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1. The ABCs of Sovereign Debt Relief

Author:
Rakan Aboneaaj, Jocilyn Estes, and Clemence Landers
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
We are living in a time when many countries face heightened debt vulnerabilities. Already high before the pandemic, debt levels reached a 50-year peak following the growth in government spending to combat COVID-19. Debt is not inherently bad; borrowing can allow countries to finance vital government investment. But unsustainable levels of debt can have devastating consequences for a country’s population, crowding out government spending on even basic necessities including food, medicine, and fuel imports. In Sri Lanka, for example, 71 percent of government revenue was spent on debt service before the country defaulted. Even where the tradeoff is not so dire, unsustainable debt service can limit productive investments in infrastructure, education, healthcare, and other sectors, hampering the economic growth necessary to reduce a country’s debt burden. After a decade-long period of low borrowing costs, a confluence of rising interest rates, inflation, and commodity shocks have raised the likelihood of overlapping debt crises in developing countries. The International Monetary Fund (IMF) now estimates that 30 percent of emerging market countries and 60 percent of low-income countries could face trouble paying down their debts or will soon. There is no international bankruptcy mechanism for countries that default on their external obligations. Instead, countries have historically depended on a patchwork of precedents, contracts, and conventions to bring creditors to the table for debt relief negotiations. The United States has a legacy as the lead architect of large global debt relief initiatives, from the Brady Bond plan for Latin America to the Heavily Indebted Poor Countries (HIPC) Initiative that kickstarted debt relief for poor countries in the 1990s. However, the global creditor landscape has changed significantly over the past decade. Low-income sovereigns’ largest creditors today—China and private bondholders—operate under much different principles than the leading bilateral creditors of the past, making the traditional norms and structures less effective for present debt challenges. The objective of the international financial architecture—historically overseen by the IMF and its shareholders— will be to corral these new creditors into a cooperative arrangement to deliver on debt relief.
Topic:
Debt, Development, Governance, Credit, and Sovereign Debt
Political Geography:
Global Focus

2. Xi Jinping’s Evergrande Dilemma

Author:
John Lee
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Hudson Institute
Abstract:
Evergrande is one of the top-two real estate developers in a still highly fragmented Chinese sector. Its main strategy is to achieve ever-increasing scale (rather than profitability) in order to move ahead of and crowd out commercial competitors. It has also amassed the largest land reserves of all Chinese developers, which were financed through massive borrowings. By 2018, Evergrande held 822 pieces of undeveloped land in 228 cities, with a planned gross floor area of 3.28 billion square feet of new homes—the equivalent of 10 percent of Germany’s entire housing stock. It paid $75 billion just for this undeveloped land. Although Evergrande’s market share is only around 4 percent, its borrowings stand out. Its current balance sheet liabilities amount to an estimated 2 percent of China’s gross domestic product (GDP), while its off-balance-sheet liabilities could be another 1 percent of China’s GDP. This makes Evergrande the most indebted property developer in the world. Burdened by this debt, struggling to meet its debt interest and repayment obligations, and viable only if property asset values and sales continue to increase, Evergrande faces possible financial collapse—an event bound to have flow-on effects for the Chinese economy. However, the unusually high global interest in Evergrande has arisen because its woes are increasingly seen as symptomatic of those faced by the broader Chinese economy, which is struggling with enormous levels of indebtedness and overreliance on the real estate sector. Debt held by nonfinancial institutions in China increased from about 115 percent of GDP in 2010 to around 160 percent of GDP currently. This is the most rapid and largest increase in a 10-year period for any major economy and makes the level of debt held by Chinese nonfinancial institutions one of the highest in the world. The real estate sector accounts for around 15 percent of GDP, while property services account for another 14 percent—the highest in any developing economy. The share of the real estate sector as a proportion of GDP was only about 4 percent in 1997 and 9 percent in 2008. Since 2008, up to a third of all domestic fixed investment has gone into real estate, and up to half of total national debt is linked to the real estate sector.
Topic:
International Relations, Foreign Policy, Debt, Economics, Markets, and Business
Political Geography:
China and Asia

3. Will corporate debt choke the post-COVID-19 recovery?

Author:
Frederico Mollet
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
Europe’s economic recovery is threatened by the corporate debt overhang created in the wake of the pandemic. Even as vaccines roll out, Europe faces the prospect of a prolonged retrenchment as indebted firms pull back investments and repair their balance sheets. Insolvency procedures have gradually improved over the past decade in Europe, but decisive and swift public action is needed to take advantage of these reforms. Given the scale of the crisis, Frederico Mollet argues in favour of a comprehensive European restructuring strategy. EU member states and the Commission must step in to provide the resources, guidance, and coordination necessary to push through this monumental restructuring. This strategy would furthermore benefit from common European guidelines and criteria for creditors and debtors. It will not only increase the likelihood of success but also protect the level playing field. Lack of a clear strategy and coordinated approach will result in a drawn-out restructuring process that pushes too many viable firms into liquidation and permanently hampers the economic recovery. Centring on private restructurings would also minimise the use of public funds at a time when governments have to deal with multiple competing fiscal pressures.
Topic:
Debt, Political Economy, and Economic Recovery
Political Geography:
Europe

4. Germany’s Debt Brake and Europe’s Fiscal Stance after COVID-19

Author:
Shahin Vallée, Jérémie Cohen-Setton, and Dominik Buhl
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
Germany’s plan to return to its debt brake creates a serious risk of premature fiscal tightening. Given that the fiscal divide between Europe and the US will widen sharply in 2021, a hasty return to European and German fiscal rules would stifle recovery and undermine efforts to rebuild transatlantic ties in trade and macroeconomic cooperation. This paper proposes several practical options to attenuate the fiscal drag associated with a return to the debt brake and calls for a broad debate on its reform.
Topic:
Debt, European Union, Finance, Transatlantic Relations, and COVID-19
Political Geography:
Europe, Germany, and United States of America

5. Containing the Pandemic Public Debt

Author:
Committee for Economic Development of the Conference Board
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
The Conference Board
Abstract:
In early 2020, the COVID-19 pandemic presented the entire world with its worst public health threat in at least a century. The precise seriousness of the pandemic, of course, could not be known at the outset; and in fact, the pandemic is not yet vanquished as this statement is written. The extent of the damage the virus and its mutations will ultimately cause is not yet fully known. But the near-miraculous efforts to develop vaccines, contain the infection, and treat the infected provide much-needed hope that a return to “normal” is not out of reach. The pandemic had economic consequences as well. And like the public health impact, the shock to the economy was large but impossible to assess accurately at its outset. And like the damage to public health, the economic fallout is still impossible to assess today with complete accuracy. For the first time in 100 years, stay-at-home orders to protect the public health spurred an economic downturn and dramatic job losses—leaving a wide swath of businesses in hospitality, travel, leisure, dining, and retail nearly shut down, with entire occupations, such as personal service workers, facing extended layoffs or even permanent job loss. The fates of these businesses and workers are unpredictable, depending on the uncertain course of the pandemic itself. Another similarity between the public health and the economic threats is that prudent public policy required strong and immediate responses. With the ultimate extent of the damage unknown but potentially catastrophic, executive and congressional policymakers deemed it essential that government react swiftly and robustly. Policymakers and commentators repeated often that the nation should err on the side of action—that it would be better to do too much rather than too little.
Topic:
Debt, Economy, Public Health, Pandemic, and COVID-19
Political Geography:
North America and United States of America

6. Improving China's participation in resolving developing-country debt problems

Author:
Martin Chorzempa and Adnan Mazarei
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The COVID-19 shock has exacerbated the struggles of many emerging-market and developing economies (EMDEs) to repay their external debt. One of the most urgent challenges relates to debt owed to China, whose lending spree under its Belt and Road Initiative and other programs has played an outsized role in what amounts to a crisis for many countries. The scope of the problem is striking. China is owed more than $100 billion, or 57 percent of all debt owed to official creditors by the countries that need help the most. China is not a member of the Paris Club of official creditors, which coordinates, within a multilateral framework, the resolution of general sovereign illiquidity or unsustainable external debt of EMDEs. There is an urgent need to put in place more effective, long-term solutions to help durably lower the risks of prolonged debt difficulties in EMDEs. These problems could be partly addressed by creating creditor committees to coordinate debt relief with China. The Group of Twenty (G20) has taken some steps to include creditor committees in the context of the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI), but only for low-income countries that qualify for the DSSI and only for official creditors. To better address debt distress, it needs to extend the approach, especially to middle-income debtor countries.
Topic:
Debt, Development, Emerging Markets, and G20
Political Geography:
China and Asia

7. Accounting for climate policies in Europe’s sovereign debt market

Author:
Marta Dominguez-Jimenez and Alexander Lehmann
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
International debt investors increasingly demand assets that are aligned with environmental, social and governance objectives. Sovereign debt is being belatedly swept up in this change. This huge asset class represents a uniquely long-term claim and funds a wide range of public expenditure, both brown and green. Public capital expenditures will be a central part of the roughly €3 trillion investment budget needed to pay for the European Green Deal. European Union countries have so far met investor appetite for climate-aligned assets through sovereign green bonds, the issuance of which has rapidly grown since 2017. The EU itself will also issue green bonds in large volumes. However, because of some inherent flaws in such instruments and as their still-weak frameworks, these bonds are unlikely to meet the environmental criteria demanded by investors, and will complicate established principles in sovereign debt management. Much more comprehensive information is needed on the climate related aspects of the public budgets of EU countries. Greater transparency in this respect would support stability and improve the functioning of capital markets, given that sovereign debt plays a pivotal role in all investor portfolios and also in regulatory and monetary policy. Adoption by sovereign issuers of green budgeting principles, based on a common taxonomy of sustainable activities, would enhance transparency. It could also be driven by investors who, under new EU rules, must disclose the climate-related aspects of all financial instruments offered in the capital market.
Topic:
Climate Change, Debt, Markets, Sovereignty, European Union, Finance, and Sustainability
Political Geography:
Europe

8. Hezbollah Has a New Strategy to Survive Lebanon’s Financial Crisis

Author:
Hanin Ghaddar
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Unless Washington and its allies respond to the protestors’ legitimate demands for reform, the group will survive through measures such as expanding its smuggling activity, promoting its financial institutions, and selectively scapegoating corrupt politicians. When IMF officials visited Lebanon late last month amid its accelerating economic freefall, many wondered whether these developments might alter the behavior of Hezbollah, the designated terrorist group that has a deep financial stake in the country’s public and private sectors. During a previous funding crisis—the increase in U.S. sanctions against the group’s chief underwriter, Iran—the “Party of God” and its foreign sponsors formulated a new strategy to evade these measures and create alternative sources of funding. Such sources allowed Hezbollah to make further inroads into government agencies following the 2018 parliamentary elections. For example, the group’s leaders insisted on controlling the Health Ministry, which commands Lebanon’s fourth-largest budget at $338 million per year; they also gained more access to the Ministry of Public Works and Transport, the Agriculture Ministry, and the Ministry of Energy and Water, whose assistance was used to fund their affiliated projects and businesses. That worked until Lebanon’s own economy began its current nosedive. Unemployment has hit a record high of 40 percent, and the lira has slumped by about 60 percent on the parallel market, hiking inflation. Officially pegged to the dollar, the currency has plummeted 40 percent on the black market as local banks ration dollars necessary for imports of food, medicine, and other essential goods. Meanwhile, Lebanon has one of the highest debt-to-GDP ratios in the world (over 150 percent) and may not be able to pay $1.2 billion in Eurobonds this month. As with the Iran sanctions, however, Hezbollah has a strategy to survive this domestic pressure, at least in the near term.
Topic:
Foreign Policy, Corruption, Debt, Politics, Protests, and Hezbollah
Political Geography:
Middle East, Lebanon, and United States of America

9. Ghana’s Oil Sales: Using Commodity Trading Data for Accountability

Author:
Alexander Malden and Denis Gyeyir
Publication Date:
12-2020
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The coronavirus pandemic has severely impacted the Ghanaian economy, with the IMF projecting that growth will slow to just 1.5 percent in 2020 compared to December 2019’s projection of 5.8 percent. The country, like many oil-rich states, is facing the challenge of responding to the pandemic with reduced government revenues resulting from the oil price crash. The coronavirus has also exacerbated the country’s debt sustainability issues, which were already on the rise prior to the pandemic. Ghana is still a relatively new oil producer, with first production from its Jubilee field occurring in November 2010 and the first cargo sold in early 2011. However, the sector represents a significant source of revenue. Ghana’s oil revenues totaled USD 938 million in 2019. Around USD 802 million of this amount, or 86 percent, came from cargos of oil sold by the Ghana National Petroleum Company (GNPC). This oil represents the state’s share of production that it derives from in-kind royalty payments and GNPC’s carried and participating interest (CAPI) in the three oil-producing projects in the country. GNPC oil sales equaled a full nine percent of Ghana’s government revenue in 2019. Responding to the pandemic with reduced government revenues makes it more important than ever that citizens are able to analyze GNPC’s oil sales activities. In this context, in this report the authors demonstrate how publicly available data on the state’s oil sales activities can be used by civil society organizations (CSOs), government, media and other oversight actors to hold the government, GNPC and trading companies accountable for how they sell and manage Ghana’s oil and its revenues. Commodity trading activities are often opaque and do not receive the same level of scrutiny as a state’s upstream operations. This opacity can create opportunities for governance and corruption risks that result in the loss and mismanagement of potential revenues. However, Ghana is one of the most transparent countries in reporting on its commodity trading activities. GNPC, the Ministry of Finance, the Bank of Ghana, the Public Interest and Accountability Committee and Ghana Extractive Industries Transparency Initiative (GHEITI) all disclose information on the state’s oil sales activities. As one example, the MoF has disclosed information on the volume, unit price, date of sale and value for every cargo sold by GNPC to date.
Topic:
Debt, Oil, Accountability, Commodities, Trade, and COVID-19
Political Geography:
Africa and Ghana

10. Born Out of Necessity: A Debt Standstill for COVID-19

Author:
Patrick Bolton, Lee Buchheit, Pierre-Olivier Gourinchas, Mitu Gulati, Chang-Tai Hsieh, Ugo Panizza, and Beatrice Weder di Mauro
Publication Date:
04-2020
Content Type:
Policy Brief
Institution:
Economics for Inclusive Prosperity (EfIP)
Abstract:
Rich and poor countries alike are facing an unprecedented economic crisis as they attempt to contain the impact of the COVID-19 pandemic. A downturn of this magnitude can cause tremendous long-term damage, with critical economic linkages between employees, businesses, and banks at risk of disappearing forever. Scores of firms will close permanently unless urgent action is taken. The threat is even more significant for emerging economies, where the economic costs of social distancing are likely to be higher, and where vulnerable small and medium sized enterprises with low cash reserves account for a much larger share of the economy than in rich countries, which can rely on extensive social and economic safety nets. Poor countries, moreover, have far more precarious health-care systems. The funds required to support vulnerable workers and businesses, and to care for COVID-19 patients, could be as high as 10% of their GDP. As a comparison, in the US the rescue measures passed in the last month alone account for at least 10% of GDP, and are likely to increase even more. A number of European countries have commited loans, equity injections and guarantees up to 35% of GDP. The COVID-19 crisis has led to a sudden collapse in capital flows to emerging and developing countries. According to estimates by the Institute of International Finance, non-resident portfolio outflows from emerging market countries amounted to nearly $100 billion over a period of 45 days starting in late February 2020. For comparison, in the three months that followed the explosion of the 2008 global financial crisis, outflows were less than $20 billion.
Topic:
Debt, Economics, International Political Economy, GDP, Business, Macroeconomics, Pandemic, COVID-19, and Credit
Political Geography:
Global Focus

11. A New Policy Toolkit Is Needed as Countries Exit COVID-19 Lockdowns

Author:
Olivier Blanchard, Thomas Philippon, and Jean Pisani-Ferry
Publication Date:
06-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The measures that most governments took in response to the sudden collapse in economic activity during the COVID-19 lockdowns nearly exclusively focused on protecting vulnerable workers and firms. These measures included unemployment benefits, grants, transfers, loans at low rates, and tax deferrals. As lockdowns are lifted, governments must shift policies toward supporting the recovery and design measures that will limit the pain of adjustment while preserving productive jobs and firms. This Policy Brief explores how such measures can be designed, with particular emphasis on Europe and the United States. The authors propose a combination of unemployment benefits to help workers, wage subsidies and partially guaranteed loans to help firms, and debt restructuring procedures for small and medium-sized companies handicapped by excessive legacy debt from the crisis.
Topic:
Debt, Economics, Government, Labor Issues, Unemployment, and Coronavirus
Political Geography:
Europe, North America, and United States of America

12. US Fiscal Health: Is There Life After Debt?

Author:
Committee for Economic Development of the Conference Board
Publication Date:
07-2020
Content Type:
Policy Brief
Institution:
The Conference Board
Abstract:
Even before the COVID-19 pandemic of 2020, the United States faced the most serious fiscal threat in its modern history. The economic devastation wrought by the outbreak has made the problem far worse. Despite the very serious threat to US fiscal health, this issue does not rank among the top five for American voters in the 2020 election campaign.1 CED addresses the direct impact of the pandemic elsewhere in this series. This CED Solutions Brief will explain why even the prepandemic threat must be a public policy priority.
Topic:
Debt, Health, Capitalism, Fiscal Policy, and COVID-19
Political Geography:
North America and United States of America

13. Sovereign debt relief in the global pandemic: Lessons from the 1980s

Author:
Edwin M. Truman
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The coronavirus pandemic and an unprecedented global recession have triggered fears of a debt crisis requiring massive intervention by international financial institutions as well as debt restructuring by private and official creditors. Truman draws two lessons for the current crisis, based on his ring-side experience during the debt crises of the 1980s. First, the initiation of debt relief will require a broad consensus among four groups: the borrowing countries, their foreign creditors, the authorities of the countries in which those creditors are located, and international institutions. Reaching consensus takes time. Second, implementation of the consensus framework will be case by case, because of differences in the political and economic circumstances of each country, which will militate against simple replication for different countries and against implementation all at the same time. Any framework will not be self-implementing. While the call for rapid action is understandable, applying a one-size-fits-all approach will not be possible.
Topic:
Debt, Emerging Markets, History, International Monetary Fund, Financial Crisis, World Bank, and COVID-19
Political Geography:
Global Focus

14. Should We Worry About Corporate Leverage?

Author:
Şebnem Kalemli-Özcan
Publication Date:
10-2019
Content Type:
Policy Brief
Institution:
Economics for Inclusive Prosperity (EfIP)
Abstract:
There has been a large increase in corporate leverage in many countries since the early 2000s. Figure 1 plots corporate debt to GDP since 2002 for different groups of countries. With the exception of the U.S., both advanced economies and emerging markets have corporate debt exceeding GDP since 2005. U.S. corporate debt is also on an increasing trend. The fastest growth in corporate debt has been observed in emerging markets. A closer look will reveal that China and other fast growing emerging countries in Asia drive most of the increase in corporate debt for the emerging markets.
Topic:
Debt, Economics, Markets, Regulation, Multinational Corporations, and Economic Policy
Political Geography:
United States and Global Focus

15. Are Interest Payments on Debt Derailing Fiscal Consolidation?

Author:
Shebo Nalishebo and Florence Banda-Muleya
Publication Date:
06-2018
Content Type:
Policy Brief
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
This policy brief provides a review of the performance of the first quarter of the 2018 National Budget. The paper provides context by looking at both the revenue and expenditure trends during the last three years when Government instituted some fiscal adjustment measures to bring the country back to a path of fiscal fitness. In analysing the 2018 Budget, the first quarter preliminary outturns are compared to the approved Budget for 2018, the projected performance for the first quarter as well as the first quarter of 2017. We assess fiscal fitness over the last three years and determine that fiscal consolidation had begun. While fiscal performance was generally high, budget credibility and sustainability were low. In the first quarter of 2018, revenues were higher than planned and most expenditures were within the projected amounts. Nonetheless, interest payments were much higher than expected and are likely to be a major source of spending overruns in 2018.
Topic:
Debt, Government, Budget, Public Debt, and Revenue Management
Political Geography:
Africa and Zambia

16. Eurobonds Repayment - Limiting the Risk of Default

Author:
Shebo Nalishebo and Albert Halwampa
Publication Date:
09-2017
Content Type:
Policy Brief
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
In recent years, the Zambian economy has been growing strongly and the country has increasingly been faced with the need to plug huge infrastructural gaps. However, the slowing down of bilateral and multilateral financing due to austerity measures in developed economies and the World Bank’s reclassification of Zambia as a lower middle income country has led financiers to divert concessional loans to other needy countries in the low income bracket. Consequently, Zambia has had to diversify its budget and project financing options by issuing Eurobonds which are commercial borrowings by governments in currencies other than their own - in Zambia’s case, it is denominated in US dollars. Since 2012, the Zambian Government has issued two ten-year sovereign bonds collectively worth US$1.75 billion to mainly finance infrastructure projects. These two bonds amounted to 37% of Zambia’s external debt in 2014. With an average coupon rate of 6.9%, the two bonds have bullet repayment structures, implying that lump sum principal payments will be paid at the end of their respective ten-year maturity periods. The coupon rate is the interest rate at the time of issuance. Notwithstanding the high interest payments of over US$125 million annually, the bullet structure of the two bonds may have significant repayment risks as the country is expected to pay out the US$1.75 billion within a two-year period (in 2022 and 2024). The country may experience difficulty in repaying or refinancing the face value at maturity if the money is not spent in activities with high economic returns and if there are adverse changes in its exchange rate or international market conditions. The risks are already on the horizon – the recent depreciation of the Kwacha has increased debt servicing costs, while the low copper prices have reduced the much-needed export revenues used to service debt. Has Zambia dug itself into another debt hole? What measures can be put in place to mitigate the risk of a pending default
Topic:
Debt and International Development
Political Geography:
Global Focus

17. Does the Level of Public Debt Matter?

Author:
Susan Schadler
Publication Date:
04-2016
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Research on links between the level of a country’s public debt and its broader economic developments has been heatedly debated in the economic literature. Two strands of the research stand out — one linking the level of debt to a country’s GDP growth rate and the other examining the debt level as an EWI of economic crises. As a broad generalization, research at the moment favors the view that high levels of debt are not a cause, in and of themselves, of low growth nor are they particularly good predictors of impending economic or even debt crises. In principle, the empirical findings have obvious implications for policy makers confronting the question of how to fashion policies (and fiscal policy in particular) when a country has a high debt burden. The IMF, as both a contributor to the literature and an adviser concerned with preventing or dealing with debt crises, has a particularly important stake in navigating the findings. Whether in its surveillance (routine annual advice to all member countries) or the construction of its lending programs to support countries in or near crisis, the IMF must answer the question “how much does the level of debt matter?” Despite the empirical research that casts doubt on the importance of debt, the level of debt figures prominently in the algebra of debt sustainability and the IMF’s real world policy advice. This policy brief examines the nexus of the relatively strong conclusions coming from the academic research and the IMF’s policy advice. It addresses the following question: given that the broad conclusion from the academic literature is that the level of debt itself is not systematically bad for growth or stability, why does the debt level seem to figure rather prominently in the IMF’s policy advice and conditionality?
Topic:
Debt, Development, Economics, International Monetary Fund, Financial Crisis, GDP, and Global Markets
Political Geography:
Global Focus

18. Ukraine and the IMF's Evolving Debt Crisis Narrative

Author:
Susan Schadler
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Against the International Monetary Fund’s (IMF’s) fraught experience with crises where debt restructuring is needed, Ukraine’s recent restructuring agreement has been a success. Several factors — in particular, Ukraine’s geopolitical position and the composition of its creditors — facilitated official support for the deal. As these are unlikely to be replicated in future debt crises, the IMF still needs a revamping of its policies and approach in crises requiring debt restructuring. This policy brief examines a number of key challenges in the evolution of a coherent role for the IMF in future crises.
Topic:
Debt, Political Economy, International Monetary Fund, Financial Crisis, and Global Markets
Political Geography:
Ukraine

19. From Populist Destabilization to Reform and Possible Debt Relief in Greece

Author:
William R. Cline
Publication Date:
08-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Using his European Debt Simulation Model (EDSM), Cline examines whether and to what extent additional debt relief is needed in Greece under the new circumstances. Greece's debt burden is significantly lower than implied by the ratio of its gross debt to GDP, because of concessional interest rates on debt owed predominantly to the euro area official sector. The IMF's call for debt relief recognizes the lower interest burden but argues that the gross financing requirement is on track to exceed a sustainable range of 15 to 20 percent. But in the Fund's June Debt Sustainability Analysis that threshold would not be exceeded until after 2030. A sustainability diagnosis based on such a distant future date would seem at best illustrative rather than definitive. The euro area creditors might, nonetheless, be well advised to provide two types of interest relief: an earmarked portion of interest otherwise due to finance a public works employment program; and additional interest relief to compensate for budget shortfalls caused by growth below plan levels. The sovereign debt situation should be alleviated by carrying out the bank recapitalization directly from the European Stability Mechanism to the banks, rather than through the sovereign as the intermediary. The large increase in the ratio of gross debt to GDP imposed by bank recapitalization is mostly an optical illusion because there would be a corresponding rise in state assets, but this increase could, nonetheless, further erode perceptions of sustainability.
Topic:
Debt, Economics, International Monetary Fund, Financial Crisis, and Budget
Political Geography:
Greece

20. Fiscal Tightening and Economic Growth: Exploring Cross-Country Correlations

Author:
Paolo Mauro and Jan Zilinsky
Publication Date:
09-2015
Content Type:
Policy Brief
Abstract:
The global financial and economic crisis that began in 2008 has rekindled the debate on the impact of fiscal policy on economic growth. At the outset of the crisis the focus—particularly in the United States—was on whether fiscal stimulus (an expansion in the fiscal deficit) boosts economic growth. Since 2011 or so, with the depth of the crisis becoming more severe in some European countries and Greece in particular, the emphasis of the debate has shifted to whether fiscal adjustment (a reduction in the fiscal deficit) curtails economic growth. Public discourse has been heavily influenced by simple charts analyzing the correlations between measures of fiscal "austerity" and economic growth for small samples of countries over limited time periods. Mauro and Zilinsky analyze the correlations in the data starting from the simplest and gradually building up, in a step-by-step, transparent manner, to multivariate regressions based on various samples of countries for different periods. The results show that simple correlations are no longer significant when considering slightly longer sample periods and omitting outliers, like Greece, from the sample. In multivariate regressions using broader samples, a tightening of fiscal policy is significantly associated with lower economic growth only in some specifications and estimation samples. On the whole, the data offer partial support to the notion that fiscal choices and output growth are correlated.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Global Focus

21. Germany and the Future of the Eurozone

Author:
Sebastian Plóciennik
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
The Polish Institute of International Affairs
Abstract:
Although the euro has survived the most severe phase of the current crisis, its future is still uncertain. The fate of the common currency will depend not only on the condition of the European economy, but also the priorities of its biggest player—Germany. So far that country has been strong enough to enforce its own vision of integration based on neoliberal reforms and austerity measures. Since the side effects of this prescription have been rising costs and risks, Berlin's new government will consider a range of different solutions, including in extremis a controlled and partial break-up of the Eurozone. For Poland, this volatility creates a challenging environment with risks, but also creates chances for Warsaw to increase its influence over the evolution of EU integration in this field.
Topic:
Debt, Economics, Monetary Policy, Financial Crisis, and Reform
Political Geography:
Europe and Germany

22. A Proposed Code to Discipline Local Content Requirements

Author:
Gary Clyde Hufbauer, Jeffrey J. Schott, and Cathleen Cimino
Publication Date:
02-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Proponents of liberalized trade and finance were relieved when the global economic crisis in 2008 produced a broad range of pledges from countries around the world to avoid new barriers to trade and investment (see Evenett 2013). These promises, designed to avert a replay of the Great Depression of the 1930s, were largely honored when it came to classic forms of protection (tariffs and quotas). But the spirit of that pledge was violated as countries shifted from traditional forms of protection to behind-the-border nontariff barriers (NTBs), including local content requirements (LCRs)—policies mandating that local suppliers of goods, services, and even entire projects be favored by governments and private firms, even when foreign firms offer lower costs, better quality, and faster delivery.
Topic:
Debt, Economics, International Trade and Finance, Markets, Financial Crisis, and Reform

23. Income Inequality Developments in the Great Recession

Author:
Tomas Hellebrandt
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The Great Recession, which cost tens of millions of jobs, a collapse of asset values around the world, and threatened the global financial system, has generated renewed concern over the long-standing issue of the fairness of the distribution of wealth and income in many societies. Economic inequality has increased in the United States and many other advanced economies over the past 20 to 30 years. This trend generated less worry in the boom years, when unemployment rates were low and cheap credit enabled consumers to borrow and maintain higher standards of living, masking the impact of growing income disparity on consumption patterns and perceptions of well-being.
Topic:
Debt, Economics, International Trade and Finance, Poverty, Social Stratification, and Financial Crisis
Political Geography:
United States, United Kingdom, Germany, Spain, Italy, and Ireland

24. The IMF's Preferred Creditor Status: Does It Still Make Sense After the Euro Crisis?

Author:
Susan Schadler
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Throughout the history of IMF lending, the institution has had PCS — that is, distressed countries borrowing from the IMF are expected to give priority to meeting their obligations to the IMF over those to other (private or official) creditors. This status is a defining characteristic of the IMF's role in financial crises: it provides a high degree of confidence that IMF resources are safe even when other creditors of the distressed country face substantial uncertainty about whether they will be repaid in full. In other words, the IMF, which lends to some of the riskiest countries in the world, faces minimal risk that its resources could be compromised by a debtor country's difficulties in servicing its debt. It does so, however, with the confidence that comes from its role in helping to formulate and monitor a program of policies that are strongly expected to return the country to stability.
Topic:
Debt, Economics, International Monetary Fund, Monetary Policy, and Financial Crisis
Political Geography:
Europe

25. Russia’s Hidden Underbelly of Debt

Author:
Maya Rostowska
Publication Date:
07-2014
Content Type:
Policy Brief
Institution:
The Polish Institute of International Affairs
Abstract:
Despite the reigning consensus that the Russian economy is facing trouble ahead, some indicators suggest that the situation is not as dire as first appeared. Moreover, it may seem that the fiscal situation in the country—particularly its copious foreign currency reserves and substantial sovereign wealth funds—could still help extricate Russia from its economic difficulties. However, the very difficult budgetary situation in the regions and the staggering levels of debt of its companies suggest that economic problems could hit the country hard. Investors should remain vigilant of social and political tensions and the possible further deterioration of the business environment in Russia.
Topic:
Debt, Economics, Politics, Governance, and Budget
Political Geography:
Russia

26. Debt Sanctions Can Help Ukraine and Fill a Gap in the International Financial System

Author:
Anna Gelpern
Publication Date:
08-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The escalating crisis in Ukraine has prompted the United States and Europe to impose the toughest economic sanctions against Russia since the end of the Cold War. Continued instability and military conflict in eastern Ukraine are straining Ukrainian finances. Despite a generous international support package, the government faces shrinking revenues, rising costs, and a spike in foreign debt payments over the next two years.
Topic:
Cold War, Debt, and Economics
Political Geography:
Russia, Ukraine, and Asia

27. Afghanistan's Looming Fiscal Crisis: What Can Be Done?

Author:
William A. Byrd
Publication Date:
08-2014
Content Type:
Policy Brief
Institution:
United States Institute of Peace
Abstract:
Afghanistan faces a fiscal crisis that reflects worsening domestic revenue shortfalls since 2011, which could reach $1 billion in 2014 compared with the 2011 outlook. The massive theft and fraud at Kabul Bank, failure of mining activities to pay taxes and royalties, and mislabeling of some commercial imports as duty-free are among other contributing factors. Turning the fiscal crisis around will take time, but a legitimate, credible new Afghan government coming into office is essential. Quality leadership and management teams in the Ministry of Finance and the Central Bank will be crucial for success. Urgent measures are needed to turn around poor revenue performance, including strong signals from the top, possible exploitation of limited new revenue sources, and cooperation among different agencies to reduce smuggling and contain revenue leakages. Accelerated recovery of stolen and lost Kabul Bank assets should be a priority, which could provide over $100 million per year of extra fiscal space for the budget. Reforms of the revenue system need to be initiated, including introduction of a value-added tax, and possibly reform of the revenue and customs services. Expenditures will need to be cut. This requires the elimination of unnecessary and wasteful expenditures as well as the meaningful prioritization of programs within a tight resource envelope. Additional international fiscal support will be needed to help stabilize the budget in the short run. Linking aid for the Afghan discretionary budget to increases in domestic revenues and Kabul Bank recoveries would make sense.
Topic:
Debt, Economics, Foreign Aid, and Financial Crisis
Political Geography:
Afghanistan

28. Was the ECB's Comprehensive Assessment up to standard?

Author:
Willem Pieter De Groen
Publication Date:
11-2014
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The Comprehensive Assessment conducted by the European Central Bank (ECB) representsa considerable step forward in enhancing transparency ineuro-area banks' balance sheets. The most notable progress since the previous European stress test has been the hamonisation of the definition of non-performing loans and other concepts as well as uncovering hidden losses, which resulted in a €34 billion aggregate capital-chargenet of tax. Despite this tightening,most banks were able to meet the 5.5% common equity tier 1 (CET1) threshold applied in the test, whichsuggests that the large majority of the euro-area banks have improvedtheir financial position sufficiently to no longer constrainthem in financing the economy.Our own estimation based on the detailed results, however,provide a more nuanced picture, with a large numberof the banks still highly leveraged and in many cases unable to meet the regulatory capital requirementsthat will be introduced in the coming years underthe adverse stress test scenario.
Topic:
Debt, Economics, International Trade and Finance, and Global Recession
Political Geography:
Europe

29. Why Bail-In Securities Are Fool's Gold

Author:
Avinash D. Persaud
Publication Date:
11-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Bailouts and bail-ins of failing financial institutions have been hotly disputed in the global financial crisis of the last five years. At the height of the crisis, several failing banks were bailed out with taxpayer money so they could service their debts, but as public outrage mounts, policymakers are increasingly looking at bailing in these institutions before using taxpayer funds. Bail-ins, also called haircuts, require the troubled institution's creditors to write off some of the debt or agree to a restructuring of the debt, which reduces their holdings. The public has demanded the imposition of these costs on creditors and bond - holders, arguing that if bad lending as well as bad borrowing went unpunished it would be encouraged. Additionally, the yawning fiscal deficits that have followed bailouts have led to unpopular fiscal retrenchment.
Topic:
Debt, Economics, Markets, Financial Crisis, and Reform
Political Geography:
United States

30. Rapid Growth in Emerging Markets and Developing Economies: Now and Forever?

Author:
Giang Ho and Paolo Mauro
Publication Date:
12-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
With economic growth in advanced economies still lackluster or elusive, much hope for world prosperity rests on projections of continued strength in developing and emerging economies. On average, the economic growth rate in these economies was roughly twice as high—on an unweighted per capita basis—as in the advanced economies during the past decade. According to the forecasts analyzed in this Policy Brief, this superior performance is projected to extend into the next two decades.
Topic:
Debt, Economics, International Trade and Finance, and Political Economy

31. IMF Lending Practices and Sovereign Debt Restructuring

Author:
Domenico Lombardi, James M. Boughton, and Skylar Brooks
Publication Date:
06-2014
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
The IMF has struggled for decades to develop a set of lending practices that enable sovereign borrowers to resolve serious debt problems and restore economic growth, but also respect the right of private financial markets to enter into and enforce contractual obligations. The challenge has always been to operate under a well-defined set of principles while dealing with each situation in a way that takes account of relevant circumstances. Recently, the international financial crisis that began in 2008 and the subsequent European sovereign debt crisis have raised this challenge to new heights. In providing €30 billion to Greece — the largest financial package ever granted to a single country — the IMF invoked greater discretion in its lending decisions to counteract potential "systemic" crises. By doing so, it entered a program without a restructuring agreement.
Topic:
Debt, Economics, International Trade and Finance, International Monetary Fund, and Reform

32. Why the ECB should cut borrowing costs in periphery

Publication Date:
06-2013
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
The European Central Bank has postponed any plans to introduce targeted measures to reduce the cost of borrowing for small and medium-sized businesses in the credit-starved peripheral Eurozone economies. Given the widening gap between the lower costs of borrowing for companies in Germany and France and the higher costs in the periphery, we think that there is a strong case for the ECB to take action. Simulations using our Global Macroeconomic Model show that if half the tightening in credit conditions seen since 2008 were to be reversed within two years, Eurozone GDP would be 0.7% higher by the end of 2017 than under our baseline forecast. There would be over 400,000 fewer people unemployed. This would be particularly beneficial for peripheral Eurozone risk assets.
Topic:
Debt, Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
Europe and Germany

33. Three Options for the EU: Assessing the EU's powers in a true economic and political union

Author:
Teija Tiilikainen
Publication Date:
09-2013
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
Safeguarding the EU's unity in the long-term development of the EMU is currently one of the major challenges for the Union. The de facto adjustments made to the EU's economic and fiscal powers due to the economic and financial crisis, including the completion of the Banking Union, create pressures to address the treaty-based division of powers and to strengthen the democratic control of the powers executed by the Union. The need to back the EU's macroeconomic goals with fiscal instruments has been made evident by the economic crisis; the position of these instruments outside the common budget might become increasingly controversial. A further increase in economic solidarity (jointly guaranteed debt, taxation power) might jeopardize the EU's stability and democratic legitimacy if carried out in the current political and institutional framework. A system of constitutional and fiscal federalism would produce a more stable outcome, but would require major changes in the EU's democratic system and system of policy implementation, in its external policies and the way its constitutional powers are arranged.
Topic:
Debt, Economics, Regional Cooperation, Monetary Policy, and Financial Crisis
Political Geography:
Europe

34. China's Credit Boom: New Risks Require New Reforms

Author:
Nicholas Borst
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The Chinese financial system has undergone almost continuous reform since the dismantling in the 1980s of the Soviet- style system where only one state-controlled bank existed. Government efforts to create a financial system that adheres to international best practices of commercial lending accelerated in the 1990s (box 1). Reforms progressed quickly during this period, but they were accompanied by excessive credit growth and a massive increase in nonperforming loans, threatening the solvency of some banks and the financial stability of the entire economy. The risk of these weaknesses was dramatized by the 1997 Asian financial crisis, in which several nearby countries were crippled by plunging currency values, rising interest rates and difficulties servicing their foreign-held debts.
Topic:
Debt, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
China

35. Lehman Died, Bagehot Lives: Why Did the Fed and Treasury Let a Major Wall Street Bank Fail?

Author:
William R. Cline and Joseph E. Gagnon
Publication Date:
09-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Five years after the Federal Reserve and the Treasury allowed the investment bank Lehman Brothers to fail, their actions (or inaction) remain a focus of debate. Some argue that it was an inconsistent policy to have let Lehman fail while making emergency loans to save other large financial institutions in the same time frame. In this Policy Brief we present evidence that the Fed and Treasury had a sound reason to have bailed out other institutions while letting Lehman fail. Simply put, Lehman was insolvent—probably deeply so—whereas the other institutions arguably were solvent. In addition, the other institutions had abundant collateral to pledge, whereas what little collateral Lehman had to pledge was of questionable quality and scattered across many affiliated entities. Thus, federal officials, at least in hindsight, appear to have followed the dictum of Walter Bagehot (cited above), which has guided central banks for almost 150 years.
Topic:
Debt, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
United States

36. Towards a Deeper EMU: An assessment of political divisions within the EU

Author:
Juha Jokela
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
Policymakers, observers and the media have referred to a vast number of divisions in crisis-torn Europe. The EU is divided between north and south or creditors and debtors. Some have emphasised the emerged division between anti-EU and pro- EU forces. Significantly, these divisions are also manifested within the eurozone, in the form of the current differences between the French and German views, and the increasing role of the populist movements in many euro countries. Yet others have highlighted the boundary between the eurozone and the rest of the EU, and suggested that the euro countries now form the core of the Union. Relatedly, some of the non-euro members are distancing themselves from the EU – most notably the UK – while many others aim to secure their influence in the Union, even if euro membership may have been put on the back burner.
Topic:
Debt, Economics, Monetary Policy, and Financial Crisis
Political Geography:
United Kingdom, Europe, and Germany

37. ARBITERS AMISS: THE FAILINGS AND SHORTCOMINGS OF INSTITUTIONS GOVERNING THE GLOBAL FINANCIAL SYSTEM

Author:
Paul Blustein
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Myriad dangers beset the global economy. The US Federal Reserve is trying to curb its ultra-easy money policy, a delicate operation that could plunge the world into recession if done too abruptly. The euro zone might fall back into turmoil. Japan's experiment with “Abenomics”1 could go sour. China's banking system looks shaky. Emerging economies are suffering large scale withdrawals of foreign funds.
Topic:
Debt, Development, Economics, International Monetary Fund, Foreign Aid, Fragile/Failed State, and Financial Crisis
Political Geography:
China

38. Geopolitical Shifts in the Eastern Mediterranean

Author:
Patrick Nopens
Publication Date:
02-2013
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
Three major geopolitical events are putting the stability of the Eastern Mediterranean at risk. Most of the region is in a deep monetary and economic crisis. The Arab Spring is causing turmoil in the Levant and the Maghreb. Gas and oil discoveries, if not well managed, could further destabilise the region. At the same time, Russia and Turkey are staging a comeback. In the face of these challenges, the EU approaches the Greek sovereign debt crisis nearly exclusively from a financial and economic viewpoint. This brief argues that the EU has to develop a comprehensive strategy for the region, complementing its existing multilateral regional framework with bilateral agreements in order to secure its interests in the Eastern Mediterranean.
Topic:
Security, Debt, Oil, Regime Change, and Financial Crisis
Political Geography:
Russia, Europe, Turkey, and Arabia

39. A case for adjusting fiscal consolidation in the eurozone

Author:
Xavier Vanden Bosch
Publication Date:
01-2013
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
Fiscal consolidation is essential to ensure the sustainability of euro zone countries' public debt. However, as a principle, consolidation should not be pursued at a pace unnecessarily undermining growth in the short term. Repeated downward revisions of growth call for the use of the flexibility foreseen in the EU fiscal framework. The Commission should adapt the deadlines for fiscal correction to prevent excessive, pro-cyclical adjustment in 2013. In turn, adequate surveillance and coordination must ensure structural adjustments constitute the core of fiscal consolidation plans.
Topic:
Debt, International Trade and Finance, Monetary Policy, and Reform
Political Geography:
Europe

40. Updating The EMU: Differentiated economic integration in the European Union

Author:
Samu Kurri
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
The financial and economic crisis has reinforced the two-layer economic integration structure in the EU. Many of the new rules and structures created during the crisis have focused on a solution to the euro crisis and are thus euro area-specific. There is little evidence, however, that the situation would have dramatically changed compared to the Maastricht EMU. All of the changes are still in line with the basic idea that all EU countries will join the euro when they are ready to do so. One of the key questions in the near future is likely to centre on the contours of the euro area specific decision-making, its relationship to the EU as a whole, and its institutions and procedures. Even if the Euro group remains 'formally informal', it has managed to transform itself into a de facto institution within the EU, and its role and weight is likely to increase rather than decrease.
Topic:
Debt, Economics, Monetary Policy, Financial Crisis, and Reform
Political Geography:
Europe

41. The Asset Quality Review and Capital Needs: Why re-capitalise banks with public money?

Author:
Daniel Gros
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
There are three aggregate numbers that describe the problem the Single Supervisory Mechanism (SSM) is inheriting: the 130 banks under its direct supervision hold assets worth 250% of the euro area's GDP, their capital is equivalent to only 4% of their assets' value and they have made zero profits, in the aggregate, over the last four years.
Topic:
Debt, Economics, Markets, Financial Crisis, and Reform
Political Geography:
Europe

42. Net Neutrality and Mandatory Network-Sharing: How to disconnect the continent

Author:
Andrea Renda
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
A lively debate emerged on the proposed "Connected Continent" legislative package presented by the European Commission in September 2013. The package contains a proposed rule on the 'open Internet', which was heavily discussed in European Parliament hearings in early December. This commentary argues that while the proposed rule is in principle balanced and appealing, it is utterly impractical due to the enormous uncertainty that its application would entail. At the same time, the rule is very far from what neutrality proponents have argued for almost a decade: rather than the place for internet freedom, it would transform the Web into a place requiring constant micro-management and tutoring of user behavior. Both arguments lead to the conclusion that the current proposal should be at once reformed and analysed under a more holistic lens. On the one hand, Europe should launch an ambitious project for the future, converged infrastructure by mobilising resources and reforming rules to encourage investment into ubiquitous, converged, 'always on' connectivity. On the other hand, enhanced legal certainty for broadband investment could justify a more neutrality-oriented approach to traffic management practices on the Internet. The author proposes a new approach to Internet regulation which, altogether, will lead to a more balanced and sustainable model for the future, without jeopardising user freedom.
Topic:
Debt, Economics, Monetary Policy, Infrastructure, and Financial Crisis
Political Geography:
Europe

43. Policy Lessons for Macroeconomic and Financial Crisis Management in the Southern and Eastern Mediterranean

Author:
Rym Ayadi and Willem Pieter De Groen
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The 2007-09 global financial crisis led to a virtual collapse in economic activity and increased financial volatility worldwide. For the developing countries, the main channel of transmission has been a drop in external transactions, such as trade, financial and capital flows, and remittances. The southern and eastern Mediterranean countries (SEMC) have also faced declining economic activity, although there seems to be considerable variation in the relative magnitudes and timing of the decline. Most of the economies in the Mediterranean basin have had delayed but longer-lasting consequences as a result of the crisis, driven mostly by their endemic trade and investment ties with the EU and the Gulf Cooperation Council (GCC) countries.
Topic:
Debt, Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

44. Strong Governments, Weak Banks

Author:
Paul De Grauwe and Yuemei Ji
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
One of the more troublesome features of banks is that they still hold so little equity. In 2013 the capital and reserves of EU banks amounted to only 7.6% of total balance sheets. Well-run businesses outside the banking sector typically hold equity shares of 20%, 30% or more of their balances sheets. For good reasons; these well-run firms know that shocks can occur that could wipe out large parts of their balance sheets. Good business strategy thus leads these firms to hold sufficiently large buffers to avoid bankruptcy.
Topic:
Debt, Economics, and Monetary Policy
Political Geography:
Europe

45. The New European Framework for Managing Bank Crises

Author:
Stefano Micossi, Jacopo Carmassi, and Ginevra Bruzzone
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The European Commission proposal for a Regulation establishing a European Single Resolution Mechanism (SRM) for banks is now under consideration before the European Parliament and the Council. The main principles and tools applicable for resolving a failing bank are contained in the June 2012 Commission proposal for a Directive on bank recovery and resolution (BRR), aimed at harmonising crisis management and resolution tools in EU member states, which is also under consideration by the European legislators. Any discussion of the new system must therefore be based on both proposals.
Topic:
Debt, Economics, International Trade and Finance, Markets, Monetary Policy, and Reform
Political Geography:
Europe

46. Pushing the Turbo Button: What Next for the Polishâ?"Romanian Strategic Partnership?

Author:
Stanislav Secrieru, Lukasz Kulesa, Agnes Nicolescu, and Anita Sobják
Publication Date:
11-2013
Content Type:
Policy Brief
Institution:
The Polish Institute of International Affairs
Abstract:
With the global economic downturn and its implications for the broader political and security architecture of the EU, the Polish—Romanian Strategic Partnership signed in 2009 is now ripe to take the positive relationship to a new level and to be further fleshed out. To this end, political coordination needs to be upgraded for promoting common interests, such as economic stability and solidarity within the Union, continued support to agriculture and cohesion policy as an important priority for EU funding, increasing the energy security of the region, engaging the neighbourhood, particularly Moldova and Ukraine, and maintaining the relevance of CSDP and of article 5 of the Washington Treaty high on the European agenda. The management of instability and protracted conflicts in their neighbourhood are also among their shared concerns. Translating these common priorities into concrete actions should aim at pushing the "turbo button" on the partnership, and help both countries achieve their goals.
Topic:
Security, Debt, Diplomacy, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe

47. Bringing Stability to Europe: Why Europe needs a banking union

Author:
Erik Jones
Publication Date:
11-2012
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
The European sovereign debt crisis is the result of capital flows across the single market. The danger that such capital flows could unleash market speculation was known from the start; indeed, the single currency was created to remove the threat of exchange rate instability. The problem is that the architects of the single currency did not consider the impact of capital market integration on the banking sector or on the relationship between banks and national governments. Once markets lost confidence in the security of their cross-border investments, investors began to pull back their capital and the internal market for financial services started to disintegrate. The creation of a banking union is part of the solution. However, the euro area also needs a common 'risk-free' asset to use as a safe haven in times of crisis.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe

48. Due Diligence: An Impertinent Inquiry into Microfinance

Author:
David Roodman
Publication Date:
01-2012
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Microfinance: Few development ideas have been so buoyed by high expectations in recent decades, and few have been so buffeted by difficulties in recent years. Images of microfinance lifting people out of poverty now compete with ones of the poor driven by debt to suicide. Where does the truth lie? David Roodman investigates in Due Diligence. He finds no evidence that small loans lift people out of poverty en masse but argues that financial services, like clean water and electricity, are essential to a modern life. The practical question is not whether microfinance should continue, but how it can play to its strengths, which lie in providing useful services to millions of poor people in a businesslike way. Due Diligence is the most complete investigation ever into the sources and consequences of microfinance. Rood - man explores the financial needs of poor people, the history of efforts to meet those needs, the business realities of doing so, and the arguments and evidence about how well modern microfinance is succeeding.
Topic:
Debt, Development, Economics, Globalization, Poverty, and Foreign Direct Investment

49. Spain's fiscal targets should be eased

Publication Date:
01-2012
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
The Spanish government has announced that the fiscal deficit for 2011 may be even worse than expected, perhaps even exceeding 8% of GDP. In response to this overshoot, the authorities have so far announced additional spending cuts and tax rises amounting to €15bn. But fiscal tightening will have to be even more severe if the government wants to meet its 4.4% of GDP deficit target for 2012.
Topic:
Debt, Economics, Government, Monetary Policy, and Financial Crisis
Political Geography:
Spain

50. Fixing Mortgage Finance: What to Do with the Federal Housing Administration?

Author:
Mark A. Calabria
Publication Date:
02-2012
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
While Fannie Mae, Freddie Mac, and private subprime lenders have deservedly garnered the bulk of attention and blame for the mortgage crisis, other federal programs also distort our mortgage market and put taxpayers at risk of having to finance massive financial bailouts. The most prominent of these risky agencies is the Federal Housing Administration (FHA).
Topic:
Debt, Economics, Government, and Financial Crisis
Political Geography:
United States

51. Interest Rate Shock and Sustainability of Italy's Sovereign Debt

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, and Financial Crisis
Political Geography:
Europe, Germany, and Italy

52. 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 (CEPS)
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

53. The Spanish Hangover

Author:
Daniel Gros and Cinzia Alcidi
Publication Date:
04-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Spain faces high unemployment and slow growth. This paper focuses on an important source of those problems, namely its housing market. While some adjustment has occurred since Spain's housing bubble burst in 2008, the authors find that house prices and construction need to decrease more to slow Spain's unsustainable accumulation of foreign debt.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe and Spain

54. The Freedom Savings Credit: A Practical Step to Build Americans' Household Balance Sheets

Author:
Lisa Mensah, Raymond O'Mara III, Colby Farber, and Robert Weinberger
Publication Date:
02-2012
Content Type:
Policy Brief
Institution:
Aspen Institute
Abstract:
The imbalance of too much debt and not enough assets fuels financial insecurity in many American households. Building Americans' household balance sheets should start with making savings and asset-building incentives more efficient and equitable. Although millions of working Americans currently receive little or no tax incentive to save, modest reforms to our tax code have the potential to dramatically improve their financial futures. The Aspen Institute Initiative on Financial Security (Aspen IFS) proposes the Freedom Savings Credit to create a more equitable and economically efficient savings system that will benefit millions of American households and the nation as a whole.
Topic:
Security, Debt, Economics, and Financial Crisis
Political Geography:
United States and America

55. EIU: Global outlook summary

Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Economist Intelligence Unit
Abstract:
The global economy remains in precarious shape. Europe's debt crisis rages on, and although the euro appears to have survived its most recent test in the form of the Greek election on June 17th, austerity and financial-market uncertainty are depressing economic activity in Europe and, by extension, in much of the rest of the world. The Economist Intelligence Unit continues to expect global GDP growth to slow in 2012, and while our forecasts for the G3 economies—the US, euro zone and China—are essentially unchanged this month, we have cut our projections for Brazil and India.
Topic:
Debt, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
United States, China, Europe, India, and Brazil

56. Implementing Basel III in Europe: Diagnosis and avenues for improvement

Author:
Rym Ayadi, Emrah Arbak, and Willem Pieter De Groen
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Adopted by the European Commission in July 2011, the proposed Capital Requirements Directive and Regulation (CRD IV-CRR) translate into EU law the Basel III standards adopted by the Basel Committee for Banking Supervision (BCBS). Among other things, the proposal increases the quality and quantity of the minimum capital; introduces new rules on liquidity, leverage ratios, counter-cyclical buffers and systemically important financial institutions; and amends the definitions of counterparty credit risk and rules for the banking book. The rules complement the earlier amendments that strengthened the capital and disclosure requirements for the trading book and resecuritization instruments as well as requirements to ensure that remuneration policies do not lead to excessive risk-taking.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe

57. An Agenda for the European Council: Feasible steps to bring the eurozone back from the precipice

Author:
Stefano Micossi
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Once again the European Council will meet in an emergency session at the end of June, with the eurozone economy in recession and actually plummeting in its Southern periphery. Further doubts are also growing on the sustainability of sovereign debts due to the vicious spiral of deteriorating bank balance sheets, ballooning potential liabilities from banking rescues and widening spreads on government borrowings. The sovereign debt crisis in the periphery has now turned into a fully fledged banking crisis that threatens to spread from Greece to Spain and tomorrow, who knows, to Italy, France and even Germany itself.
Topic:
Debt, Economics, Regional Cooperation, Financial Crisis, and Governance
Political Geography:
Europe, Greece, France, Germany, Spain, and Italy

58. 'Grexit': Who would pay for it?

Author:
Daniel Gros, Cinzia Alcidi, and Alessandro Giovannini
Publication Date:
05-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
What would be the cost if Greece were to exit from the eurozone? This much-debated question cannot be answered with a single number. The consequences of Greece's exit would depend decisively on the exact circumstances of events in the country itself as well as the general state of financial markets in the eurozone.
Topic:
Debt, Markets, Regional Cooperation, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Greece

59. Can Italy and Spain survive rates of 6-7%?

Author:
Daniel Gros
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The sentiment that the euro is now in real danger is based in large part on the widespread conviction that interest rates of 6-7% are simply unsustainable for both Italy and Spain., After taking a closer look at the fundamentals, however, Daniel Gros concludes in this new Policy Brief that both countries should be able to live with this level of interest rates for quite some time, but only if they mobilize domestic savings, which remain strong in both countries. For Spain, some debt/equity swaps are also needed.
Topic:
Debt, Economics, Markets, and Financial Crisis
Political Geography:
Europe, Spain, and Italy

60. Unholy compromise in the eurozone and how to right it

Author:
Stefano Micossi
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Two years after the first Greek rescue in May 2010, crisis management in the eurozone has still failed to restore confidence. A vivid picture of the situation can be found in Figure 1: the constellation of spreads on ten-year sovereign debts over the Bund in the eurozone is wider than it was before monetary union, as though financial markets had already discounted its breakdown. Temporary respites, notably in the early part of 2012, have not interrupted the trend of increasing divergence that risks undermining the credibility of adjustment efforts under way.
Topic:
Debt, Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

61. Central Banks in Times of Crisis: The FED vs. the ECB

Author:
Daniel Gros, Cinzia Alcidi, and Alessandro Giovannini
Publication Date:
07-2012
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Different economic and financial structures require different crisis responses. Different crises also require different tools and resources. The first 'stage' of the financial crisis (2007-09) was similar on both sides of the Atlantic, and the response was also quite similar. The second stage of the crisis is unique to the euro area. Increasing financial disintegration within the region has forced the ECB to become the central counterparty for the entire cross-border banking market and to intervene in the sovereign bond market of some stressed countries. The actions undertaken by the European Central Bank (ECB), however, have not always represented the best response, in terms of effectiveness, consistency and transparency. This is especially true for the Securities Markets Programme (SMP): by de facto imposing its absolute seniority during the Greek PSI (private sector involvement), the ECB has probably killed its future effectiveness.
Topic:
Debt, Economics, International Trade and Finance, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

62. Money and power: EU budget negotiations in a time of austerity

Author:
Sara Hagemann
Publication Date:
05-2012
Content Type:
Policy Brief
Institution:
Danish Institute for International Studies
Abstract:
The ongoing negotiation of the EU's multi-annual budget is heavily constrained by how the decision process takes place. Governments focus on narrowly defined national interests, rather than on securing a better budget for Europe. While the budget is small in size, it could be used as a powerful political tool for much needed economic growth policies on a larger scale.
Topic:
Debt, Economics, Government, and Financial Crisis
Political Geography:
Europe

63. The United States and the Global Future

Author:
Banning Garrett, James B. Steinberg, David Ignatius, and Uri Dadush
Publication Date:
03-2012
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
How will the US economy evolve over the next twenty years and what might be the impact of various US economic scenarios on the global system? Will the United States have a Japan-like decade or two of anemic growth? If so, would this lead the United States to reduce its foreign involvement and commitments, become more protectionist, and focus on its internal problems? Or will the United States solve its fiscal and debt problems, reinvigorate growth and innovation, and return to sustainable economic growth? Would this underpin a renewed commitment to active US global leadership in mobilizing international cooperation to manage security, economic growth, and global challenges?
Topic:
Foreign Policy, Debt, Economics, International Trade and Finance, and Hegemony
Political Geography:
United States and North America

64. The global crisis: Have we learned the right lessons?

Author:
György Surányi
Publication Date:
03-2012
Content Type:
Policy Brief
Institution:
Center for Social and Economic Research - CASE
Abstract:
The global crisis, which was the worst economic and financial downturn since the Great Depression, revealed the fundamental deficiencies in the global financial system and drastically changed the way we view the world and the global financial system. The crisis challenged long-standing views and ideas, and in response, after the most acute phase of the crisis, joint global efforts were launched to put the system on firm footing again and prevent the next crisis. These efforts can only be successful if we fully understand the root causes of the crisis and learn the right lessons from it. In his E-brief Dr. György Surányi focuses on four topics: regulation, external position, monetary policy and the European debt crisis. This E-brief is based on Dr György Surányi’s presentation at the CASE 2011 International Conference on Europe 2000: Exploring the Future of European Integration held on November 18-19, 2011.
Topic:
Debt, Monetary Policy, Regulation, and Economic Crisis
Political Geography:
Europe

65. The need for contingency planning: potential scenarios of Eurozone disintegration

Author:
Marek Dabrowski
Publication Date:
06-2012
Content Type:
Policy Brief
Institution:
Center for Social and Economic Research - CASE
Abstract:
Since the beginning of 2010, the common currency area in Europe found itself under serious strain as a consequence of the sovereign debt crisis in several member states. While a substantial political and financial effort has been made to avoid a collapse of the Euro project, its ultimate outcome remains uncertain due to continuous financial market pressures and political challenges faced by individual member states. Therefore, one cannot entirely rule out the possibility of either a partial or total breakup of the Eurozone, even if such a demise would bring about disastrous economic and political consequences for the entire EU and its external partners.
Topic:
Debt, European Union, Economic Policy, Macroeconomics, and Eurozone
Political Geography:
Europe

66. Global Rebalancing: The Dangerous Obsession

Author:
Uri Dadush
Publication Date:
02-2011
Content Type:
Policy Brief
Institution:
Carnegie Endowment for International Peace
Abstract:
The current emphasis on global rebalancing—which aims to reduce trade deficits and surpluses—is misguided. Trade deficits and surpluses narrowed significantly during the Great Recession, can be financed and eased over time, and are largely the result of domestic forces—making further global rebalancing unlikely. The obsession with global rebalancing stokes currency and protectionist tensions and diverts attention from what is really needed—reforms at home. Rather than focusing on global rebalancing, countries should concentrate more on fixing their domestic problems and expanding their domestic demand at the maximum sustainable rate.
Topic:
Debt, Globalization, International Trade and Finance, Global Recession, and Financial Crisis

67. External versus Domestic Debt in the Euro Crisis

Author:
Daniel Gros
Publication Date:
05-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
As EU leaders muddle through the eurozone crisis, the debate about its root causes continues. CEPS Director Daniel Gros argues in this Policy Brief that the debate is important if we are to understand how to prevent future crises. In his view, external debt is the key to the turmoil in European economies and that the focus on total public debt is therefore misleading.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Europe

68. The EU's Response to the Financial Crisis: A mid-term review

Author:
Karel Lannoo
Publication Date:
04-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Two years after the London G-20, CEPS Chief Executive Karel Lannoo finds that the EU is well advanced in delivering on the commitments made for the 2013 target date. Important steps have been taken on the institutional side, and regulatory changes are moving ahead. On some issues, in fact, such as remuneration, the EU has made even greater headway than the US. But certain key sensitive matters remain, such as bank resolution or structural changes.
Topic:
Debt, Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
United States, Europe, and London

69. Can the eurozone countries still live together happily ever after?

Author:
Marcello Messori
Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
After the Greek public debt crisis and the bilateral loans to Greece from the other members of the European Monetary Union (EMU), in May 2010 the Ecofin Council launched the European Financial Stabilization Mechanism (EFSM). In June of the same year the EMU countries instituted the European Financial Stability Facility (EFSF). These two mechanisms, which are charged with providing support to EMU countries in “exceptional difficulty”, received their baptism of fire with Ireland in January 2011 and successfully made their first bond issue on the market.
Topic:
Debt, Economics, and Monetary Policy
Political Geography:
Europe and Greece

70. Restoring financial stability in the euro area

Author:
Christian Kopf
Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The pricing of sovereign credit risk is a necessary component of the financial architecture of the European Monetary Union. However, unnecessarily high and volatile risk premia on government bonds are currently preventing effective financial intermediation within the euro area, thereby inhibiting its economic recovery. Several proposals have been made on how these risk premia should be brought down, namely i) permanent pooling of funding through joint bond issuance, ii) temporary liquidity assistance through multilateral funds, iii) debt buybacks using multilateral funds, and iv) debt restructuring.
Topic:
Debt, Economics, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
Europe

71. Debt reduction without default?

Author:
Daniel Gros and Thomas Mayer
Publication Date:
02-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper proposes a two-step, market-based approach to debt reduction: · Step 1.The European Financial Stability Facility (EFSF) would offer holders of debt of the countries with an EFSF programme (probably Greece, Ireland and Portugal = GIP) an exchange into EFSF paper at the market price prior to their entry into an EFSF-funded programme. The offer would be valid for 90 days. Banks would be forced in the context of the ongoing stress tests to write down even their banking book and thus would have an incentive to accept the offer. · Step 2. Once the EFSF had acquired most of the GIP debt, it would assess debt sustainability country by country. a) If the market price discount at which it acquired the bonds is enough to ensure sustainability, the EFSF will write down the nominal value of its claims to this amount, provided the country agrees to additional adjustment efforts (and, in some cases, asset sales). b) If under a central scenario this discount is not enough to ensure sustainability, the EFSF might agree on a lower interest rate, but with GDP warrants to participate in the upside.
Topic:
Debt, Monetary Policy, and Financial Crisis
Political Geography:
Europe

72. An evaluation of the French proposal for a restructuring of Greek debt

Author:
Christian Kopf
Publication Date:
06-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
French commercial banks are proposing a swap of €85.5 billion in Greek government bonds maturing between 2011 and 2014 into a combination of new long-term Greek bonds with principal guarantee and cash payments. If this initiative were implemented under the proposed parameters, private creditors would only suffer a minimal haircut and official lenders would be provided with cash-flow relief of around €20 billion over the next three years, but the solvency of the Hellenic Republic would worsen significantly.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Europe

73. Europe on the Brink

Author:
Simon Johnson and 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, and Financial Crisis
Political Geography:
Europe, Greece, and Ireland

74. Turkey's 2000/1 Banking Crisis: A Case Study for the Transformation of the Greek Finance?

Author:
Onur Bayramoğlu
Publication Date:
08-2011
Content Type:
Policy Brief
Institution:
Global Political Trends Center
Abstract:
On April 2010, recently after the eruption of the Greek crisis, an unexpected hand from Turkey reached to Greece. Proud with his country's last decade growth figures, Turkey's then Vice Prime Minister, Ali Babacan, paid a visit to Greece in order to share his country's reform period after its 2000/1 crisis, arguing that it could also be a case study for Greece. In this brief, I analyzed Greek and Turkish financial crises. Although it is a mere fact that the structural problems in Greek economy complicate the reform period in Greece, there are certain lessons that Greeks can learn from the Turkish experience. As Turks did after 2001, they should see the crisis as an opportunity to overcome the long time problems . In this regard, Greeks first and foremost should establish consensus among themselves, signaling to the markets that they are ready to face the burdens of the reform period.
Topic:
Debt, Economics, International Political Economy, and Financial Crisis
Political Geography:
Europe, Central Asia, Turkey, and Greece

75. The Eurozone Debt Crisis: From its origins to a way forward

Author:
Diego Valiante
Publication Date:
08-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The Eurozone debt crisis has now reached a turning point. This paper argues for a more organised intervention by the ECB to stop contagion through the creation of a quantitative easing programme, coupled with a political agreement among member states on a more federalist budget for the Eurozone.
Topic:
Debt, Economics, Regional Cooperation, and Financial Crisis
Political Geography:
Europe

76. Only a more active ECB can solve the euro crisis

Author:
Paul De Grauwe
Publication Date:
08-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The biggest threat for the eurozone is the contagion of the Greek sovereign debt crisis to the rest of the system. If the Greek crisis could be isolated, it would barely matter for the eurozone as a whole. After countless crisis meetings of the European Council, however, it has to be admitted that the European leaders have failed to isolate the Greek crisis and to stop the forces of contagion. The latest meeting of the heads of state or government of the euro area on July 21st is no exception.
Topic:
Debt, Markets, Regional Cooperation, and Financial Crisis
Political Geography:
Europe

77. Sustainability of Greek Public Debt

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, and Financial Crisis
Political Geography:
Europe and Greece

78. Eurozone finally agrees a deal but uncertainties remain unresolved

Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
After protracted negotiations, Eurozone leaders finally agreed on a new package of measures last week. The outline deal has a three-pronged approach aimed at tackling the main aspects of the crisis: reducing Greece's debt burden, avoiding a credit crunch by recapitalising European banks, and preventing contagion to other countries via a boost to the EFSF.
Topic:
Debt, Economics, Markets, Regional Cooperation, and Financial Crisis
Political Geography:
Europe and Greece

79. Speculative Attacks within or outside a Monetary Union: Default versus Inflation (what to do today)

Author:
Daniel Gros
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Is a high level of public debt inherently more dangerous within a monetary union? During the 1990s it was often argued that only by entering the EMU could Italy (or Spain) protect itself from the high interest rates it had to pay on its large public debt. The argument was that by joining the single currency, Italy could convince financial markets that it would not inflate away the value of its debt and hence benefit from lower risk premia.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Europe, Spain, and Italy

80. Austerity ahead: How will a conservative victory change Spanish politics?

Author:
Teemu Sinkkonen
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs
Abstract:
The electoral defeat suffered by the ruling Socialist Party (Partido Socialista Obrero Español, PSOE) in the municipal elections and the prolonged financial crisis has forced Prime Minister Zapatero to call an early general election on 20 November. The Conservative People's Party (Partido Popular, PP) is ahead in the polls by a clear margin and is likely to gain an absolute majority in the parliament. The economic outlook for Spain looks bleak, which means that the new government will have to create new jobs quickly and push through harsh and unpopular reforms, particularly regarding the fiscal and administrative structures. The Indignados protest movement is gaining support, and looks set to challenge the legitimacy of the system and force the future government to produce speedy results. Spain is expected to enhance its role in international politics through pragmatic bilateral relations. In particular, relations with the US seem to be warming up, while Spain can turn to the UK and Poland in the EU for companionship
Topic:
Debt, Democratization, Economics, and Financial Crisis
Political Geography:
United States, United Kingdom, Europe, and Spain

81. Going for Broke: The Budgetary Consequences of Current US Defense Strategy.

Author:
Carl Conetta
Publication Date:
10-2011
Content Type:
Policy Brief
Institution:
Project on Defense Alternatives
Abstract:
The sharp rise in the Pentagon's base budget since 1998 (46% in real terms) is substantially due to strategic choice, not security requirements, per se. It reflects a refusal to set priorities as well as a move away from the traditional goals of military deterrence, containment, and defense to more ambitious ends: threat prevention, command of the commons, and the transformation of the global security environment. The geographic scope of routine US military activity also has expanded.
Topic:
Security, Foreign Policy, Defense Policy, and Debt
Political Geography:
United States

82. The Pentagon's New Mission Set: A Sustainable Choice?

Author:
Carl Conetta
Publication Date:
10-2011
Content Type:
Policy Brief
Institution:
Project on Defense Alternatives
Abstract:
Today, the United States enjoys an abundance of military power, but it is a uniquely expensive asset. During the past 20 years we have sought new ways to put this asset to work. Reviewing the change in the Pentagon's mission set, several broad trends are discernible: Mission objectives have grown much more ambitious, generally. The geographic scope for intensive US military efforts has widened significantly. Across the globe, the focus of US military action and investment has become less discriminate and more sweeping or comprehensive. Missions that put US “boots on the ground” in foreign nations in either a direct action, advisory, or capacity- building role have grown much more prominent. US policy continues to emphasize multinational approaches to addressing security issues, however the trend has been for the United States to play an ever more prominent role as the convener, governor, and quartermaster of joint action.
Topic:
Security, Defense Policy, and Debt
Political Geography:
United States

83. Strategic Adjustment to Sustain the Force: A survey of current proposals.

Author:
Charles Knight
Publication Date:
10-2011
Content Type:
Policy Brief
Institution:
Project on Defense Alternatives
Abstract:
The essential challenge in the art of strategy is how to achieve objectives within the demanding reality of resource constraints. Agile strategists must always be prepared for changing resource conditions and quickly adapt accordingly.
Topic:
Security, Defense Policy, and Debt
Political Geography:
United States

84. Pentagon cuts in context: No reason for "doomsday" hysteria

Author:
Carl Conetta
Publication Date:
10-2011
Content Type:
Policy Brief
Institution:
Project on Defense Alternatives
Abstract:
Recent Obama administration defense budget requests and proposals all fall within a narrow range of possible expenditures for the 2013-2023 period. All have kept the Pentagon's base budget above Cold War spending peaks. The President's 13 April proposal is no exception. It is a modest step that, at best, aims to retract future budget plans by 6.5 percent or $400 billion. The resulting average annual Pentagon base budget f or 2013-2023 would be close to today's level in real terms. The President's slice into non-security discretionary spending plans is audacious by comparison, reversing the proportionately suggested by his Fiscal Commission, and increasing the proportion of discretionary spending allocated to the Pentagon. The President's proposed new constraints on Pentagon budget growth hardly risk America's role in the world, as some contend, and by themselves do not necessitate a strategic review. Still, the President's launch of a such a review is a welcome development. It can help return America' s military posture to a reasonable and sustainable footing – provided that it elicits broad debate, solicits alternative viewpoints, and reaches beyond a $400 billion crease in the Pentagon's future budget plans.
Topic:
Defense Policy, Cold War, and Debt
Political Geography:
United States and America

85. Continuing Resolution: Congress Goes Easy on DoD Rebalances Budget in Pentagon's Favor

Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Project on Defense Alternatives
Abstract:
The struggle over a full-year Continuing Resolution (CR) shows that both houses of congress are “going light” on DoD, pointing toward a discretionary budget balanced more heavily in favor of the Pentagon. Within the so-called “security basket,” International Affairs is set to be the big loser. Setting aside war costs, the Pentagon budget constitutes about 50% of discretionary spending. The Pentagon accounted for an even greater proportion of the rise in discretionary spending during the past ten years of debt accumulation. Nonetheless, both the House and Senate efforts to cut spending for FY-2011 allocate much less than 50% of the pain to DoD's base expenditures. The House allocates only 15% of its proposed cuts to DoD. The Senate, about 38%.
Topic:
Security, Defense Policy, and Debt
Political Geography:
United States

86. The Pentagon and Deficit Reduction: FY-2012 Budget Retains Exceptional Level of Defense Spending

Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Project on Defense Alternatives
Abstract:
President Obama's 2012 budget plan maps out a future of steady increases for the National Defense account (apart from war costs, which the budget presumes will decline). The budget sets the base or peacetime portion of national defense to rise from $551.9 billion in 2010 to $637.6 billion in 2016 - a boost of about 15.5%. This increase exceeds the expected rate of inflation by about seven-tenths of a percent per year.
Topic:
Security, Defense Policy, and Debt
Political Geography:
United States

87. What Can and Cannot Be Done about Rating Agencies

Author:
Nicolas Véron
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Credit Rating Agencies (CRAs) are prominent participants in the assessment of credit risk by financial markets. They determine and publish credit ratings, which represent the CRA's opinions on issuers' relative probability of default. The market for credit ratings is currently dominated in most western countries by three players: n Standard Poor's (S) is a division of the McGraw- Hill Companies, a US-based media group whose ownership is dispersed (the largest shareholder is Capital Group, with 12 percent of shares); n Moody's Corporation is an autonomous US-based listed company with dispersed ownership (the largest shareholder is Berkshire Hathaway, with 12.5 percent of shares); n Fitch Ratings is a division of the Fitch Group which is jointly owned by Fimalac, a Paris-based listed investment vehicle (60 percent of shares), and the US-based Hearst Corporation (40 percent of shares).
Topic:
Debt, Economics, Globalization, International Trade and Finance, and Markets
Political Geography:
United States

88. Debt Relief for Egypt?

Author:
John Williamson and Mohsin S. Khan
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The current government of Egypt has frequently stated that external financial assistance is necessary in the present economic situation and has expressed a strong preference for receiving it in part via debt relief. The question asked in this policy brief is whether there is a case for debt relief and if so what form this relief should take. This policy brief reviews a number of cases in which debt relief has been granted to draw out the lessons and implications for Egypt.
Topic:
Debt, Economics, Regime Change, and Popular Revolt
Political Geography:
Arabia, Arab Countries, North Africa, and Egypt

89. Oil Exporters to the Euro's Rescue?

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, and Financial Crisis
Political Geography:
Europe

90. US Lessons for the Eurozone: Restoring Confidence through Transparency

Author:
Julie Chon
Publication Date:
12-2011
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
When it comes to resolving financial crises, size matters, but so does transparency. In both the US and European crises, the drive for size—firing off enough public funds to plug the hole in the financial system—has proven to be self-defeating as markets raise ever higher, unrealistic, and inappropriate expectations for government policy. This strategy addresses some of the economics and none of the politics of crisis management. The race to meet the size test distracts policymakers from addressing the real impediment to restoring investor and public confidence: the inherent uncertainty and lack of transparency associated with extraordinary government actions in times of crisis. The absence of transparent decision-making inflicts a costly blow to the credibility of policymakers because markets and citizens cannot see or believe what leaders are doing to stabilize the financial system.
Topic:
Debt, Economics, International Trade and Finance, and Financial Crisis
Political Geography:
United States and Europe

91. Botswana's Debt Sustainability: A Brief Narrative

Author:
Haile Taye
Publication Date:
03-2011
Content Type:
Policy Brief
Institution:
Botswana Institute for Development Policy Analysis
Abstract:
In terms of basic macroeconomic indicators, Botswana is, on the whole, in an enviable position relative to many African countries. The recent economic crisis notwithstanding, its growth rate has been more than average and its Balance of Payments position (as reflected in its foreign exchange reserves) has been impressive. Further, its exchange rate has been relatively stable compared to many middle and low income countries. Some of the weak points of the economy in recent years have been: (a) high inflation, even though it declined to a single digit in the last year (from 15% to about 7%); (b) relatively high unemployment for a fast growing economy (about 20%, according to the 2007 Informal Sector Survey); (c) stable financial sector, but with a wide spread between deposit and lending interest rates; and (d) lack of diversification, a heavy reliance on a few mineral products.
Topic:
Debt, Macroeconomics, Sustainability, and Economic Crisis
Political Geography:
Africa and Botswana

92. Will It Be Brussels, Berlin, or Financial Markets that Check Moral Hazard in Europe's Bailout Union? Most Likely the Latter!

Author:
Jacob Funk Kirkegaard
Publication Date:
10-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
So far so good for the European Union in preventing the Greek sovereign debt crisis from spiraling out of control in the short term. But with Greece in May 2010 requiring an unprecedented bailout from the European Union/IMF to avoid immediate default and 25 of the European Union's 27 member states currently subject to an “excessive deficit procedure” (European Commission 2010i), it remains evident that the European Union's existing fiscal surveillance framework patently failed both before and during the Great Recession and that Europe's leaders must head back to the drawing board for a required long term reform of the EU fiscal policy and surveillance framework.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Europe and Greece

93. Emerging Africa: How 17 Countries Are Leading the Way

Author:
Steven Radelet
Publication Date:
09-2010
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
There's good news out of Africa. Seventeen emerging countries are putting behind them the conflict, stagnation, and dictatorships of the past. Since the mid-1990s, these countries have defied the old negative stereotypes of poverty and failure by achieving steady economic growth, deepening democracy, improving governance, and decreasing poverty.
Topic:
Debt, Democratization, Development, Economics, and Poverty
Political Geography:
Africa

94. The NBRIC Revolution and International Relations?

Author:
Dr Graeme P. Herd and Mr Dale A. Till
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
The Geneva Centre for Security Policy
Abstract:
We live in the “Anthropocene” era – the Age of Humans: human activity impacts earth's at-mosphere, its climate system, and is the driver of one of the biggest mass extinctions in history.The rapid advancement and application of NBRIC technologies (Nanotechnology, Biotechnology, Robotics, and Information and Communications technology) both enable and exacerbate the global impact of human activity. The rise in speed and fall in the cost of computational analysis and the force multiplying convergence of NBRIC clusters have led revolutions in these inter-enabling technologies. Such technologies are located in biological systems where biotechnology and genetics, post-genomics, and epigenetics try and bridge the gulf between the genome and the or-ganism, and material systems, where advances in nanotechnology, robotics and information and communications technologies are ground-breaking.
Topic:
International Relations, Debt, Genocide, Politics, Science and Technology, and Power Politics

95. How Europe Can Muddle Through Its Crisis

Author:
Jacob Funk Kirkegaard
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
As Europe's financial market contagion spreads to systemically important eurozone members, the region is echoing with "end-game scenarios" (Johnson and Boone 2010) and demands for major new steps by European policymakers (Financial Times 2010). Among these would be a European "fiscal transfer union," a new common eurozone bond, action by the European Central Bank (ECB) to monetize sovereign debts, and finally a eurozone breakup itself.
Topic:
Debt, Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe

96. Lessons from the Asian Monetary Fund for the European Monetary Fund

Author:
Yonghyup Oh
Publication Date:
04-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The euro area is facing a challenge with Greece in danger of falling into sovereign default and some of its other members, the so-called 'GIPSY' nations, finding themselves in serious financial distress. Creation of a European Monetary Fund to deal more effectively with this type of situation is gaining support. This paper draws lessons from the Asian experience that might be applied to the current European development.
Topic:
Debt, Economics, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

97. Icon or Omen? Dubai's Debt Problem and the Gulf

Author:
Simon Henderson
Publication Date:
12-2009
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Late on November 25, just before the start of the Islamic Eid festival and, coincidentally, Thanksgiving in the United States, Dubai's flagship investment company Dubai World announced that it would be requesting a six-month delay on paying its debts. Within hours, Dubai's reputation was being rewritten, and its ambition to be a financial center, building on its historic reputation as a focal point for regional trade, was being recast. Uncertainty continued on November 30, when the Dubai government said that it would not guarantee Dubai World's debt. In any event, the larger story has been the nervousness of world financial markets, which are now also evincing worry about the debt of countries like Greece or Ireland. Within the Middle East, the focus is on the extent of support that Dubai will receive from Abu Dhabi, the neighboring -- and richer -- member sheikhdom of the United Arab Emirates (UAE), whether other city-states like Bahrain and Qatar are also at risk, and whether Dubai's links with Iran will change as a result of its financial situation.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
United States, Iran, Middle East, Arabia, Bahrain, Dubai, and Abu Dhabi

98. US Interests and the International Monetary Fund

Author:
C. Randall Henning
Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The United States Congress is now considering whether to raise US commitments to the International Monetary Fund (IMF). A positive decision would ratify President Obama's pledge in early April, taken with the other leaders of the G-20, to bolster the IMF as part of their cooperative response to the global economic crisis. The package of measures advanced by the G-20 leaders would triple the resources available to the Fund to $750 billion and would greatly reinforce its role in the international financial system. However, the IMF remains a controversial institution and congressional support cannot be taken for granted.
Topic:
Debt, Monetary Policy, and Financial Crisis
Political Geography:
United States

99. Synchronized Dive into Recession: Focus on Damage Limitation

Author:
Vanessa Rossi
Publication Date:
10-2008
Content Type:
Policy Brief
Institution:
Chatham House
Abstract:
The global financial system has suffered a once-in-a-century meltdown that almost brought the world economy to a halt in late September. Confidence and trust have been shattered. In spite of concerted and extraordinary efforts on the part of central banks and political leaders, including recapitalizing the banks, it is not yet certain that the waves of panic and destruction have been halted. Many of the repercussions have yet to emerge, including possible legal action as well as economic damage. Even before this latest explosion, the leading OECD economies were plunging into an unusually synchronized recession, driven by the simultaneous collapse in consumer and business spending. This will now get worse.
Topic:
Debt, Economics, Globalization, International Political Economy, and Markets

100. Defense Monitor, Vol. XXXVII, No. 2 - March/April 2008

Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
Center for Defense Information
Abstract:
The new 2009 defense budget has just been released. The more you look into the numbers, the more things become unclear, very unclear. Most of the numbers that have been released are inaccurate or incomplete, or both. Other numbers will change as the year progresses, but we do not know if they will go up or down.
Topic:
Security, Defense Policy, Arms Control and Proliferation, Debt, Nuclear Weapons, and Weapons of Mass Destruction