The Cost of Servicing Greece’s Debt: A Sisyphean task? CEPS Commentary, 4 February 2015

Following the victory of Syriza in the Greek elections on January 25th, policy-makers, economists and concerned EU citizens are scrambling to understand the causes, modalities and consequences of a possible Greek default in order to anticipate and prepare for what is likely to unfold in the coming weeks and months. The debate on the sustainability of Greek public finances has often been characterised by a lack of clarity and even a certain degree of confusion. This brief note focuses first on the cost that Greece faces in servicing its debt and then asks whether this is a manageable or a Sisyphean task. It concludes by reflecting on the political implications of the new government’s announced intentions and whether these are being taken into account in the current debate over debt restructuring.

A case for adjusting fiscal consolidation in the eurozone. European Policy Brief No. 14, January 2013

Fiscal consolidation is essential to ensure the sustainability of eurozone countries’ public debt. However, as a principle, consolidation should not be pursued at a pace unnecessarily undermining growth in the short term. Repeated downward revisions of growth call for the use of the flexibility foreseen in the EU fiscal framework. The Commission should adapt the deadlines for fiscal correction to prevent excessive, pro-cyclical adjustment in 2013. In turn, adequate surveillance and coordination must ensure structural adjustments constitute the core of fiscal consolidation plans.

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.

Imperial legacy? The EU's Developmental Model and the Crisis of the European Periphery. CES Papers - Open Forum #19, 2013-2014

The high hopes for rapid convergence of Eastern and Southern EU member states are increasingly being disappointed. With the onset of the Eurocrisis convergence has given way to divergence in the southern members, and many Eastern members have made little headway in closing the development gap. The EU´s performance compares unfavourably with East Asian success cases as well as with Western Europe´s own rapid catch-up to the USA after 1945. Historical experience indicates that successful catch up requires that less-developed economies to some extent are allowed to free-ride on an open international economic order. However, the EU´s model is based on the principle of a level-playing field, which militates against such a form of economic integration. The EU´s developmental model thus contrasts with the various strategies that have enabled successful catch up of industrial latecomers. Instead the EU´s current approach is more and more reminiscent of the relations between the pre-1945 European empires and their dependent territories. One reason for this unfortunate historical continuity is that the EU appears to have become entangled in its own myths. In the EU´s own interpretation, European integration is a peace project designed to overcome the almost continuous warfare that characterised the Westphalian system. As the sovereign state is identified as the root cause of all evil, any project to curtail its room of manoeuvre must ultimately benefit the common good. Yet, the existence of a Westphalian system of nation states is a myth. Empires and not states were the dominant actors in the international system for at least the last three centuries. If anything, the dawn of the age of the sovereign state in Western Europe occurred after 1945 with the disintegration of the colonial empires and thus historically coincided with the birth of European integration.

What do Eurozone academics think about EMU reform? On broad support and German exceptionalism. Bruges Political Research Papers 41/2015.

This paper is an empirical contribution to the literature on the formation of policy preferences on Economic and Monetary Union (EMU) reform within its Member States. In the aftermath of the euro crisis, many proposals to ‘complete’ EMU have been tabled. However, discord among Member States has led to a piecemeal restructuring of EMU. For this paper, a survey has been conducted among euro area academic experts, gauging preferences on EMU reform. We find that general consensus masks significant discord among academics from different Member States. Our data indicates the existence of conflicting national epistemic communities, bound by shared causal beliefs on macro-economic policy. Academics within the key creditor Member State, Germany, assume an outlier position. Within the sample of German academics, economists are particularly strongly opposed to all moves in the direction of fiscal or social union. As economists are those academic experts most likely to influence the economic policy beliefs dominant among the German policy elite, these results are highly politically salient. We confront these findings with the literature on the exceptionalism of German economics. We contend that our results substantiate the claim that inadequate EMU reform and, more generally, the EU approach to the Eurozone crisis, can be partially explained by the firm grip these economic doctrines hold over the economics profession and policy-making circles in Germany.

What role for social investment in the new economic governance of the Eurozone? EPC Policy Brief, 10 November 2015

The EU, and the Eurozone in particular, has been going through a period of prolonged economic difficulty. While there are some signs of recovery, growth rates remain too low, only returning to the already modest growth rates of the pre-crisis period. This not only affects the creation of jobs, but also, through lower tax revenues and stagnant GDP levels, the consolidation of public finances.

Greece as an example of “post-politics” in the eurozone. EPIN Commentary No. 28/9 November 2015

The negotiations between Greece and the EU and IMF tested the unity, limits, stamina and financial interdependence of eurozone member states. Greece emerged wounded from the fray, but Prime Minister Alexis Tsipras has established beyond doubt his dominance in Greek politics, in defiance of partisan competitors at home and his counterparts’ wishes in the rest of Europe. In this EPIN Commentary the authors argue that – beyond the political significance of SYRIZA’s third electoral victory in seven months – this vote of confidence brings certain characteristics of both Greek and EU politics into sharper relief. The high-risk political activism undertaken by Syriza’s leadership in the first half of 2015 has (re)opened the debate about what kind of EU we live in, and contributed to the creation of another type of discourse in Europe – one that has so far been the preserve of established elites.

Banking Union as a Shock Absorber: Lessons for the eurozone from the US. CEPS Paperback, December 2015

This book illustrates how the structure of the US banking market and the existence of federal institutions allowed regional financial shocks to be absorbed at the federal level in the US, thus avoiding local financial crisis. The authors argue that the experience of the US shows the importance of a ‘banking union’ to avoid severe regional (national) financial dislocation in the wake of regional boom and bust cycles. They also discuss the extent to which the institutions of the partial banking union, now in the process of being created for the euro area, should be able to increase its capacity to deal with future regional boom and bust cycles, thereby stabilising the single currency.

Banking crisis yet again and how to fix it. CEPS Commentary, 15 February 2016

Almost out of the blue, a combination of diverse factors has elicited a run on bank stocks and junior and senior debt, raising the spectre of a renewed systemic bank crisis within the European Union. The policy response cannot come from the European Central Bank but, instead, must consist of regulatory responses capable of dispelling the uncertainty over future prudential capital requirements while also temporarily suspending the rules on state aid cum bail-in that had ignited the crisis.

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.

IMF Go Home. CEPS Commentary, 10 June 2016. No pdf available-see document at original URL

The curtains have gone up on yet another act of the Greek debt drama. Eurozone finance ministers and the International Monetary Fund have agreed with Greece to begin, per the IMF’s demands, providing some debt relief to the country, and to release €10.3 billion in bailout funds. Greece, for its part, has agreed to another round of austerity and structural reform.