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31. Three Myths Behind the Case for Grexit: A Destructive Analysis

Author:
Photis Lysandrou
Publication Date:
06-2015
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Greece faces a stark choice: either to compromise on the terms laid down by its international creditors and thereby remain in the eurozone or reject any compromise on the terms and exit the eurozone. The Syriza government was elected in January, 2015, on the double promise that it would tear up the deeply unpopular memorandum imposed by the Troika while at the same keeping the euro. It was a promise that it could not keep. After several months of tough negotiations it has become clear that Greece's creditors, led by the German government, have no intention of accepting a renegotiated deal that substantively lightens Greece's debt burden and thus the need for the type of harsh austerity measures contained in the memorandum.
Topic:
Debt, Economics, Government, and Financial Crisis
Political Geography:
Europe and Greece

32. A Relationship and a Practice: On the French Sociology of Credit

Author:
Laure Lacan and Jeanne Lazarus
Publication Date:
02-2015
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
This paper aims to describe the social studies of credit developed in France over the past dozen years. We argue that this French sociology of credit, mostly centered on France, can be useful for researchers analyzing other countries, with other institutional particularities, because it proposes a specific method and a specific way to raise questions: credit is mostly understood as a result of social interactions embedded in organizational and legal structures. French researchers also deeply analyze the consequences of the organization of the credit market for inequalities, social stratification, and people’s life experiences. The first part of the paper focuses on works that have examined credit as a social test, looking at the institutional, technical, and social frameworks of money lending. Then, credit is understood as a sociological experiment: how is it integrated into household economies? How do people use forms of credit? Finally, the third part concentrates on credit failure, when a bank loan becomes a debt. This aspect is mostly framed in French sociology as “over-indebtedness,” which is an administrative and a social category. Throughout the paper, we address credit as both a relationship and a practice. This approach is heuristic, as we seek to demonstrate, because it enables us to show that credit is a social and political issue.
Topic:
Debt, Economics, Sociology, Inequality, and Credit
Political Geography:
Europe and France

33. 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

34. Sovereign Debt Crisis Management: Lessons from the 2012 Greek Debt Restructuring

Author:
Miranda Xafa
Publication Date:
06-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
The 2012 Greek debt exchange was a watershed event in the euro area debt crisis. It generated fears of contagion and was viewed as a threat to the euro itself. Although it achieved historically unprecedented debt relief, amounting to €106 billion (55 percent of GDP), it was “too little, too late” in terms of restoring Greece's debt sustainability. There is a heated debate as to whether the debt restructuring should have taken place sooner, when Greece's adjustment program was agreed to in May 2010. This paper argues that a deep haircut up front, under threat of legislative action, would have been seen as unnecessary and deeply coercive. But delaying the restructuring beyond mid-2011, when it became clear that Greece's debt was unsustainable, was unjustified. The delay reduced the stock of privately held debt subject to a haircut, possibly making an official debt restructuring inevitable down the road. Initial fears that the Greek debt restructuring would pose a serious threat to the euro area's financial stability proved to be exaggerated. On the contrary, it demonstrated that an orderly default involving a pre-emptive debt restructuring is possible in a monetary union, provided appropriate firewalls are in place to limit contagion risks. With crisis management institutions and procedures now in place in the euro area, and with much stricter fiscal surveillance, the Greek experience is likely to remain unique in the history of debt restructurings; however, some lessons can be learned from its specific features.
Topic:
Debt and Governance
Political Geography:
Europe and Greece

35. 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

36. 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 (CIGI)
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

37. 'Broken and Can't Be Fixed': The Impact of the Economic Crisis on the Greek Party System

Author:
Susannah Verney
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The International Spectator
Institution:
Istituto Affari Internazionali
Abstract:
The Greek election of May 2012 failed to produce a government, resulting in repeat elections six weeks later. This shock outcome was a symptom of a broader delegitimation of the national political system. Over the past decade Eurobarometer data show a much more extensive loss of confidence in political institutions in Greece than in the European Union as a whole. In a first phase, rising political discontent was managed within the traditional political framework through alternation in power between the two major parties. In contrast, the second phase, following the outbreak of the Greek sovereign debt crisis, led to the dramatic fragmentation of the party system and changed the mode of government formation. This process is not reversible and entails serious democratic dangers.
Topic:
Debt, Economics, and Government
Political Geography:
Europe and Greece

38. The Transatlantic Trade and Investment Partnership: Ambitious but Achievable

Author:
Garrett Workman and Tyson Barker
Publication Date:
04-2013
Content Type:
Working Paper
Institution:
Atlantic Council
Abstract:
As leaders in the United States and Europe prepare for the formal launch of Transatlantic Trade and Investment Partnership (TTIP) talks, the Bertelsmann Foundation and the Atlantic Council have conducted a survey of trade policy experts from the public and private sectors on both sides of the Atlantic to gauge their expectations for the results of negotiations. This policy brief examines the results of this survey and analyzes its policy implications in three possible scenarios. The United States and Europe have discussed a transatlantic free trade area in various guises for decades. But as negotiations for a new Transatlantic Trade and Investment Partnership (TTIP) begin, this time seems different. Both sides recognize the need to stimulate their stagnant economies in the aftermath of the financial and Eurozone crises. In an age of austerity, as debt and deficit problems have led to a major loss of market confidence in the United States and Europe's ability to recover in a sustainable manner, a deepened trade relationship marks a path forward without adding to national debt levels. Furthermore, the rise of the emerging markets—particularly China—which often subscribe to a different economic model focused on state-owned enterprises and government directed investment decisions, marks a historic decision-point for the transatlantic community.
Topic:
Debt, International Trade and Finance, and Reform
Political Geography:
United States, Europe, and Atlantic Ocean

39. The Greek Debt Restructuring: An Autopsy

Author:
Jeromin Zettelmeyer, Christoph Trebesch, and Mitu Gulati
Publication Date:
08-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The Greek debt restructuring of 2012 stands out in the history of sovereign defaults. It achieved very large debt relief— over 50 percent of 2012 GDP—with minimal financial disruption, using a combination of new legal techniques, exceptionally large cash incentives, and official sector pressure on key creditors. But it did so at a cost. The timing and design of the restructuring left money on the table from the perspective of Greece, created a large risk for European taxpayers, and set precedents—particularly in its very generous treatment of holdout creditors—that are likely to make future debt restructurings in Europe more difficult.
Topic:
Debt, Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Greece

40. 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