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.

Restoring Euro Area confidence

Adam Bennett (Senior Member, St Antony's College, Oxford)

In the second session of PEFM’s Michaelmas seminar series, on Monday, October 21, the spotlight shifted from UK banking reform to the problems of the Euro Area. Klaus Regling, Managing Director of the European Stability Mechanism (ESM), gave a comprehensive presentation of how he saw progress towards restoring confidence in the Euro since the onset of the Euro Area crisis in 2009. Regling conceded that the various European authorities had perhaps not done the best job in reacting to the crisis—that many measures had been ad hoc and too late—but he insisted that there was and remains a coherent strategy. Moreover, he believed that this strategy was working.

Banking reform five years on

Adam Bennett (Senior Member, St Antony's College, Oxford)

On Monday, October 14, PEFM’s Michaelmas term seminar series got off to a flying start with an extremely interesting presentation by Professor Sir John Vickers, Warden of All Souls College and former Chairman of the Independent Commission on Banking (ICB).  Professor Vickers summarized and explained some of the key findings of the ICB (which were published in September 2011), elements of which have since been incorporated into the Financial Service (Banking Reform) Bill currently progressing through Parliament, and outlined the features of ongoing deliberations. While his presentation can be followed on PEFM’s forthcoming Podcast of the seminar, what follows is an attempt to extract the essence of his message.