IMF and bank creditors: Who's in charge when a country can't pay?" and "Stabilising an unstable world: Is there a better future for international finance?

Jack Seddon (St John's College, Oxford)

Dr. James Boughton, the former official historian of the International Monetary Fund and current CIGI Senior Fellow, shared his experience with PEFM through two presentations addressing the following topics: first, "IMF and bank creditors: Who's in charge when a country can't pay?"; and, second, "Stabilising an unstable world: Is there a better future for international finance?"

Addressing the question of who's in charge, Dr. Boughton provided a fascinating account of an "un-holy" trinity – to paraphrase Cohen's apt portrayal of the Mundell-Flemming trilemma – that have competed to shape the international community's responses to countries facing payments problems. The trinity comprises the IMF, the US Treasury and other bilateral official bodies and international banks and bond holders. While these players share a common interest in wanting to see the country in trouble recover and repay its debts, Dr. Boughton eruditely showed how their particular preferences will differ. In particular, he showed how bilateral creditors must respond to strategic and political considerations that will not concern the private sector, while the IMF is beholden to its mission and various stakeholders in sometimes unobvious ways.

EMU Governance: An interdisciplinary perspective

Jack Seddon (St John's College, Oxford)

The EMU project may still be riddled with uncertainty, but some of the fog is lifting. Today, only the most uncritical Europhiles would dare to think that enough has been done to ensure prosperity and economic security going-forward, while only those rhetorically trapped by prior-grave-predictions continue to write-off the prospect that this aspiration may yet become reality. The increasingly open space in between means there is work to be done. On 11th and 12th March 2014, the Political Economy of Financial Markets (PEFM) programme, in collaboration with the Santander Fellowship at the European Studies Centre, rolled up its sleeves in response to this emergent space for debate and sponsored a unique seminar on the future of EMU governance. The seminar was entitled: 'The Governance of EMU: Recasting Political, Fiscal and Financial Integration'. The broad aim was to graft scholarly content into the on-going EMU governance debates and to add new systematic analysis that might better explain the emergent trajectories. This academic seminar, conducted as a roundtable under the Chatham House Rule, brought together economists, economic historians, political scientists and international relations experts - as well as some officials and market participants - from several European countries and the United States.

Global Monetary and Regulatory Spillovers

Heraclitus writes:

Since the onset of the global and euro area crises, advanced economy governments have introduced new policy approaches that have changed the monetary and regulatory landscape – including unconventional monetary policies in major economies and the agreement by bank regulators on Basel III. In today’s interdependent economy, such policies spill across borders: these changes have indeed had a substantial effect on emerging and developing countries in all regions. On 12th February, 2012, the Global Economic Governance (GEG) Programme and the Blavatnik School of Government, in association with the Political Economy of Financial Markets (PEFM) programme, hosted a high-level international roundtable on how monetary and regulatory spillovers are affecting emerging and developing countries, and what policy responses are called for.

The Eurozone crisis: An insider’s view from Cyprus

Androulla Kaminara (Academic Visitor, St Antony's College, Oxford)

On the 27th of January Dr Michael Sarris[1] gave a very lucid account into the functioning of the Eurogroup, as was experienced by the Cypriot delegation during the two meetings of March 2013. The first meeting resulted in a decision for a bail-in of Cypriot banks by all depositors and the second decision of bail-in from depositors with deposits of over 100,000 euro.

He highlighted that the current narrative is based on looking only at some of the symptoms of what is wrong with the European construction and not at the underlying problems. He believes that many Member States took seriously the benefits of the Eurozone and less seriously the obligations emanating from being a member. However the Eurozone architectural construction had shortcomings that were not addressed, as for example, the lack of a mechanism to control imbalances, in both surplus and deficit countries. “When we realised that they were a lot of fires burning – we concentrated on rules to avoid new fires from developing, rather than to put out existing fires.” Crisis mismanagement and a faulty decision making process are at the heart of the Eurozone’s continuing troubles.

A Schuman Compact for the Euro Area

Heraclitus writes:

Europe needs to go back to its political roots, and these roots remain predominantly national. The challenge of improving the robustness of the euro area, in the wake of the crisis, cannot overturn this basic political reality. Forcing the pace on fiscal union, directly or through a mutually-supported banking union, would outrun popular support for the European project. For the foreseeable future, therefore, centralisation and fiscal union do not represent a viable way ahead for strengthening the euro area. As this becomes clear, the present tactic of 'muddling through' will simply become a muddle. These were among the tough messages of Ashoka Mody (Visiting Professor, Princeton; formerly IMF), in his seminar on EMU for the Political Economy of Financial Markets Programme.

Political extremism in the interwar period and its economic roots

Russell Kincaid (Senior Member, St Antony's College, Oxford)

Lenin wrote, “No amount of political freedom will satisfy the hungry masses.” This statement was addressed by Professor Kevin O’Rourke (All Souls College) at PEFM’s penultimate Michelmas seminar on November 25, 2013. In a lively session chaired by Professor Paul Betts (St. Antony’s College), Professor O’Rourke presented empirical analysis on interwar voting patterns using economic and non-economic variables based his recent joint article in the Journal of Economic History. Dr. Othon Anastasakis (St. Antony’s College), as the discussant, asked probing questions and drew modern parallels.

Restructuring the Greek debt

Heraclitus writes:

It was the best of times, it was the worst of times...'  That pretty much captures the composite picture of the Greek debt restructuring, as it emerged from the PEFM seminar on November 11th. Jeromin Zettelmeyer of the EBRD presented; Jens Bastian of ELIAMEP (formerly on the EU Greek Task Force) discussed; and Russell Kincaid (St Antony's College, formerly IMF) guided the animated debate that followed.

Maybe you needed a shot of Mediterranean coffee to keep on top of all the issues: the contested valuations; the debt projections; the inter-creditor fights... But Jeromin Zettelmeyer shed fresh analytic light on all these facets, and in so doing he laid the foundations for some rather important new findings about the Greek debt restructuring and its implications for the future.