The transition times of the banking system in South-eastern Europe

The paper analyses the commercial banking sector's development in southeastern Europe during the transition period. The transition of the banking sector evolved - or is still evolving - parallel with the general economic transition. However, due to its complexity and the widespread factors that influence its activity, its development was a slow and gradual process with occasional systemic meltdowns. The paper proves that despite the different legacies, initial condition, applied economic policies, and historical events, the banking sector's structure became similar in all country cases by the end of the transition period. This similarity could be explained by the mutual challenges and the financial globalisation.

A comprehensive approach to the euro-area debt crisis

The euro area‘s sovereign debt crisis continues though significant steps have been taken to resolve it. This paper proposes a comprehensive solution to the crisis based on three pillars: a plan to restore banking sector soundness in the whole euro area, a resolution of sovereign debt crisis -including a revision of EU assistance facilities and a reduction of the Greek public debt- and a strategy to foster growth and competitiveness. The paper provides novel estimates and analysis focusing on the current situation of Greece, Ireland, Portugal and Spain.

Monetáris hatásosság közösségi szinten (The community level efficiency of monetary policy)

A monetáris integráció központi szereplője a Közösség jegybankja. A közös valuta értékállóságának közvetlenül fő meghatározója a jegybank. Mozgásterét azonban több tényező alakítja. E tanulmány az intézményi és stratégiai, a tagállami (decentralizált fiskális) és a pénzpiaci környezet függvényében vizsgálja az Európai Központi Bank (ECB) lehetőségeit és monetáris politikájának hatásosságát. / === / The efficiency of the European Economic and Monetary Union is a big dilemma of European applied economics. The first part introduces the monetary policy made by ECB. Rates and objectives are the framework of efficiency analysis. The second part details the common pool resource problem in the community of EMU countries, and describes the prisoner's dilemma of indebting in a currency community. The EMU practice shows free riding behavior of many member states what generally causes higher default risks. The increasing indebtedness shows dysfunction too, as the ECB must adjust the interest rate to the higher default risk which means cost premiums for fiscally disciplined countries as well. The third part analyses the efficiency of the ECB through the standards of monetary transmission. The updated criteria can explain any success or failure of the ECB in a not perfectly homogeneous community. The measures of transmission used in the study are the way of financing (banks vs. market), terms of financing, structure of the banking sector, private sector indebtedness, structure of savings and wealth, price elasticity, interest rate elasticity, wage elasticity. They show that the single monetary policy can create tension in the community not only because of the fiscal differences but also due to money market discrepancies.

Europe’s Growth Emergency

Highlights: • The European Union growth agenda has become even more pressing because growth is needed to support public and private sector deleveraging, reduce the fragility of the banking sector, counter the falling behind of southern European countries and prove that Europe is still a worthwhile place to invest. • The crisis has had a similar impact on most European countries and the US: a persistent drop in output level and a growth slowdown. This contrasts sharply with the experience of the emerging countries of Asia and Latin America. • Productivity improvement was immediate in the US, but Europe hoarded labour and productivity improvements were in general delayed. Southern European countries have hardly adjusted so far. • There is a negative feedback loop between the crisis and growth, and without effective solutions to deal with the crisis, growth is unlikely to resume. National and EU-level policies should aim to foster reforms and adjustment and should not risk medium-term objectives under the pressure of events. A more hands-on approach, including industrial policies, should be considered.

Európai Unió: túlélés vagy távlati tervezés – az állam változó szerepei (European Union – survival or long term planning?)

Az EU-ban, a mai állapotok szerint, csak „transzferunióról” beszélhetünk és nem egységes piacról. Az eurós pénzfolyamatok eltorzítva közvetítik a versenyképességet is: mind az árukban és vagyontárgyakban, mind – főleg – a pénzügyi eszközökben megtestesült munkákat/teljesítményeket rosszul árazzák. Egy ilyen keretben különösen könnyen alakul ki az, amit potyautas-problémának nevezünk, vagyis ahol tényleges vagy mérhető teljesítményleadás, vagy éppen fizetés nélkül lehet fogyasztani, és túl olcsón lehet szabad forrásokhoz jutni. Az eurózóna számos közvetítő mechanizmusában is tökéletlen. A sok, szuverénadósság-présbe került tagország között van kicsi, közepes és nagy is. Ez a tény, valamint az általános növekedési és munkapiaci problémák, egyértelműen „rendszerszintű zavarokat” jeleznek, amelyeket ebben a dolgozatban teljesítmény közvetítési-átviteli problémának hívunk, és ezért egy szokatlan, ám annál beszédesebb, elektromosenergia-átviteli rendszeranalógiával segítünk értelmezni. Megmutatjuk, hogy egy jó nagyvállalat miért jobb pénzügyi tervező, mint egy azonos méretű állam. _____ Why are ill-defined transfer mechanisms diverting valuable assets and resources to the wrong destination within the EU? Why do we witness ongoing pressure in the EU banking sector and in government finances? We offer an unusual answer to these questions: we apply an analogy from physics (from an electric generation and distribution network) to show the transmission inefficiency and waste, respectively, of the EU distribution mechanisms. We demonstrate that there are inherent flaws in both the measurement and in the distribution of assets and resources amongst the key EU markets: goods, money and factor markets. In addition, we find that when international equalizer mechanism is at work (cohesion funds allocated), many of these equity functions are at risk with respect to their reliable measurement. Especially are at risk the metered load factors, likewise the loss/waste factors. The map of desired outcomes does not match the real outcome, since EUtransfers in general are put to work with low efficiency.

A Tale of Three Countries: Recovery after Banking Crises

Highlights: • Iceland, Ireland and Latvia experienced similar developments before the crisis, such as sharp increases in banks’ balance sheets and the expansion of the construction sector. However the impact of the crisis was different: Latvia was hit harder than any other country in the world. Ireland also suffered heavily, while Iceland came out from the crisis with the smallest fall in employment, despite the greatest shock to the financial system. • There were marked differences in policy mix: currency collapse in Iceland but not in Latvia, letting banks fail in Iceland but not in Ireland, and the introduction of strict capital controls only in Iceland. The speed of fiscal consolidation was fastest in Latvia and slowest in Ireland. • Economic recovery has started in all three countries and there are several encouraging signals. The programme targets in terms of fiscal adjustment, structural reforms and financial reform are on track in all three countries. • Iceland seems to have the right policy mix. • Internal devaluation in Ireland and Latvia through wage cuts did not work, because privatesector wages hardly changed. The productivity increase was significant in Ireland and moderate in Latvia, yet was the result of a greater fall in employment than the fall in output, with harmful social consequences. • The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model is the right choice. • There is a strong case for a European banking federation.

A fenntartható fejlődés elvei és azok érvényre jutása a banki gyakorlatban II. rész (The principles of sustainable development and their realization in the banking practice II. part)

Az utóbbi évtizedben a környezettudatos gazdálkodás szerepének felértékelődése új tevékenységi területet nyitott meg a bankok előtt, amit nemzetközi szóhasználattal élve green banking-nek neveznek. A fenntartható fejlődést támogató projektek banki finanszírozása számos lehetőséget nyit a pénzügyi intézmények számára – hírnév, új ügyfélbázis, kockázatcsökkentés, jövedelmezőség növelése –, amennyiben a bankok a fenntarthatóság elveit megfelelően integrálják működési stratégiájukba. A cikksorozat második részében a szerzők a bankok fenntartható működését támogató külső és belső motiváló tényezőit veszik vizsgálat alá, amelyet már nemzetközi elvek és megállapodások is szabályoznak és támogatnak. Kiemelt fontosságot tulajdonítanak a környezettudatos gazdálkodás banki stratégiába történő integrálásának, melynek alapjait teremthetik meg a cikkben vizsgált nemzetközi irányelvek. ________ In the last decade, a lot of publications came to light, dealing with the social and environmental responsibility of financial institutions. Banks are expected to improve their competitive advantage by demonstrating economic development, while promoting environment care and social responsibility. This sustainable finance means to manage environmental and social risks in corporate lending and project financing. Green financial institutions have developed a wide range of innovations that can support sustainable development. This article highlights a few external and internal factor that support this aim, and which are regulated by international principles. However the authors’ survey shows that in the relevant literature there are a lot of ways to define sustainability and its achievement. They suggest that all of them can be interpreted associated with green banking operation. The goal of this paper is to identify the role of financial institutions in achieving sustainable development, and stress its strategic importance. The authors also attempt to show, why and how can this sector become the promoter of sustainability.