses morphed into something much more profound and fundamental – the sustainability of Russia's current governance model and its preferred longer-term modernization paradigm. On 10 September 2009 President Medvedev published a remarkably frank article entitled 'Russia, Forward!' This article noted that Russia's governance model appeared to be failing, proving vulnerable in the face of the global financial crisis. President Medvedev himself criticized Russia's 'humiliating' dependence on raw materials, as well as its 'inefficient economy, a semi-Soviet social sphere, an immature democracy, negative demographic trends, unstable Caucasus.' In his 12 November 2009 Message to the Federal Assembly, Medvedev elaborated further on this theme: Russia could either modernize or deteriorate; modernization would provide a touchstone for 'how we can overcome our chronic backwardness, dependence on raw materials exports, and corruption'. On 3 February 2010, the Institute for Contemporary Development (INSOR) published a report that received widespread coverage entitled 21st Century Russia: The Image of Tomorrow We Want. As President Medvedev had created INSOR in 2008 to give him independent advice on economic and foreign policy and sat as a trustee on its board, this report received widespread publicity. Such publicity was magnified as the report touched just about every exposed nerve by advocating that Russia should join NATO, end censorship, abolish the state security service, and adopt a Western-style democracy, entailing the separation of the courts from the state, of the legislative branch from the executive, horizontal modernization (characterized as the debureaucratization of the vertical top-down corrupt, over-regulated economic process)3. Without change, Russia faced a strategic cul de sac that leads to slow and steady strategic marginalization: 'In a few years, when it turns out that Russia has nothing to boast about except export supplies of raw materials at prices that are dictated to us, we will be exporting people. And, not only the cleverest like now, but any workers, who are in demand in Europe, as is happening today in Latvia, for example. I frankly do not know what Russia should do in this situation. This problem will be one of the main ones for the president who is elected in 2012
Topic:
Democratization, Global Recession, and Financial Crisis
Political Geography:
Russia, Europe, and Latvia

488. How Did a Domestic Housing Slump Turn into a Global Financial Crisis?

Author:
Steven B. Kamin and Laurie Pounder DeMarco
Publication Date:
01-2010
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The global financial crisis clearly started with problems in the U.S. subprime sector and spread across the world from there. But was the direct exposure of foreigners to the U.S. financial system a key driver of the crisis, or did other factors account for its rapid contagion across the world? To answer this question, we assessed whether countries that held large amounts of U.S. mortgage-backed securities (MBS) and were highly dependent on dollar funding experienced a greater degree of financial distress during the crisis. We found little evidence of such “direct contagion” from the United States to abroad. Although CDS spreads generally rose higher and bank stocks generally fell lower in countries with more exposure to U.S. MBS and greater dollar funding needs, these correlations were not robust, and they fail to explain the lion’s share of the deterioration in asset prices that took place during the crisis. Accordingly, channels of “indirect contagion” may have played a more important role in the global spread of the crisis: a generalized run on global financial institutions, given the opacity of their balance sheets; excessive dependence on short-term funding; vicious cycles of mark-to-market losses driving fire sales of MBS; the realization that financial firms around the world were pursuing similar (flawed) business models; and global swings in risk aversion. The U.S. subprime crisis, rather than being a fundamental driver of the global crisis, may have been merely a trigger for a global bank run and for disillusionment with a risky business model that already had spread around the world.
Topic:
Financial Crisis, Global Financial Crisis, and Housing
Political Geography:
United States and North America

489. The Young Generation Prepares to Support the United Nations

Author:
Hans Blix and William J. vanden Heuvel
Publication Date:
04-2009
Content Type:
Journal Article
Institution:
Council of American Ambassadors
Abstract:
Today, people throughout the world are experiencing the most severe set of global crises since the United Nations was formed over 60 years ago. They include financial, economic and environmental crises as well as crises of scarcity—of food, fuel and water.
Topic:
Climate Change, United Nations, and Financial Crisis
Political Geography:
United States

490. The G-2 Mirage

Author:
Elizabeth C. Economy and Adam Segal
Publication Date:
05-2009
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
A heightened bilateral relationship may not be possible for China and the United States, as the two countries have mismatched interests and values. Washington should embrace a more flexible and multilateral approach.
Topic:
Foreign Policy and Financial Crisis
Political Geography:
United States, China, Washington, Israel, and Palestine