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9441. Financing SMEs in Europe: Stylised Facts, Policies, Challenges

Author:
Daniele Ciani, Paolo Finaldi Russo, and Valerio Vacca
Publication Date:
12-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
This paper describes the main features of European SMEs’ financial behaviour and the policies recently put in place to support their funding. European SMEs are structurally more leveraged and charged with higher interest rates than large firms. Moreover, the crisis has deeply affected their fund-raising capacity, as banks reduced credit supply while non-bank funding was unavailable to most SMEs. Against this background, EU has focussed its policies on long-term investment and on a more favourable environment for SMEs financing, including through the launch of the Capital Markets Union. At the national level, most governments have provided guarantees and enhanced the role of national development banks. Nevertheless, key issues are still outstanding, such as the funding of innovative firms and the improvement of transparency and of the legal and regulatory frameworks.
Topic:
Economics, International Trade and Finance, Markets, and European Union
Political Geography:
Europe
Publication Identifier:
978-88-98650-71-2
Publication Identifier Type:
DOI

9442. Italy and the Renegotiation of the UK's EU Membership

Author:
Riccardo Alcaro
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
British Prime Minister David Cameron has pledged to campaign for the UK to stay in the EU in the incoming in-or-out referendum on the UK’s EU membership, but only if London succeeds in recalibrating its relationship with the Union. As the EU’s fourth largest country, Italy will play a crucial role in the negotiation. The challenge for Rome is to balance its long-standing commitment to strengthening European integration with the interest in keeping a country the size and influence of the UK in the EU. Matteo Renzi’s government should be supportive of British proposals about competitiveness, pragmatic as far as sovereignty issues are concerned, constructive but cautious regarding economic governance, and understanding of British concerns but also firm about immigration.
Topic:
Markets, Regional Cooperation, Immigration, and European Union
Political Geography:
United Kingdom and Europe
Publication Identifier:
978-88-98650-70-5
Publication Identifier Type:
DOI

9443. Russia's Pivot to Asia: Myths and Realities

Author:
Daniele Fattibene
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Russia’s “pivot to Asia” has come to the fore in the wake of the crisis over Ukraine. Growing tensions with the West over the common neighbourhood, coupled with economic sanctions, have accelerated this trend, with China gaining in strength as both an economic and military partner to Moscow. The Kremlin’s propaganda has sought to convince the broader public that Russia’s strategies in Eastern Europe, Central Asia and the Arctic region are a complement to China’s new Silk Road Economic Belt. Nonetheless, behind the headlines huge potential problems jeopardise the emergence of a durable Sino-Russian consensus in Eurasia. Against this backdrop, the EU should opt for “strategic patience.” This would be a far more effective policy choice than finger pointing, which only deepens the mutual ideological clash between the EU and Russia.
Topic:
Diplomacy, Economics, International Trade and Finance, Bilateral Relations, and Sanctions
Political Geography:
Russia, China, and Asia
Publication Identifier:
978-88-98650-69-9
Publication Identifier Type:
DOI

9444. Authoritarian Stability through Perpetual Democratisation

Author:
Francesco Cavatorta
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
The survival of the Moroccan monarchy during the Arab revolts did not come as a surprise. Once the King reclaimed political leadership through the launch of a constitutional reform, the protest movement faded and whatever challenge to the pre-eminence of the monarchy in the political system might have existed ended quickly. A number of different and interlinked explanations have been advanced for the survival of authoritarianism in Morocco, but they generally rehash conventional wisdoms about Moroccan politics that may not be as valid as they were in the past. This paper looks beyond such traditional explanations, focusing on less obvious factors that contributed to the survival of the monarchy. A more sophisticated explanation for the survival of the regime can serve as a more insightful guide to what Morocco might look like in the future and what are the challenges and opportunities ahead.
Topic:
Democratization, Governance, Authoritarianism, Popular Revolt, and Reform
Political Geography:
North Africa
Publication Identifier:
978-88-98650-67-5
Publication Identifier Type:
DOI

9445. Migration and Refugee Governance in the Mediterranean: Europe and International Organisations at a Crossroads

Author:
Sarah Wolff
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
The death of Aylan, a 3-year-old boy on a Turkish beach, prompted European leaders and public opinions to acknowledge that Europe is the deadliest migration destination in the world. In spite of this disturbing truth, there is little agreement on an EU solution to the Syrian refugee crisis. In September 2015, the EU Interior Ministers struggled to agree over the relocation of 120,000 refugees through a common compulsory mechanism, as Eastern European countries oppose the idea of “sharing the burden.” Progress regarding other solutions such as a European rescue at-sea-mission, the delivery of humanitarian visas or the opening of legal means of migration have also met strong member state resistance. If Europe is not up to the task, can international organisations (IOs), often critical of European states for their inaction, impulse change? What influence do IOs have on EU and Mediterranean migration and refugee policies? This paper investigates how IOs have been trying to frame an alternative debate and the challenges they meet in promoting transregional governance.
Topic:
Humanitarian Aid, Migration, War, Immigration, and Border Control
Political Geography:
Europe and Middle East
Publication Identifier:
978-88-98650-66-8
Publication Identifier Type:
DOI

9446. Social, Economic and Political Dynamics in Tunisia and the Related Short- to Medium-Term Scenarios

Author:
Maryam Ben Salem
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Tunisia is the only Arab Spring country which has succeeded so far in its democratic transition. Now that all the democratic institutions have been put in place, and after the legislative and presidential elections of 2014, the chances of democratic consolidation remain to be seen. Yet the regime faces serious challenges that cast doubt on its survival capacity. The political dynamics at play after the 2014 elections, which allowed Nidaa Tounes to come to power, cannot be understood without taking into account the conditions surrounding the political transition itself. The National Dialogue, hosted by the Quartet who were recently awarded the Nobel Peace Prize, is key to understanding the ongoing process of democracy consolidation. Taking into account both contingent and structural factors, this paper analyses how the current context is likely to shape the choices of the presidency of the Republic and of the Essid government, as well as the implications in terms of their legitimacy.
Topic:
Democratization, Islam, Regime Change, and Popular Revolt
Political Geography:
North Africa
Publication Identifier:
978-88-98650-65-1
Publication Identifier Type:
DOI

9447. Is Europe to Benefit from China's Belt and Road Initiative?

Author:
Nicola Casarini
Publication Date:
10-2015
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
With the One Belt One Road (OBOR), arguably Beijing’s major diplomatic outreach in decades, a process towards greater Sino-European connectivity has been put in place. The implementation of the OBOR in Europe has focused so far on financing infrastructure projects, in particular railways in Southeast Europe and ports in the Mediterranean Sea. This has been complemented by growing monetary linkages between the People’s Bank of China and European central banks through the establishment of currency swap agreements and yuan bank clearing – so-called “offshore renminbi hubs” – with the aim of lowering transaction costs of Chinese investment and bolstering the use of the Chinese currency. While there are undoubtedly great economic opportunities, China’s OBOR initiative also presents the EU with a major political challenge. There is the risk, in fact, that a scramble for Chinese money could further divide EU member states and make it difficult for Brussels to fashion a common position vis-à-vis Beijing. Furthermore, China’s economic penetration into Europe may lead – if not properly managed – to a populist backlash as well as a strain in relations with Washington. All these elements should be taken into consideration by EU policymakers, as China’s OBOR makes inroads into the Old Continent.
Topic:
Development, International Trade and Finance, Bilateral Relations, and Infrastructure
Political Geography:
China and Europe
Publication Identifier:
978-88-98650-64-4
Publication Identifier Type:
DOI

9448. Recent Declines in Labor's Share in US Income: A Preliminary Neoclassical Account

Author:
Robert Z. Lawrence
Publication Date:
06-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Over the past decade, the US economy has been plagued by sluggish wage growth and rising income inequality. The debate over inequality in the 1980s and 1990s focused on the growing disparity between the earnings of skilled and unskilled workers and the earnings of the super-rich. Growing inequality between capital and labor income has now been added to these concerns. Remarkably, the growth in real GDP per worker over the decade of the 2000s, which averaged 1.7 percent annually, was actually more rapid than in the 1970s, 1980s, or 1990s, yet in the 2000s workers saw almost no increase in their take-home pay. Consistent with this gap between labor productivity and wage growth was a pronounced decline in the share of US national income earned by workers. As labor's share has declined, the share of capital has risen and has been especially concentrated in corporate profits. As profits are far less equally distributed than wages, this increase has contributed to rising income inequality. There are several plausible reasons for this development—globalization, automation, weak bargaining power of labor, political capture, higher markups—but the natural starting point for explaining factor income shares is the neoclassical theory of the functional distribution of income enumerated by John Hicks and Joan Robinson in the 1930s. In this framework there are two possible explanations for labor's recent declining share. The first is that capital and labor are gross substitutes, and the second is that capital and labor are gross complements. Several papers have explained the recent decline in labor's share in income by claiming that capital has been substituted for labor. Lawrence puts forward the alternative "gross complements" explanation for the declining US labor share. He shows that despite a rise in measured capital-labor ratios, labor-augmenting technical change in the United States has been sufficiently rapid that effective capital-labor ratios have actually fallen in the sectors and industries that account for the largest portion of the declining labor share in income since 1980. In combination with estimates that corroborate the consensus in the literature that the elasticity of substitution is less than 1, these declines in the effective capital-labor ratio can account for much of the recent fall in labor's share in US income at both the aggregate and industry level. Paradoxically, these results also suggest that increased capital formation, ideally achieved through a progressive consumption tax, would raise labor's share in income.
Topic:
Economics, Globalization, Markets, and Labor Issues
Political Geography:
United States

9449. An Old Boys' Club No More: Pluralism in Participation and Performance at the Olympic Games

Author:
Marcus Noland and Kevin Stahler
Publication Date:
05-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Decades ago, the Summer Olympic Games were an old boys' club; by many measures the Winter Games still are. Now, however, this old boys' club must compete with talented athletes from almost every country on earth, large and small, rich and poor, many of whom have found their comparative sporting niches. Looking forward, the image of the incumbent champion—rich, European, and male—will become ever more antiquated. This paper models the historical determinants of success at the Olympic Games in the context of their growing pluralism, evolving from their aristocratic and largely European male roots to the more gender-inclusive and geographically diverse showcase of athletic talent that is seen today. A wide set of socioeconomic variables is correlated with winning medals, particularly with respect to the Summer Games and women's events. Host advantage is particularly acute in judged contests such as gymnastics. However, there is evidence that the influence of correlates such as country size, per capita income, and membership in the communist bloc is declining over time as competition becomes increasingly diverse. These effects are less evident in the Winter Games, events that require significant capital investments, and judged contests.
Topic:
Diplomacy, Economics, Gender Issues, and Sports
Political Geography:
Global Focus

9450. Testing the Modigliani-Miller Theorem of Capital Structure Irrelevance for Banks

Author:
William R. Cline
Publication Date:
04-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Some advocates of far higher capital requirements for banks invoke the Modigliani-Miller theorem as grounds for judging that associated costs would be minimal. The M&M theorem holds that the average cost of capital to the firm does not depend on its capital structure (ratio of equity finance to debt finance), because any reduction in capital cost from switching to higher leverage using lower-cost debt is exactly offset by an induced increase in the unit cost of higher-cost equity capital as a consequence of the associated rise in risk. Statistical tests for large US banks in 2002–13 find that less than half of this M&M offset attains in practice. Higher capital requirements would thus impose increases in lending costs, with associated output costs from lower capital formation. These costs to the economy would need to be compared with benefits from lower risk of banking crises to arrive at optimal levels of capital requirements.
Topic:
Economics, International Trade and Finance, Markets, Politics, and Budget
Political Geography:
Global Focus