Search

We use sign‐identified macroeconomic models to study the interaction of financial sector and sovereign credit risks in Europe. We find that country‐specific financial sector bailout shocks do not generate strong international spillovers, because they primarily transfer private sector risk onto the local sovereign. By contrast, sovereign risk shocks generate substantial spillovers onto the global financial sector and for international sovereign debt markets. We conclude that any financial sector bailout policy that undermines the creditworthiness of the affected sovereign is likely to exacerbate global credit risk. Our findings highlight the unintended global consequences of country‐specific financial sector bailout programmes. [ABSTRACT FROM AUTHOR]

Abstract: Preserving the trust of bond markets is crucial for the world's many indebted countries, but it is still unclear when and how national or international actors can contribute to this goal. We present a set of arguments addressing this question and test them on the case of the eurozone debt crisis. Distinguishing between actors' capacity and willingness to avoid defaults, we argue that the crisis was marked by a lack of capacity at the national level, and limited or uncertain willingness at the European level. Accordingly, we find that European‐level efforts to reassure markets had considerably stronger effects than similar efforts at the national level. Furthermore, national efforts appear to have mattered the least in countries with the least capacity. These findings are based on a comprehensive new dataset of political events and relevant news, and they hold across a number of robustness checks and placebo tests. [ABSTRACT FROM AUTHOR]

In recent debates about inequality, many have pointed to the predominant position of the finance. This article highlights that structural power, not lobbying resources, are key to explaining variations across countries. It examines finance-government negotiations over national bank rescue schemes during the recent financial crisis. Given the structural power of finance, the variation in bank bailouts across countries cannot be explained by lobbying differences. Instead of observing organized interest intermediation, we can see that disorganization was crucial for the financial industry to get off the hook and let the government carry the burden of stabilizing the economy. Put differently, structural power is strongest when finance remains collectively inactive. In contrast to traditional accounts of the lobbying influence of finance, the comparison highlights that the lack of organization can have crucial redistributive consequences. [ABSTRACT FROM AUTHOR]

The study of the impact of the economic crisis on attitudes toward democracy tends to be focused on satisfaction with specific democratic institutions. This article expands upon previous research to explore how the current economic crisis can affect core support for democracy as a regime. Based on European Social Survey data for the Eurozone countries, the findings are twofold. It is shown, firstly, that perceptions of the state of the economy have an impact both on satisfaction with and support for democracy, and, secondly, that citizens’ support for democracy is greater in bailed-out countries. In countries that have experienced intervention, the more critical citizens and those less satisfied with the outputs of democracy are the stronger advocates of democracy. The article argues that this is connected with the tendency of critical citizens in bailed-out countries to blame external agents for the economic situation while increasing the saliency of democratic rules as a reaction to the imposition of unpopular measures. [ABSTRACT FROM PUBLISHER]

This article aims to discuss the discursive legitimation strategies used by the Portuguese government to legitimate its political action between 2011 and 2014 in the context of the financial, economic and social crisis and the implementation of a three-year bailout programme and consequent austerity policies. Drawing from Critical Discourse Analysis for discussing discursive legitimation strategies, we selected eight political discourses delivered by the Portuguese Prime Minister and organised his discursive legitimation strategies into four main categories: (1)‘state of exception’, (2) blame allocation, (3) no alternative options and the appeal to emotions and (4) effectiveness. We conclude that, between 2011 and 2014, the Portuguese Prime Minister, through the ‘state of exception’ narrative and blame allocation strategies, sought to impose and legitimate governmental political action as the only viable option to overcome the crisis, as well as to reify the idea that austerity policies were the correct path to ensure a sustainable growth and to build a dynamic, prosperous and fair country. [ABSTRACT FROM AUTHOR]

The article looks at the eurozone sovereign debt crisis, focusing on the role of Germany in responding to the crisis in relation to the country's politics, government, and history. The author presents a case for the view that the crisis is not likely to lead to the collapse of the euro monetary union and that German Chancellor Angela Merkel's policies in handling the crisis reflect continuity with Germany's ordoliberal economic policy tradition. Topics include Germany's economic power within Europe, financial bailouts and the eventual requirement for private creditors to pay part of the cost of bailout, austerity economic policies, how ordoliberalism differs from neoliberalism, monetary policy and inflation, and German public opinion.

This article identifies and examines the features of protest events in Ireland in the aftermath of the EU-IMF bailout in order to understand why the patterns of protest in Ireland have not mirrored those in the other EU countries that received bail outs. To identify characteristics of Irish protest I used contemporary newspaper articles to compile a database recording objective features of protest events that took place in Ireland between 22 November 2010 and 1 February 2013. Participants from three protest campaigns were then asked to respond to a questionnaire aimed at establishing their motivations for participating in protest. The results of the research show that the largest protest events recorded during the period were in response to the bailout and that the bailout was the most frequently protested issue, challenging the characterization of the Irish as a passive nation dutifully taking its medicine. [ABSTRACT FROM AUTHOR]

Throughout the euro crisis, the French government has pushed to invert the rules of the Maastricht Treaty. After the height of the crisis had been overcome, one can see the success of the French government. The European Central Bank (ECB) has assumed a fiscal policy role by its extensive government bond buying, the no bailout clause has been replaced by the permanent European Financial Stability Facility and negotiations over a stronger political union have gained new impetus. This contribution traces the influence of different societal actors on the French government's preferences, which have largely shaped the outcome of the European summits. By following the domestic politics approach, it systematically juxtaposes the support or the discontent of the business community, namely that of the financial industry and the industrial interests, with the electoral pressures by the broad French public. The paper asks whether the economic interests trumped the electoral concerns and shows that the strong ties between the French financial sector with the southern periphery have been a driving factor in the first years of the euro crisis. As public opinion grew more and more disgruntled, it constrained the French government, which in turn changed its substantive position in the negotiations and sought to allot many of the responsibilities to the ECB, to avoid further unpopular financial commitments and bank bailouts. [ABSTRACT FROM AUTHOR]

Motivated by the theoretical prediction of the opportunistic behaviour of large banks that face expected public intervention, we test a full and a partial form of the too-big-to-fail (TBTF) hypothesis. The full form of the hypothesis implies the increase in the risk undertakings and profitability of banks that exceed a certain dimension; the partial form of the hypothesis implies only an augmented risk appetite of large banks compared to their smaller counterparts. The examined area is the European banking industry, whose behaviour is observed over the first wave of the present financial crisis (2007/09). The estimation of a quadratic fit that links change in a bank’s credit risk profile and profitability retention rates with a bank’s size suggests the existence of a partial form of the TBTF hypothesis. However, a more precise, local rolling windows estimation of the size sensitivities reveals that large banks – those whose liabilities exceed approximately 2% of the country of origin’s GDP (15% of our sample) – show an increase in credit risk profile and a superior capability of retaining higher ROA scores,vis-à-vis their smaller counterparts. With the caveats of our investigation, we interpret these results as evidence of a full form of the TBTF hypothesis. [ABSTRACT FROM PUBLISHER]

In this paper we assess of the most important and controversial policies used by governments: state loans, asset acquisition programs and nationalizations. We combine unique bank-level data of European banking institutions and cross-country data in order to estimate the impact of these programs on the banking sector stability. The existing literature includes many studies of the impact of individual policy measures on bank behavior, but as far as we know there is less research on the impact of various policies on banking sector risk. Our empirical results are correlated with an existing theoretical model from the literature (Dietrich, D., Hauck, A,. (2012),) and reflect a significant negative influence of state loan policy and nationalization on bank stability, while the acquisition of impaired assets from banks' balance sheet reflects a positive and significant influence on bank stability. [ABSTRACT FROM AUTHOR]

We model a loop between sovereign and bank credit risk. A distressed financial sector induces government bailouts, whose cost increases sovereign credit risk. Increased sovereign credit risk in turn weakens the financial sector by eroding the value of its government guarantees and bond holdings. Using credit default swap (CDS) rates on European sovereigns and banks, we show that bailouts triggered the rise of sovereign credit risk in 2008. We document that post-bailout changes in sovereign CDS explain changes in bank CDS even after controlling for aggregate and bank-level determinants of credit spreads, confirming the sovereign-bank loop. [ABSTRACT FROM AUTHOR]

The article discusses the government bailouts in response to the 2008-2009 Global Financial Crisis and the European Sovereign Debt Crisis, including the U.S. government's bailing out U.S. financial institutions. The article examines the forms of capitalism in the U.S. and Europe, suggesting that the U.S. should undertake regulatory reforms. An overview of the government policies on the banking industry in the U.S. and Europe is provided.

The Van Rompuy Report and also additional proposals made by the European Commission outlined steps for a 'genuine Economic and Monetary Union'. This article explains, assesses and comments on the proposals made. Moreover, it outlines what could be recommendations in order to achieve a 'genuine Economic and Monetary Union'. For this purpose, details of the Interim Report are systematically evaluated. We also deal with different governance visions emerging from the ongoing euro area crisis and starts from different views of the 'North and the South' of the euro area on this issue. This contribution argues that there is an alternative option to the notion of cooperative fiscal federalism involving fiscal union, bailouts and debt mutualisation: competition-based fiscal federalism accompanied by a properly defined banking union. In order to be a successful one, any deal will have to come up with a successful recipe of how to (re-)create trust between European citizens and their elected governments. [ABSTRACT FROM AUTHOR]

Copyright of Social & Economic Revue is the property of Alexander Dubcek University of Trencin, Faculty of Social & Economic Relations and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The European sovereign debt crisis is a financial crisis that makes it impossible for some European states to pay their government debt without outside aid. Europe's debt problem is worse than any other region because Europe has the largest banking system in the world. Italy and Spain, Portugal, Ireland and Greece are facing the crisis despite rescue packages and ancillary measures. Germany is the economic leader of the 17-nation eurozone. Since any help to the stricken states will ultimately devolve largely upon prosperous Berlin, Chancellor Merkel has firmly opposed further help. She insists on 'austerity' by the affected states, especially worst-case Greece, rather than 'bailout' with external help. This has resulted in a polarized euro-opinion divided between the 'austerity' school and the more populist 'growth'/bailout school. Germany's action will be key to the eurozone's and the euro's survival. [ABSTRACT FROM AUTHOR]

Governments in Europe and the United States have recently acquired significant stakes in a number of financial institutions, raising fears that they will use their investments to pursue interventionist goals. The comparative analysis of sixteen major bailouts in Belgium, Germany, France, Ireland, Switzerland, the United Kingdom and the United States provides evidence to the contrary. Fiscal and political considerations have prompted governments to generally avoid common stock investments, limit direct managerial involvement and favor early exits. While this investment strategy may prove detrimental to other stakeholders, it resembles the approach distressed asset investors would adopt under the circumstances. [ABSTRACT FROM AUTHOR]

The Republic of Ireland was the first country in the eurozone to adopt a neoliberal infused ‘austerity budget’, and the ill-judged state bailing out of a number of reckless banks and associated financial institutions is costing billions of euros. In late 2010, as the crisis deepened, the International Monetary Fund and European Central Bank provided a ‘bailout’ package that resulted in further punitive public spending cuts and the eradication of national sovereignty. This paper maintains that the present crisis is more than a mere economic crisis, but can be viewed as a series of interlinked ‘conjunctures’. Tracing the connection between the historical and the contemporary, the first part of the discussion will explore six thematic components relating to the structuring of the Irish state. These are identified as: a ‘class rule state’; an ‘authoritarian state’; a ‘confining state’; a ‘censoring state’; a ‘discriminatory state’; and a ‘state within the state’. These six dimensions provide a contextual underpinning for the second part of the paper, which focuses on the crisis in child welfare and child protection services and dwells on the shambolic performance of the Health Service Executive (HSE), deficits in the ‘care’ system and the HSE failure to furnish reliable data on the deaths of children in contact with social workers. [ABSTRACT FROM PUBLISHER]

The reprint of an article that was earlier published in the "Wall Street Journal," is presented. The article discusses that the U.S. paid its national debt only once in 1789 to preserve its federal system, but in 1840, it refused to bailout and instead provided them with fiscal independence. The 1789 bailout was designed by politicians Alexander Hamilton and George Washington, to form federal government. Also, Europe can take the U.S. bailout as example to manage its financial crises.

The author discusses the do-it-yourself (DIY) economy and its applicability in the times of financial crises. It is mentioned that the Occupy Wall Street and the Occupy London movements have roots in DIY economics, as in both cases the public opposes the high bonuses to the bankers in the times of increasing unemployment. Also, the public in the U.S. and Europe is not satisfied with the government bailout of the corporations when households and small businesses are suffering financial crises.

Recent scholarship has underscored the possibility that capital-adequacy regulations may have contributed to the 2008 financial crisis by privileging highly rated asset-backed securities, such as mortgage-backed securities. The same regulations gave an even more privileged position to sovereign debt, leading to the question of whether they helped cause the European sovereign-debt crisis. There is little question that the regulations encouraged European banks to invest in European governments' bonds, but it does not appear that this encouragement led to more government borrowing by significantly reducing the yield governments needed to pay on their debt. However, it does appear that capital-adequacy regulations—along with post-2008 liquidity regulations—concentrated sovereign risk in the European banking system, aggravating the sovereign-debt problem by requiring government bailouts that, in turn, required the issuance of more sovereign debt, further jeopardizing the governments' fiscal position and banks' solvency. Exacerbating the situation, in the midst of a panic, the European Banking Authority imposed new capital requirements on banks and effectively forced them to realize mark-to-market losses on sovereign exposures. [ABSTRACT FROM PUBLISHER]

The Euro crisis and the political measures to solve it have generated new cleavages towards European politics in Germany. Never before in the history of European integration have the parties in parliament been so divided regarding such an important issue. The article compares the situation interpretations, problem diagnosis and resolution strategies of the government and opposition parties in the German Bundestag from the first decisions on the rescue package for Greece up to the parliamentary voting on the extension of the EFSF bailout fund in the Bundestag on 29 September 2011. The results confirm the persistence of the pro-European basic consensus in the German party system but exemplify that the proposals on how to combat the financial crisis diverge significantly between the political camps. [ABSTRACT FROM AUTHOR]

The article examines politics and government in Greece in 2010. The article focuses upon the political impact of Greece's public debt and the possibility that the country would default on that debt. The article discusses Greek prime minister Giorgos Papandreou's formal request for a support package from the European Union (EU) and the International Monetary Fund (IMF). According to the article, a bailout package for Greece was finalized on May 5, 2010, and ratified by the Greek parliament on May 6, 2010. The article discusses how the supporters and proponents of the bailout impacted Greek political parties, and the formation of a new political party called the Democratic Alliance. The article also examines violence in Greek cities in response to the economic difficulties.

En este artículo se analiza la crisis financiera de varas naciones europeas, las cuales han estado al borde del colapso económico en fechas recientes. Islandia fue la pnmera nación europea que no pertenece a la UE, en la cual estalló una importante burbuja financiera que dejó a su sistema bancario con enormes deudas respecto de los grandes bancos británicos y holandeses, entre otros. Este país inició la ronda de rescates de naciones desarrolladas en que participa el FMI, en épocas recientes. Por su parte, Irlanda y Grecia presenciaron el estallido de sendas burbujas inmobiliarias, la cuales involucraron a buena parte de sus respectivos sistemas bancarios, requiriendo onerosos rescates por parte de la UE, así como del FMI. En los tres casos, los contribuyentes de cada país han debido incrementar su carga impositiva y padecer los recortes del gasto en servicios sociales. Por su parte, la crisis griega ha desestabilizado a los mercados financieros de la región, afectando en particular a la economía española y amenazando con hacerlo también con la de Italia. Como algunos analistas advirtieron en su momento, el euro ha sido una camisa de fuerza pars las naciones europeas que están en recesión, ya que les impide modificar su tipo de cambio. Por último, el artículo analiza los efectos contraproducentes de la aplicacion de los planes de austendad en las economías europeas con elevados niveles de desempleo [ABSTRACT FROM AUTHOR]

The article discusses the impact of rising bond yields in some Euro area countries on debt sustainability. It examines the case of vulnerable countries that have not received bailouts such as Italy, Spain and Belgium and the macroeconomic impact of the Greek debt restructuring that follows the resulting reduction in private sector wealth and bank capital. It suggests that no long-run effects in any country is expected when bank lending margins and user costs of capital reverts to baseline.

Commenting on recent developments in Europe, German author, poet and »good European« »par cœur« Hans Magnus Enzensberger deplores the fact that governments are »messing Europe up« and that they »antagonize people for no good reason.« Unfortunately, Germany has become a major player in this risky game of antagonizing Europe, which is the Europe of ordinary people and political elites alike. The Greek quasi-bailout, the euro turmoil, and the current crisis management among EU member states all reveal that »messing Europe up« is nowadays a policy outcome that German politicians are more than willing to put up with. Europe's current crisis is, for the most part, a crisis of Germany in Europe, the biggest and most influential member state in the EU. Instead of sighing »Ach Europa,« as Enzensberger did in the late 1980s, »Ach Deutschland« might be a more appropriate commentary on Europe's current state. Economically, after World War II, Germany became a benign hegemon by default, a status granted by its former enemies. Nowadays, it is on its way to losing this comfortable position as benign leader and legitimate power in the EU, not because others are rejecting its leadership or denying fellowship, but because it made a deliberate - and misguided - political choice: in the current Greece and euro crisis, it is acting unilaterally instead of seeking to gain support for its own policy by leading and persuading others. Germany is losing control because it lacks vision. However, without a vision of how Europe might best be served and tied closely to its own economic fate, German leadership is doomed to failure. Benign hegemony is not about administering the status quo, but about creating environments according to one's own interests, persuading one's partners to follow. The current euro crisis shows that the German government does not have a vision of monetary Europe and has no idea of what leadership in EMU and Europe might be for. Persuasion is thus in short supply. Germany is glibly tossing away its role as hegemon in EMU and Europe. Presenting the main analytical concepts on benign hegemony and cooperation the paper seeks to show that reestablishing Germany as a benign hegemon within the framework of European monetary cooperation would be the best way of serving the interests of both Germany in EMU and EMU itself. [ABSTRACT FROM AUTHOR]

The article discusses the issue of financial stimulus plans and their impact on the European Union (EU) banking sector. The EU member nations have reportedly imposed bailout strategies to back the banking sector, wherein the strategies are according to the fundamental principles within the Economic and Financial Affairs Council (ECOFIN) standards. Also discussed are the proposed bailout plans for major EU nations including Great Britain, France and Spain to provide support to the banks.

Following months of negotiations, seven European governments have reached a deal with EADS, the parent company of aircraft manufacturer Airbus, which should rescue the troubled A400M transport-aircraft project from failure. At a time when persistent gaps in European military capabilities are defying solutions, and with defence-budget cuts expected, many governments have begun to look more closely at multinational cooperation to generate improved capabilities at better value for the taxpayer. However, the A400M saga provides a sobering background to the debate. [ABSTRACT FROM AUTHOR]

This article deals with the history behind the initiative that led to the adoption of the European Insolvency Regulation 2000. It covers the background to the proposals, the content of the various drafts that have merged over the past four decades and criticism of the proposals by commentators. Copyright © 2003 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The author reflects on the significance of international relation in the global economy. He mentions the case of indebtedness in Greece and Italy that cause question on sovereign debt and stability of the European Banks. He mentions that the financial bailouts disturb the European investors confidence which lead to the claim of neoliberal market.