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You searched for: Content Type Policy Brief Remove constraint Content Type: Policy Brief Publishing Institution Peterson Institute for International Economics Remove constraint Publishing Institution: Peterson Institute for International Economics Political Geography Europe Remove constraint Political Geography: Europe Topic Financial Crisis Remove constraint Topic: Financial Crisis
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  • Author: C. Fred Bergsten, Jacob Funk Kirkegaard
  • Publication Date: 01-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Doom and gloom about the euro abounds. An increasing number of commentators and economists, including here at the Peterson Institute, have begun to question whether the common currency can survive.
  • Topic: Economics, International Trade and Finance, Political Economy, Regional Cooperation, Financial Crisis
  • Political Geography: Europe
  • Author: William R. Cline
  • Publication Date: 02-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Contagion from Greece, together with domestic political uncertainty in Italy, caused interest rates on Italian sovereign debt to spike in the second half of 2011. As shown in figure 1, the risk spread above German bunds for 10-year Italian government bonds rose from 200 basis points in early July 2011, to a range of 300 to 400 basis points after the July 21 Greek package with its new emphasis on private sector involvement. There was a second surge to the 400 to 500 basis point range in November through January, following the October 27 Greek package that insisted on a 50 percent reduction in private sector claims.
  • Topic: Debt, Economics, Financial Crisis
  • Political Geography: Europe, Germany, Italy
  • Author: C. Fred Bergsten, Jacob Funk Kirkegaard
  • Publication Date: 06-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Getting the diagnosis right is a prerequisite for understanding the euro area predicament and evaluating key decisions taken since early 2010. As we laid out in Bergsten and Kirkegaard (2012), while the euro area faces multiple overlapping and mutually reinforcing elements of fiscal (Greece), banking (Ireland/Spain), and competitiveness (Southern periphery) crises, it is first and foremost facing a crisis of institutional design. The common currency as designed in the Maastricht Treaty of 1992 is a half-built house without the critical components of banking and fiscal union necessary to sustain it through the type of crushing economic and financial down- turn witnessed since October 2008.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Anders Åslund
  • Publication Date: 06-2012
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: In the current financial crisis plaguing Europe, Latvia stands out for resolving its financial problems quickly and resolutely. After contracting 24 percent in 2008 and 2009, it grew at the rate of 5.5 percent in 2011. The speed and determination. with which the government carried out austerity measures in 2009 and restored confidence after suffering the worst output decline is a crucial lesson for the ailing South European countries—Greece, Italy, Portugal, and Spain. Many policy observers and economists have dismissed Latvia's crisis resolution as irrelevant to the situation in Southern Europe. The Latvian orange, they say, cannot be compared with the South European apples. I argue otherwise.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Financial Crisis
  • Political Geography: Europe, Greece, Latvia
  • Author: Anders Åslund
  • Publication Date: 06-2011
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: In the fall of 2008, Central and Eastern Europe became a flashpoint in the global financial crisis. The ten new eastern members of the European Union were in a state of severe overheating in all regards. Inflation surged everywhere and to double digits in Bulgaria, Estonia, Latvia, and Lithuania. Wages and real estate prices skyrocketed, rendering these countries ever less competitive, which further undermined their current account balance. Output plunged and unemployment soared.
  • Topic: Economics, Global Recession, Financial Crisis
  • Political Geography: Europe, Lithuania, Estonia, Bulgaria, Latvia
  • Author: Simon Johnson, Peter Boone
  • Publication Date: 07-2011
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Attempts to resolve the problems in Europe are failing, and the crisis is spreading from Greece, Ireland, and Portugal to larger nations. Europe's financial system relies on moral hazard, i.e., a “no defaults” policy, to attract the funding needed to roll over large amounts of short–term bank and sovereign debt. Now that politicians in creditor nations are calling for private sector burden sharing, investors are demanding higher interest rates to hold these debts. But higher rates may tip banks and nations toward bankruptcy. Europe's banks and financial system are highly integrated across countries. Rising expectations of default in some countries could lead to large-scale capital flight into “safe” countries. This shift will raise concerns regarding solvency and liquidity of many financial institutions. The payments system of the euro area is serving as an opaque bailout mechanism that is currently preventing the euro area from falling apart at this time. If the number of nations in trouble spreads beyond Greece, Ireland, and Portugal, this bailout system will be stressed because of the potential size of accumulated funding. The European Central Bank (ECB) could soon see a vocal debate between inflationist and hawkish (anti–inflation) members. Inflationists will call for large–scale interventions, including bond buybacks and emergency loans, while the hawks will attempt to close loopholes in the payments system that effectively permit each troubled nation to create money needed to finance capital flight and budget deficits. At this stage in the debate, we see little chance that Europe can avoid ending the “moral hazard” regime, in which case it needs to plan for widespread sovereign and bank debt restructurings.
  • Topic: Debt, Economics, Regional Cooperation, Financial Crisis
  • Political Geography: Europe, Greece, Ireland
  • Author: William R. Cline
  • Publication Date: 10-2011
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: On July 21, 2011, the heads of government of the euro area announced a new plan to address the Greek debt crisis. This policy brief presents a simulation exercise that examines whether the new arrangements are likely to provide a sustainable solution. The analysis focuses on four key measures: gross debt relative to GDP; net debt relative to GDP; net interest payments relative to GDP; and amortization of medium-and long-term debt coming due during the year in question, relative to GDP. The new Greek package shows prospective future progress on all four measures, and Greek debt looks much more sustainable after the package than before. Debt also appears considerably more manageable if the criterion is net debt or interest burden rather than gross debt ratio, although even for gross debt the ratio is down substantially by 2020. It also becomes clear that the major contribution of the private-sector involvement (PSI) part of the package is in the form of sharply cutting amortization due, although by avoiding large new borrowing at crisis-level interest rates it also alleviates the interest burden that would otherwise occur.
  • Topic: Debt, Economics, Regional Cooperation, Financial Crisis
  • Political Geography: Europe, Greece
  • Author: Philip K. Verleger
  • Publication Date: 12-2011
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: When a boat springs a leak far from shore, it is customary for all hands to man the pumps—be they friends or enemies, passengers or crew. Every individual's survival depends on the actions of his or her compatriots. So it is with the global economy today.
  • Topic: Debt, Markets, Oil, International Monetary Fund, Financial Crisis
  • Political Geography: Europe
  • Author: Nicholas R. Lardy
  • Publication Date: 03-2010
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: China's policy response to the global financial and economic crisis was early, large, and well-designed. Although Chinese financial institutions had little exposure to the toxic financial assets that brought down many large Western investment banks and other financial firms, China's leadership recognized that its dependence on exports meant that it was acutely vulnerable to a global recession. Thus they did not subscribe to the view sometimes described as “decoupling,” the idea that Asian countries could passively weather the financial storm that originated in the United States and other advanced industrial economies. They understood that absent a vigorous policy response China inevitably would suffer from the backwash of a sharp economic slowdown in its largest export markets—the United States and Europe.
  • Topic: Economics, Financial Crisis
  • Political Geography: United States, China, Europe, Asia
  • Author: Jacob Funk Kirkegaard
  • Publication Date: 06-2010
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Nothing is easier than pointing fingers at policymakers woring feverishly at 2 a.m. to contain a rapidly spreading financial crisis. Rarely has this been truer for the European Union than during the current crisis's amateurish policy management. Yet, what really matters is the final result, which is far more postive for Europe than the ugly sausage-making process.
  • Topic: Economics, International Trade and Finance, Financial Crisis
  • Political Geography: Europe