Europe and the Financial Crisis PDF
Preview Europe and the Financial Crisis
Europe and the Financial Crisis Edited by Pompeo Della Posta and Leila Simona Talani Europe and the Financial Crisis Also by Pompeo Della Posta and published by Palgrave Macmillan GLOBALIZATION, DEVELOPMENT AND INTEGRATION: A European Perspective (co-editor) Also by Leila Simona Talani and published by Palgrave Macmillan THE FUTURE OF THE CITY OF LONDON THE GLOBAL CRASH (editor) THE FUTURE OF THE EMU (editor) Europe and the Financial Crisis Edited by Pompeo Della Posta Associate Professor in Economic Policy, University of Pisa, Italy and Leila Simona Talani Associate Professor (Reader) in International Political Economy, King’s College London, UK Palgrave macmillan Selection and editorial matter © Pompeo Della Posta and Leila Simona Talani 2011 Individual chapters © contributors 2011 Softcover reprint of the hardcover 1st edition 2011 978-0-230-28554-5 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-33070-6 ISBN 978-0-230-30500-7 (eBook) DOI 10.1057/9780230305007 A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Europe and the financial crisis / edited by Pompeo Della Posta, Leila Simona Talani. p. cm. Includes index. 1. Financial crises—Europe. 2. Global Financial Crisis, 2008–2009. 3. Monetary policy—Europe. 4. Europe—Economic policy. I. Della Posta, Pompeo. II. Talani, Leila Simona. III. Title. HB3782.E87 2011 330.94'0561—dc22 2011004361 10 9 8 7 6 5 4 3 2 1 20 19 18 17 16 15 14 13 12 11 Contents List of Figures and Tables x Foreword and Acknowledgements xiii Notes on the Contributors xiv Introduction 1 Pompeo Della Posta PART I E UROPE AND THE FINANCIAL CRISIS: GENERAL ISSUES 1 The Regulation of the European Financial Market after the Crisis 9 Pedro Gustavo Teixeira Introduction 9 The financial crisis: disintegrating markets? 9 The new European Supervisory Authorities 13 The establishment of a European Systemic Risk Board 17 Conclusion: the further development of European integration 20 2 The Monetary Policy Response to the Financial Crisis in the Euro Area and in the United States: A Comparison 28 Domenica Tropeano Introduction 28 The Federal Reserve’s policy response to the crisis 30 The ECB’s response 34 The current state of the financial markets in the US 37 The current situation of the financial markets in the euro area 39 Concluding remarks 42 3 Real Divergence Across Europe and the Limits of EMU Macroeconomic Governance 46 Elisabetta Croci Angelini and Francesco Farina Introduction 46 The evolution of real divergence across EMU economies (1979–2009) 48 v vi Contents Within-EMU macroeconomic imbalances: an econometric assessment 54 Macroeconomic imbalances within and between currency areas 62 Alternative views on EMU macroeconomic governance 64 Conclusions 69 4 The Euro in the International Monetary System after the Global Financial and Economic Crisis and after the European Public Debt Crisis 74 Pompeo Della Posta Introduction 74 Reasons for the creation of the euro 74 The performance of the euro during its first decade of existence and the international role of the dollar 77 The consequences of the global financial and economic crisis in Europe 79 What future for the international monetary system? 81 Concluding remarks 86 5 Europe in Crisis: More Political Integration in the Eurozone is the Solution 91 Teodoro Dario Togati Introduction 91 Why is standard macroeconomic theory an obstacle to political integration? 94 Political union calls for an alternative theoretical perspective 99 Conclusion 103 6 Economic Crisis and Industrial Policy in the Union: The Need for a Long-term Vision of Industrial Development 107 Patrizio Bianchi and Sandrine Labory Introduction 107 Structure of European industry 108 The EU as a world economic power 111 The Lisbon Strategy: an industrial policy for the coherence of the Union at a time of deep transformations 115 Industrial policy as a long-term vision of development 117 Concluding remarks 121 Contents vii PART II T HE IMPACT OF THE FINANCIAL CRISIS ON SINGLE EUROPEAN COUNTRIES 7 The UK and the Euro in the Aftermath of the Global Financial Crisis 127 Leila Simona Talani Introduction 127 The case for the UK to join the EMU after the global financial crisis 127 Why did the UK not join EMU in the first place? 133 Conclusion 138 8 The Greek Debt Crisis: Causes, Policy Responses and Consequences 143 Antimo Verde Introduction 143 The Greek crisis: the immediate causes and catalyst factors 144 Structural causes 149 Policy responses 150 The EU–IMF Greek rescue plan 151 German measures on short selling and credit default swaps 152 The consequences for EMU 152 The Greek crisis and the Stability and Growth Pact 152 ECB independence and the no-bailout clause 155 The Greek crisis and the ‘two-speed EMU’: the restricted solidarity hypothesis 157 Some concluding remarks 161 9 From Miracle to Crash? The Impact of the Global Financial Crisis on Spain 165 Ramon Pacheco Pardo Introduction 165 Economic growth and modernization in the 1970s and 1980s 166 The Socialists in power and the boon of EEC membership 168 Economic recession and boom in the 1990s and into the twenty-first century 169 The conservatives in power 171 The global financial crisis and Spain 173 The socialist government and the crisis, step one: denial 174 viii Contents The socialist government and the crisis, step two: stern action 177 Conclusion 179 10 France: Steering Out of Crisis? 183 Susan Milner Introduction 183 French banking system 184 Economic outlook in 2010: a fragile recovery 186 Social and employment policy 190 Conclusion 194 11 The Effects of the Financial Crisis on the Italian and US Labour Markets 198 Tindara Addabbo, Fahima Aziz and Jack Reardon Introduction 198 Similarities and differences between the US and Italian labour markets 198 The effect of the crisis on the Italian and US labour markets 200 The experience of unemployment in Italy and in the US 207 The costs of being unemployed in the US in terms of income poverty 209 Concluding remarks 214 12 Reaching Out in a Time of Crisis: How External Anchors Assist Southeastern Europe 218 Jens Bastian Introduction 218 The macroeconomic situation 219 External anchors to the rescue 220 The Romanian case 221 The Serbian case 222 Can Albania and Bulgaria be considered outliers? 223 Is the crisis assistance discretionary, tilted towards EU members? 225 Initiatives to support financial sector stability in Southeastern Europe 228 Cooperation between multilateral lenders and commercial banks 231 Exit strategies and shaping the reform agenda? The role of external anchors 233 Conclusion 237 Contents ix 13 Russia in Crisis: Implications for Europe 242 Serena Giusti Introduction 242 Russia and the crisis 242 The effects on Russia’s external dimension 245 The crisis and the post-Soviet space 249 Conclusion 253 Conclusion 258 Leila Simona Talani Index 261
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