The Political Economy of Financial Crisis Policy. Bruegel Working Paper 2015/06, July 2015

Highlights • Government intervention to stabilise financial systems in times of banking crises ultimately involves political decisions. This paper sheds light on how certain political variables influence policy choices during banking crises and hence have an impact on fiscal outlays. • We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. • Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors.

Banks and the political economy of the sovereign debt crisis in Italy and Spain. CES Papers - Open Forum #18, 2013-2014

This paper sets out to explain why Spain experienced a full-fledged sovereign debt crisis and had to resort to euroarea financial assistance for its banks, whereas Italy did not. It undertakes a structured comparison, dissecting the sovereign debt crisis into a banking crisis and a balance of payments crisis. It argues that the distinctive features of bank business models and of national banking systems in Italy and Spain have considerable analytical leverage in explaining the different scenarios of the crises in each country. This ‘bank-based’ analysis contributes to the flourishing literature that examines changes in banking with a view to account for the differentiated impact of the global banking crisis first and the sovereign debt crisis in the euroarea later.

Why EU promotion is at odds with successful crisis management: public relations, news coverage, and the Aceh Monitoring Mission. EU Centre in Singapore Working Paper No. 10, September 2012

The EU’s Common Foreign and Security Policy (CFSP) and its accompanying Common Security and Defence Policy (CSDP) missions can be tools used to increase the international profile of the European Union. Nevertheless, CSDP missions garner little news coverage. This article argues that the very nature of the missions themselves makes them poor vehicles for EU promotion for political, institutional, and logistical reasons. By definition, they are conducted in the middle of crises, making news coverage politically sensitive. The very act of reporting could undermine the mission. Institutionally, all CSDP missions are intergovernmental, making press statements slow, overly bureaucratic, and of little interest to journalists. Logistically, the missions are often located in remote, undeveloped parts of the world, making it difficult and expensive for European and international journalists to cover. Moreover, these regions in crisis seldom have a thriving, local free press. Using the Aceh Monitoring Mission (AMM) as a case study, the author concludes that although a mission may do good, CSDP missions cannot fulfil the political function of raising the profile of the EU.

National Parliaments and their Role in European Integration: The EU’s Democratic Deficit in Times of Economic Hardship and Political Insecurity. Bruges Political Research Paper 28/2013

The article describes and assesses the role of national parliaments in EU legislation considering the reforms introduced by the Lisbon Treaty. This is closely connected with the understanding and (political) application of the principle of subsidiarity. After an analysis of the possibilities and limitations of the relevant legal regulations in the post-Lisbon age, alternative ways for participation of national legislators on the European level are being scrutinized and proposed. The issue of democratic legitimization is also interconnected with the current political reforms being discussed in order to overcome the Euro Crisis. Finally, the authors argue that it does not make sense to include national parliaments in the existing legislative triangle of the EU, but instead to promote the creation of a new kind of supervisory body.

The European Citizens‘ Initiative – Chances, Constraints and Limits. IHS Political Science Series No. 134, April 2013

In order to celebrate the 20th anniversary of the establishment of European Union citizenship under the Maastricht Treaty in 1993, the year 2013 has been designated by the European Commission as the ‘European Year of Citizens’. The European Citizen’s Initiative (ECI) – labelled by the Commission as a ‘direct gateway through which citizens can make their voices heard in Brussels’ - may emerge in the European awareness as a new appealing platform for policy-shaping and communication. The ECI, through its transnational vox civilis character, figures among the most important novelties in the Lisbon Treaty and in the long run may facilitate and accelerate the bottom-up building of a European demos. The question is, however, whether the mechanism of pan-European signature collection is strong enough to face the democratic challenges present in the EU, especially during the ongoing financial crisis.

Transforming Power Relationships: Leadership, Risk, and Hope. IHS Political Science Series No. 135, May 2013

Chronic communal conflicts resemble the prisoner’s dilemma. Both communities prefer peace to war. But neither trusts the other, viewing the other’s gain as its own loss, so potentially shared interests often go unrealized. Achieving positive-sum outcomes from apparently zero-sum struggles requires a kind of riskembracing leadership. To succeed leaders must: a) see power relations as potentially positive-sum; b) strengthen negotiating adversaries instead of weakening them; and c) demonstrate hope for a positive future and take great personal risks to achieve it. Such leadership is exemplified by Nelson Mandela and F.W. de Klerk in the South African democratic transition. To illuminate the strategic dilemmas Mandela and de Klerk faced, we examine the work of Robert Axelrod, Thomas Schelling, and Josep Colomer, who highlight important dimensions of the problem but underplay the role of risk-embracing leadership. Finally we discuss leadership successes and failures in the Northern Ireland settlement and the Israeli-Palestinian conflict.

Macedonia - A country in crisis. CEPS Policy Brief No. 299, 13 September 2013

Macedonia is a country in deep trouble. There is a climate of mistrust between all the political parties; intolerance of minority groups is increasing and fear is also generated by the all-pervasive control of the main governing party. In 2009 the European Commission recommended that a date be set for accession negotiations to start, but since then the country's efforts to join the EU (and NATO) have been blocked. Author Erwan Fouéré sets out ten clear recommendations for both Macedonia and the EU on the way forward.

spotlight europe # 2014/01 — February 2014: North Africa - Crisis and Consensus

The Arabellion is now in its fourth year. There is more freedom today, but less security. There are far more opportunities, but fewer jobs. And there is a patchwork of conflicts. In many places though the Arab world is tentatively moving towards democracy and the social market economy. Although there have been some difficulties along the way, European assistance for the transformation process is moving in the right direction. Still, the EU could certainly do more on the political level.

What role for migration policy in the Ukraine crisis? CEPS Commentaries, 27 March 2014

While the geopolitics of the Ukraine crisis have dominated headlines, little attention has been paid to the potential challenges arising from the movement of people from the region to the EU. Yet recent history should tell us this could be a grave oversight. As we witnessed during the Arab Spring in 2011, political upheaval can result in people fleeing their state in fear of persecution or seeking to leave their state in search of new horizons and economic opportunities. The EU would do well to learn from that experience and the policy failures that resulted from the Union’s response of closing its borders and returning people to Africa. This Commentary argues that it is critical that – independently of the still uncertain outcome of the Ukraine crisis – the EU formulates and implements a credible policy strategy addressing the potential impact and benefits of mobility between Ukraine and the EU.

Euroscepticism vs. Political Pragmatism: The Finns Party tones down its criticism of the EU. EPIN Commentary No. 19, 26 June 2014

While many Eurosceptic parties in Europe achieved historical successes in this year’s EP elections, Finland’s populist Finns Party was unable to fulfil its own high expectations. With the eurozone crisis at least temporarily subsiding and Finland’s own economy struggling, the party has been unable to find a new electoral trump card. Facing a changed political climate and stiffer competition, the party is currently toning down its criticism of the EU, as indicated by its recent decision to join the British Tories in the European Conservatives and Reformists (ECR) group.

DEMOCRACY AND CITIZENSHIP IN NORTH AFRICA AFTER THE ARAB AWAKENING: CHALLENGES FOR EU AND US FOREIGN POLICY (EUSPRING). Arab Citizenship Review No. 6, October 2014. EGYPT. The Return to Authoritarianism and the Crisis of Citizenship Rights

Citizenship and democratic rights have been shrinking in Egypt with the rise of president Abd El Fattah El Sisi, widely popular among Egyptians who fear more violence and unrest in an increasingly volatile region. In this EU Spring Policy Brief, Moataz El Fegiery examines the political landscape in the run-up of parliamentary elections, arguing that the short term is likely to see further curtailment of acquired rights, further crackdown on the opposition and consolidation of military power. In the longer term, however, it is in the interest of Egyptian society and institutions as well as of Europe to reverse the politics of exclusion and ensure that freedoms, pluralism and participation prevent the rise of extremism and political violence.

Government failure, opposition success? Electoral performance in Portugal and Italy at the time of the crisis. Jean Monnet Occasional Paper 05/2014

The costs of the crisis in Southern European countries have not been only economic but political. Economic crises tend to lead to government instability and termination while political challengers are expected to exploit this contingent window of opportunity to gain an advantage over incumbents in national elections. The current crisis seems to make no exception, looking at the results of the general elections recently held in Southern Europe. However, this did not always lead to a clear victory of the main opposition parties. In most of the elections, in fact, the incumbent parties’ loss did not coincide with the official opposition’s gain. The extreme case is represented by Italy, where both the outgoing government coalition led by Silvio Berlusconi – setting aside for the moment the technocratic phase – and its main challenger, the centre left coalition, ended up losing millions of voters and a new political force, the Five Star Movement, obtained about 25 per cent of votes. On the opposite side there is Portugal. Only in Portugal did the vote increase for the centre right PSD, in fact, exceed the incumbent socialists’ loss. The present work aims at exploring the factors which might account for this significant divergence between the two cases.

The crisis in Iraq and the twists and turns of Turkish Middle East policy. OSW Commentary No. 142, 29.07.2014

The spectacular offensive by Islamic radicals in Iraq this June has led the country to the verge of collapse, and is another scene of the deep crisis in the Middle East, in which Turkey is entangled. The immediate consequence of this is a severe crisis of prestige after the kidnapping by terrorists of Turkish diplomats and Ankara’s inability to resolve the situation; in the long term consequences include escalation of the Kurdish problem, and a further increase in threats to the security of Turkey itself as well as the fundamental principles of its foreign policy. Both Ankara’s options and its political will to actively respond to the crisis are extremely limited. Yet again in recent years, the current crisis, the broader situation in the Middle East, and finally the position of Turkey in the region elude unambiguous assessments and forecasts – these are prevented by the scale and growth of the reappraisals and tensions in the region. The only undoubted fact is that Turkey is strategically and irreversibly entangled in the Middle East’s problems, which are an important factor affecting the transformation of the state which the ruling AKP is implementing; and in the near future, this state of affairs will only deepen.

Partnership in times of crisis: challenges for the Eastern European countries' integration with Europe. OSW Point of View Number 36, July 2013

Over the four years since its launch, the Eastern Partnership initiative has created frameworks and mechanisms for the integration of Eastern Partnership countries with the European Union. Despite this, the partner countries have so far made little meaningful progress in modernisation, implementation of reforms or integration with the EU.Since the European Neighbourhood Policy was launched in 2004, the situation in areas of key importance for the EU, such as democratisation, free-market transformations, European integration, political stability and regional security, has not improved significantly. In this context, it is legitimate to ask questions about the extent to which the European Neighbourhood Policy and the Eastern Partnership have brought the Union closer to achieving its declared objectives in the relations with eastern neighbours. What is the underlying cause of the dwindling involvement and declining interest in achieving real progress in integration? How may the events that have been dominating the political agenda – i.e. the EU’s financial crisis, the debate on the future of the Union, but also the political processes taking place within the partner countries – affect the future of mutual relations?

'The power gained, we will never surrender': Russian ruling elite versus the succession and economic crisis. OSW Point of View (Policy Brief), October 2009

Even though the economic crisis proved harmful to the Russian economy and people's living standards, it has nonetheless failed to make the elite revise its policy. Despite some problems, the government has managed to sustain economic and political stability, thanks to the reserves it amassed in the times of prosperity, and to the propaganda campaign that protected it, above all Vladimir Putin. The crisis failed to force the elite to implement deeper structural and political reforms. Moreover, it has actually reinforced existing tendencies, such as state control over the economy and its oil-oriented character, the elite's economic expansion at the expense of private businesses, and the preservation of political power. Thus, the crisis has so far failed to dismantle Putinism, indeed quite the reverse - it has in fact contributed to its becoming 'set in stone'.