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102. 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 (FIIA)
- 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
103. Fiscal Asymmetries and the Survival of the Euro Zone
- Author:
- Paul R. Masson
- Publication Date:
- 12-2011
- Content Type:
- Working Paper
- Institution:
- Centre for International Governance Innovation (CIGI)
- Abstract:
- The independence of the European Central Bank (ECB), seemingly guaranteed by its statutes, is presently under attack. The ECB has been led to acquire large amounts of government debt of the weaker euro zone members, both to help contain their interest costs and to help protect the solvency of banks throughout the zone that hold their debt. This paper presents a model of a dependent central bank that internalizes the government's budget constraint. Using a Barro-Gordon framework, the model embodies both the desire to stimulate output and to provide monetary financing to governments. As a result of the inability to pre-commit to first-best policies, the central bank produces excess inflation — a tendency partially reduced in a monetary union. The model implies that not only shock asymmetries, but also fiscal asymmetries, are important in the membership calculus of desirable monetary unions. On the basis of this framework, calibrated to euro zone data, the current membership is shown not to be optimal: other members would benefit from the expulsion of several countries, notably Greece, Italy and France. A narrow monetary union centred around Germany is sometimes mooted as a preferable alternative, especially if it could guarantee central bank independence. However, simulation results suggest that such a narrow monetary union would not be in Germany's interest: though better than the euro zone with a dependent central bank, it would not internalize enough trade to make it more attractive than the resumption of monetary autonomy by Germany.
- Topic:
- Debt, Economics, Monetary Policy, and Governance
- Political Geography:
- Europe, Greece, France, Germany, and Italy
104. Outward FDI from Greece and its policy context
- Author:
- Aristidis P. Bitzenis and Vasileios A. Vlachos
- Publication Date:
- 12-2011
- Content Type:
- Working Paper
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- With the fall of centrally planned economies in the Balkans, their liberalization and the opening of their borders to free trade and capital movements, Greece became more active in the generation of outward foreign direct investment (OFDI). Greece's OFDI stock increased from US$ 3 billion in 1990 to US$ 6 billion in 2000 and to US$ 38 billion in 2010. The Europeanization process of Turkey and the transition of the economies in the Balkans was accompanied by a gradual rise of FDI from Greece into those economies. More than half of Greece's OFDI stock – over US$ 20 billion in 2009 (67% of total) – is located in South-East Europe: in the Balkans, Cyprus and Turkey. While Greece's early OFDI flows were directed to the secondary sector to reduce costs, the bulk of later flows was directed to the services sector, as new markets were opened. This shift signifies the rise of major corporate players. The Greek Balkan policy, which commenced through the European Union, and the upgrading of the Athens Stock Exchange have positively affected Greece's position as a key regional investor. The expectations for sustaining this leading role, however, have been weakened recently since, due to the Greek sovereign debt crisis, Greek multinational enterprises (MNEs) disinvested US$ 1.6 billion from their FDI abroad in 2010.
- Topic:
- Debt, Economics, Foreign Direct Investment, and Financial Crisis
- Political Geography:
- Europe, Turkey, Greece, Balkans, and Cyprus
105. 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
106. The Reform of European Economic Governance : Towards a Sustainable Monetary Union?
- Author:
- Stijn Verhelst
- Publication Date:
- 06-2011
- Content Type:
- Working Paper
- Institution:
- EGMONT - The Royal Institute for International Relations
- Abstract:
- The euro is a rather unusual currency as it is shared by a union of largely independent states. This results in a single supranational monetary union, while most 'economic' matters are decided on a national level. A key challenge in such a system is to ensure that the different levels of decision-making do not undermine the advantages of the common currency. For this reason, the European monetary union has been buttressed by economic integration, resulting in the Economic and Monetary Union (EMU).
- Topic:
- Debt, Economics, Monetary Policy, Financial Crisis, and Governance
- Political Geography:
- Europe
107. Renewed Financial Supervision in Europe – Final or transitory?
- Author:
- Stijn Verhelst
- Publication Date:
- 03-2011
- Content Type:
- Working Paper
- Institution:
- EGMONT - The Royal Institute for International Relations
- Abstract:
- In order to obtain financial sector stability, adequate financial regulation and supervision are paramount. Despite their crucial role, both failed to prevent or at least mitigate the financial crisis. While financial regulation strives to impose a set of rules that ensure a safe and resilient financial sector, it has proven to contain too many gaps and loopholes.
- Topic:
- Debt, Economics, Markets, Monetary Policy, Financial Crisis, and Governance
- Political Geography:
- Europe
108. 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
109. European Debt Crisis: What Is The Way Out
- Author:
- Charles Wyplosz
- Publication Date:
- 03-2011
- Content Type:
- Working Paper
- Institution:
- Center for Social and Economic Research - CASE
- Abstract:
- "The current European debt crisis is just bringing to the fore well-defined cracks in the Eurozone’s construction. Fiscal discipline was left in the careless hands of national governments, banking regulation and supervision was delegated to national authorities more interested in promoting national champions than in completing the Single Market. Moreover, crisis management was masterminded not by the Commission but by national governments. This leaves panicked policymakers with the firm view that economics is largely useless and that any policy can be pursued if it makes good political sense."
- Topic:
- Debt, Globalization, Markets, Macroeconomics, and Economic Integration
- Political Geography:
- Europe
110. 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