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 Penetration of Financial Instability in Agricultural Credit and Leveraging. Factor Markets Working Paper No. 2, September 2011

This paper describes the aggregate rural capital markets of the EU and the main differences between the markets of its member countries. The results of our study suggest that the agricultural credit markets are still quite segmented and the segments are country- rather than currency- or region specific. Financial instability in Europe is also penetrating the agricultural sector and the variation of interest rates for agricultural credit is increasing across countries. Perhaps the most dramatic signal of growing financial instability is that the financial leverage (gearing rate) of European farms rose in 2008 by almost 4 percentage points, from 14 to 18%. The 4 percentage-point annual rise was twice the 2 percentage-point rise observed during the economic recession in the late 1980s and early 1990s. The distribution of the financial leverage of agriculture across countries does not, however, reflect the distribution of country-specific risk premiums in the manner that they are observed in government bond yields. Therefore, in those countries that have the weakest financial situation in the public sector and in which the bond markets are encumbered with high country-specific risk premiums, the agricultural sector is not directly exposed to a very large risk of increasing interest rates, since it is not so highly leveraged. For example in Greek and Spanish agriculture, the financial leverage (gearing) rate is only 0.6% and 2.2% respectively, while the highest gearing rates are found elsewhere (in Denmark), reaching 50%.

The Financial Crisis and the Future of the Eurozone. Bruges European Economic Policy (BEEP) Briefing 21/2010

The government debt crisis, erupted in the Eurozone in 2009, nearly led to the collapse of European monetary union. Now that this has been averted, the question is what should be done to make the Eurozone sustainable in the long run. The survival of the Eurozone hinges on the capacity of its leaders to improve the eurozone's governance. With the exception of Greece, the root cause of the government debt crisis has little to do with the poor performance of the SGP, rather, with unsustainable debt accumulation by private actors. Also, the method of convergence implicit in the SGP has not worked well – macroeconomic divergences have stubbornly remained for nearly a decade and several countries experienced boom and bust dynamics. Although strong declines in real interest rates may explain part of the story (but e.g. Italy did not experience boom & bust), self-fulfilling waves of optimism and pessimism which might be called 'animal spirits' and are of mainly national origin, seem a good candidate for explanation. These national animal spirits endogenously trigger credit expansion and contraction. It follows that (national) movements of credit ought to be under much firmer control and this is up to the monetary authorities, including the ECB. Critical recommendations for better governance of the Eurozone should therefore combine credible measures to maintain fiscal discipline over the medium term with such instruments as minimum reserve requirements to control the growth of bank credit as well as minimum reserve requirements in different national banking systems. Finally, the idea of adding more sanctions to the SGP may be ill-conceived since, in future, it might pre-empt national governments to come to the rescue of banks (under credible threats of contagion) and/or prevent a downward spiral in economic activity.

Agricultural Credit Market Institutions: A Comparison of Selected European Countries. Factor Markets Working Paper No. 33, January 2013

This paper describes and compares the institutional framework of the agricultural credit markets in selected European countries. The institutions can be both formal (rules, regulations, authorities and actors) and informal (norms, values and relations). They also interact and in situations where the formal institutions are weak, the informal ones increase in importance. The study is based on a questionnaire sent to agricultural financial experts in selected countries. The case studies show that credit regulations are typically general, with no specific regulations for the agricultural credit market. On the other hand, several countries support agricultural credit in various forms, implying that the governments do not perceive the general credit market to function in the case of agricultural firms. In a risk assessment, the most frequent reasons for rejecting a loan application are all linked to economic performance and the situation of the farmer. Personal characteristics, such as educational level or lack of experience, were generally perceived as less influential. Another interesting point when it comes to risk assessment is that in some countries the importance of asset-based lending compared with cash flow-based lending seems to differ when concerning a first-time applicant and when there is an application to extend a loan. To get an idea of the availability of credit, the loan-to-value (LTV) ratio was calculated, and it showed remarkably low values for Poland and Slovakia. For all the countries, the calculated value was lower than what the financial experts would have expected. This might imply credit rationing in agriculture in some of the countries studied. The financial experts all judged the possibility of an agricultural firm obtaining a loan as higher than that for other small rural firms, implying that the latter are also credit-rationed.

Benchmarking the Financial Sector in the Southern and Eastern Mediterranean Countries and Projecting 2030 Financial Sector Scenarios. MEDPRO Technical Report No. 31/March 2013

This paper aims at devising scenarios for the development of the financial system in the southern and eastern Mediterranean countries (SEMCs), for the 2030 horizon. The results of our simulations indicate that bank credit to the private sector, meta-efficiency and stock market turnover could reach at best 108%, 78% and 121%, respectively, if the SEMCs adopt the best practices in Europe. These scenarios are much higher than those of the present levels in the region but still lower than the best performers in Europe. More specifically, we find that improving the quality of institutions, increasing per capita GDP, opening further capital account and lowering inflation are needed to enable the financial system in the region to converge with those of Europe.

Debating the European debt crisis: Government leadership, party ideology and supranational integration as focal points of parliamentary debates in Austria, Germany and the United Kingdom. ACES Cases No. 2012.3

Parliamentary debates about the resolution of the EU debt crisis seem to provide a good example for the frequently assumed “politicizationˮ of European governance. Against this background, the paper argues that in order to make sense of this assumption, a clearer differentiation of three thematic focal points of controversies – with regard to the assessment of government leadership, concerning the debate between competing party ideologies within the left/right dimension, and with regard to the assessment of supranational integration – is needed. Applying this threefold distinction, the paper uses a theory of differential Europeanization to explain differences in the thematic structure of debates in the Austrian Nationalrat, the British House of Commons, and the German Bundestag. Empirically, the paper is based on data gained from the computer-based coding of plenary debates about the resolution of the European debt crisis between 2010 and 2011.

Development of Multisector Alliances (MSAs): Organization and Leadership. ACES Working Papers, 2012

The research team reviewed numerous several multi- sectoral entities and identified nine GGNs that became the subject of our case studies. The research team conducted semi-structured interviews with executives and staff from each of these GNNs and prepared a profile, including a description of the unique evolution of the organization, goals and objectives, organizational structure and governance arrangements for each GGN. The following list provides an overview of the nine GGNs profiled: 1. Every Woman Every Child is an unprecedented global effort that mobilizes and amplifies action by governments, multilaterals, the private sector, research centers, academia and civil society to address life-threatening health challenges facing women and children globally. 2. HERproject catalyzes global partnerships and local Networks to improve female workers’ general and reproductive health in eight emerging economies. 3. R4 Rural Resilience Initiative is a cutting-edge, strategic, large-scale partnership between the public and private sectors to innovate and develop better tools to help the world’s most vulnerable people build resilient livelihoods. 4. Extractive Industry Transparency Initiative is a coalition of governments, companies, civil society groups, investors and international organizations that aims to improve transparency and accountability in the extractives sector. 5. Global Network for Neglected Tropical Diseases works with international partners at the highest level of government, business and society to break down the logistical and financial barriers to delivering existing treatments for the seven most common neglected tropical diseases. 6. Global Alliance for Improved Nutrition is an alliance that supports public-private partnerships to increase access to the missing nutrients in diets necessary for people, communities and economies to be stronger and healthier. 7. Inter-Agency Network For Education in Emergencies is a global Network of individuals and representatives from NGOs, United Nations and donor agencies, governments, academic institutions, schools and affected populations working to ensure all persons have the right to a quality and safe education in emergencies and post- crisis recovery. 8. mHealth Alliance works with diverse partners to advance mobile-based or mobile-enhanced solutions that deliver health through research, advocacy, support for the development of interoperable solutions and sustainable deployment models. 9. The Rainforest Alliance is a global non-profit that focuses on environmental conservation and sustainable development and works through collaborative partnerships with various stakeholders.

Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter? CES Germany & Europe Working Papers, No. 00.8, December 2000

This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some DECO-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unem­ployment than most continental-European DECO-countries. It is argued that the often-blamed labor market rigidities alone, while important, do not provide a satisfactory explanation for these differ­ences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the "new economy". Highly developed venture capital markets should help to alleviate such financial constraints. This view that labor-market institutions should be sup­plemented by capital market imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant insti­tutional variable.

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.

Ukraine on the financial front – the problem of Ukraine’s foreign public debt. OSW COMMENTARY NUMBER 178|05.08.2015

One of the key challenges that Ukraine is facing is the scale of its foreign debt (both public and private). As of 1st April it stood at US$ 126 billion, which is 109.8% of the country’s GDP. Approximately 45% of these financial obligations are short-term, meaning that they must be paid off within a year. Although the value of the debt has fallen by nearly US$ 10 billion since the end of 2014 (due to the private sector paying a part of the liabilities), the debt to GDP ratio has increased due to the recession and the depreciation of the hryvnia. The value of Ukraine’s foreign public debt is also on the rise (including state guarantees); since the beginning of 2015 it has risen from US$ 37.6 billion to US$ 43.6 billion. Ukraine does not currently have the resources to pay off its debt. In this situation a debt restructuring is necessary and this is one of the top priorities for the Ukrainian government as well as for the International Monetary Fund (IMF) and its assistance programme. Without this it will be much more difficult for Ukraine to overcome the economic crisis.

Financial regulation in the European Union: A research agenda. CES Papers - Open Forum #10, 2012

Over the past two decades, the European Union (EU) has become a central actor in financial regulation and developed complex institutions to fulfill its roles. Pre-financial crisis scholarship has provided key insights into the functioning of this institutional cobweb and its evolution over time. However, the financial crisis has highlighted four facets of EU financial regulation (EUFR) that deserve more scholarly attention than they have received so far: (1) the permissive pre-crisis consensus on the merits of financial liberalization and integration, (2) the embeddedness of financial regulation in the political economy of EU integration at large, (3) preference formation of public and private stakeholders in EUFR, and (4) the global economic and regulatory context of EUFR. This paper presents the key scholarly challenges across these four areas. Addressing them promises not only academic insights but also promotes the relevance of EUFR research for real-world policy dilemmas.

Saving the Banks: The Political Economy of Bailouts. CES Papers - Open Forum #8, 2012

How much leeway did governments have in designing bank bailouts and deciding on the height of intervention during the 2007-2009 financial crisis? This paper analyzes comparatively what explains government responses to banking crises. Why does the type of intervention during financial crises vary to such a great extent across countries? By analyzing the variety of bailouts in Europe and North America, we will show that the strategies governments use to cope with the instability of financial markets does not depend on economic conditions alone. Rather, they take root in the institutional and political setting of each country and vary in particular according to the different types of business-government relations banks were able to entertain with public decision-makers. Still, “crony capitalism” accounts overstate the role of bank lobbying. With four case studies of the Irish, Danish, British and French bank bailout, we show that countries with close one-on-one relationships between policy-makers and bank management tended to develop unbalanced bailout packages, while countries where banks have strong interbank ties and collective negotiation capacity were able to develop solutions with a greater burden sharing from private institutions.

State Transformation and the European Integration Project. Lessons from the financial crisis and the Greek paradigm. CEPS Special Report No. 130/February 2016

The financial crisis that erupted in the eurozone not only affected the EU’s financial governance mechanisms, but also the very nature of state sovereignty and balances in the relations of member states; thus, the actual inequalities between the member states hidden behind their institutional equality have deteriorated. This transformation is recorded in the case law of the Court of Justice of the European Union and the member states’ constitutional courts, particularly in those at the heart of the crisis, with Greece as the most prominent example. It is the issue of public debt (sovereign debt) of the EU member states that particularly reflects the influence of the crisis on state sovereignty as well as the intensely transnational (intergovernmental) character of European integration, which under these circumstances takes the form of a continuous, tough negotiation. The historical connection between public debt (sovereign debt) and state sovereignty has re-emerged because of the financial crisis. This development has affected not only the European institutions, but also, at the member state level, the actual institutional content of the rule of law (especially judicial review) and the welfare state in its essence, as the great social and political acquis of 20th century Europe. From this perspective, the way that the Greek courts have dealt with the gradual waves of fiscal austerity measures and structural reforms from 2010 to 2015 is characteristic. The effect of the financial crisis on the sovereignty of the member states and on the pace of European integration also has an impact on European foreign and security policy, and the correlations between the political forces at both the national and European level, thus producing even more intense pressures on European social democracy. In light of the experience of the financial crisis, the final question is whether the nation state (given the large real inequalities among the EU member states) currently functions as a brake or as an engine for future European integration.

Financial assistance to Greece: Three programmes. EPC Discussion Paper, 26 February 2016

There are a lot of myths surrounding the bailout money that was given to Greece. Many people still believe that the money never went to the Greek people, but to the Greek and European banks; that the intervention of the euro-area governments and the IMF dealt almost exclusively with the Greek debt; that very little money was used to finance Greek public expenditure; that most Greek debt was reimbursed; that no cuts were made to the stock of Greek government bonds on the market; and, finally, that so far, no cuts have been made to the debt of the Greek state towards the euro-area countries. In this Discussion Paper, Fabio Colasanti debunks some of those myths by taking stock of the numbers behind the financial support given to Greece by the countries of the euro-area and the IMF. Examining the three bailout programmes in detail, he discusses the reasons for and against a restructuring of the Greek public debt in 2010, its implementation in 2012, the degree in which the Greek debt towards the euro-area countries has already been cut, and the scope for further cuts. Finally, the paper explains how both issues were and are still dominated by internal political considerations, both in the creditor countries and in Greece.

The debt, the stock market and the state-owned enterprises. The sources of chaos on the Chinese financial markets. OSW Commentary NUMBER 201/16.03.2016

The government’s extensive programme for stimulating the economy has enabled China to maintain high economic growth after the global financial crisis in 2008. However, this success has come at the price of a number of negative economic phenomena and the consequences they have had are the major challenge for the government today. The vast programme of investments in infrastructure, construction and fixed assets, which has been the main source of economic growth over the past few years, has caused a rapid increase in China’s debt from 158% of GDP in 2007 to 282% in 2014. Along with the local governments in charge of implementing the programme, the Chinese sector of state-owned enterprises (SOEs) has been heavily burdened by the stimulation policy. The sector’s profitability has fallen, its indebtedness has increased and management problems have been revealed.