Sovereign debt crisis in the EU

The purpose of this research is to analyse the validity of the expression The Greek Miracle, utilised in a purely economic sense, which gained popularity in the 1950s and afterwards, while apparently lacking concrete arguments to uphold it. The manifestations of this alleged miracle are therefore traced throughout a historical timeline ranging from the reconstruction of the Greek economy following the Second World War with the adoption of the Marshall Plan, to the military junta regime and all the way to present day. Hence, it becomes a priority to link the abovementioned economic evolution to the distressing phenomenon of the sovereign debt crisis and its intricate manifestations within the Greek economy. The effects of a series of policies dating back to the miraculous period of time are set against the background of the current status of the Greek economy, with the help of comparative research methods and the support of up-to-date publications.

Introductory chapter of PhD thesis: 'Why Not Default? The Structural Power of Finance in Sovereign Debt Crises.' Defended (without corrections) at the European University Institute in Florence on May 19, 2016.

This thesis aims to answer a simple question with far-reaching implications: why do heavily indebted peripheral states not default on their external debts more often? Building on case studies of sovereign debt crises in Mexico (1982-’89), Argentina (1999-’05) and Greece (2010-’15), the findings of this research demonstrate that the traditional explanations of debtor compliance proposed in the economics literature — centering on reputation, sanctions and democratic institutions — hold limited explanatory power.

Instead, the thesis spells out a political economy approach to sovereign debt that recognizes the importance of social conflicts and power struggles over the distribution of adjustment costs. In these conflicts, it is argued that finance possesses a unique advantage over indebted states: through their capacity to withhold the short-term credit lines on which the latter depend for their reproduction, lenders can inflict debilitating spillover costs that greatly limit the debtor’s room for maneuver. This structural power of finance has increased markedly as a result of globalization and financialization, and the main objective of this project is to identify the exact mechanisms through which it operates and the conditions under which it is effective and under which it breaks down.

The findings highlight the importance of debt concentration in the lending structure (which eases the formation of creditors’ cartels, strengthening market discipline); the exposure of big banks and institutional lenders in core countries (which compels creditor states and international financial institutions to intervene as lenders of last resort and provide emergency loans under strict policy conditionality); and the bridging role fulfilled by bankers and elites inside the borrowing country (which endows them with a privileged position in financial policymaking and internalizes fiscal discipline into the debtors’ state apparatus). The thesis concludes by spelling out the implications of these findings for the quality of democracy and the study of political economy more generally.

La Unión Europea (UE) se encuentra en las horas más bajas de su historia, en una “crisis existencial” que pone en cuestión su racionalidad, legitimidad, relevancia y viabilidad. Esa crisis afecta al menos a cuatro dimensiones substantivas del proyecto europeo:

- La primera se refiere a la UE como proyecto económico capaz de promover la estabilidad, el crecimiento y la competitividad internacional, generado empleo y bienestar a través, primordialmente, de la experiencia más avanzada del mundo de integración económica.

- La segunda dimensión alude a la UE como experiencia federal y modelo político singular de gobernanza democrática cosmopolita y redefinición “federalizante” de la soberanía, la democracia y la ciudadanía más allá del tradicional Estado-nación.

- La tercera se refiere a la “Europa social” y al papel de la UE como mecanismo de solidaridad transnacional, a través de las políticas de cohesión económica, social y territorial.

- Finalmente, la cuarta dimensión se refiere a su papel como actor global en un sistema internacional caracterizado por rápidos e intensos procesos de cambio de poder.

Este trabajo examina los dilemas que la Unión enfrenta en cada una de estas cuatro dimensiones, que se relacionan con desafíos externos y en particular con los procesos de globalización y de cambio de poder a escala mundial, así como con sus limitaciones internas en el plano político e institucional. La resolución de esos dilemas pueden llevar a la Unión a tres posibles escenarios: uno, la paulatina renacionalización de la política y la economía, sobre la falsa premisa del control nacional; dos, la conversión de la moneda única y las instituciones de la UE en un mecanismo disciplinario al servicio de los mercados financieros, fracturando el binomio disciplina-solidaridad que ha caracterizado históricamente el proyecto europeo; o bien, como tercer escenario posible, la redefinición de la UE como proyecto de gobernanza efectiva de la globalización, garantizando la cohesión y la solidaridad intraeuropea.

United Europe was born as a construction entrusted with the anchorage of the Member States to capitalism, thus representing an intensifier of neoliberal thought and practice. Mainly, this result has been achieved through a sort of market of reforms, i.e. through the concession of financial assistance as a counterpart for the acceptance of the neoliberal orthodoxy, in line with what happened with the distribution of the funds related to the Marshall plan. The same scheme can be observed in connection with the enlargement of the European construction to the South and East, with the distribution of the cohesion funds, as well with the ongoing restructuring of sovereign debts.

The "Greek crisis" was officially inaugurated on May 2010 with the loan the Greek government took from the IMF-European Union-European Central Bank troika, the largest a country had ever taken (€110 bn). Since then, the social implications of this crisis have been dramatic. The form and the scale of social phenomena observed today in Greece and particularly in Athens--e.g., extreme poverty and inequality, profound police violence, organized racist violence--are unprecedented for the country. Nevertheless, a diachronic examination of some socio-spatial aspects of Athens reveals that the social character of the current crisis has been taking shape for some time. This article aims shed light on the social shape of the crisis by outlining three such socio-spatial dimensions as they materialized in the case of Athens during 1990s and 2000s: first, the emergence of new forms of social exclusion and inequality; second, the vast project of urban (re)development and the new spatialities it produced, and third the emergence of novel forms of political and xenophobic violence.

This paper examines the dynamics and implications of the increasing influence yielded by private security companies on the formulation and practices of EU immigration and asylum policy. The implications of the corporate turn in European immigration politics is exemplified by the detention camps, transport- and deportation-operations of G4S in the UK and Finmecanicca´s intimate collusion with the Libyan authorities under first Gaddafi, and later, the New Libyan authorities. It is argued that the current European trend towards advanced and high tech control of migrant mobility via UAV-drones, satellites surveillance and military robots is not only due to nationalist policies in member states, but also caused by lobbyism by the European military-industrial complex in structures such as the the European Security Research Programme, the ”Group of Personalities” and the Frontex R&D Unit. The paper conceptualizes the commodification of immigration control as a neoliberal reconfiguration of EU border politics meaning that control elements are decentralized and diffused among new actors. Central EU structures emerge as the transnational regulators of this transformation through the subsidising of the security industry. Linking the evolution of the industry for border control with underlying financial actors and dynamics in the political economy of borderscapes, such as debt financing, the European Investment Bank and export credit agencies, the paper argues that this development has vast humanitarian and democratic implications for both immigrants and the population of Europe.

Most of the current analysis which attempts to explain the Greek crisis tends to follow two trends. The first highlights the Greek crisis as a debt-crisis provoked by extensive corruption in every level of social, economic and political life. There are two problems with this argument. The first one is that it does not take into account the European and global context within which the Greek crisis took place. The second one is that it transforms a capitalist crisis to a mere debt crisis of public mismanagement and at the same does not answer how this peculiar clientilistic form of corporatism was historically developed.
The second trend gives a partial answer to the first problem of the first analytical context as it is focused on the fragile Greek domestic demand model which was unable to compete with the stronger export economies within the context of the Eurozone. This point of view stresses
the structural weaknesses of the Eurozone and its weak fiscal and political union which were unable to protect the European economies, as a whole, against the global financial crisis. Greece is placed among other countries like Portugal, Ireland and Spain which did not have a
high public debt prior to the Eurozone crisis. This trend of argumentation offers a European and global analytical context but it needs to be accompanied with a historical analytical context of highlighting the role and impact of the Greek productive sphere for the formation of the Greek crisis. This paper aims to contribute in this direction by exploring the historical relation between the
Greek crisis of production in the 1980s, Greek membership in the Eurozone and the Greek sovereign debt crisis by applying Marxist political economy. It argues that the causes of the Greek sovereign debt crisis of 2010 can be traced back to the crisis of the Greek productive
sphere during the 1980s and in the implied Greek national economic strategies for the management of this crisis, based on the recovery of profit without the recovery of industrial growth. These strategies initiated the deterioration of the competitiveness of the Greek
productive sphere, a process which was aggravated through Greek membership in the Eurozone and easy access to the financial markets. The already burdened Greek public debt as part of the management of the crisis of production in the 1980s continued to increase within the context of the EMU, leading to the Greek sovereign debt crisis within the general context of the Eurozone crisis. However, the manifestation, dynamic and management of the Greek sovereign debt crisis based on austerity measures are also related to the economic and political structures of the Eurozone and the present analysis will take place within this
framework. In the theoretical part of the paper the dialectical method will be unfolded along
with the theoretical framework of Marxist political economy. The empirical approach is
revealed in two main parts. The first part focuses on highlighting the political, economic and
social class implications of European integration till the creation of EMU and its recent crisis
while the second part draws attention to the historical structural formation of the Greek crisis
and its dialectical relation with the European Monetary Union.

Staatsinsolvenzen sind ein topaktuelles Thema: Spätestens seit der Staatsschuldenkrise im Euroraum (auch kurz „Euro-Krise“ genannt)  infolge der weltweiten Finanz- und Wirtschaftskrise ist die Abwendung einer drohende Zahlungsunfähigkeit von Staaten eine brennende Frage, nicht nur für die betroffenen Staaten wie etwa Griechenland, Spanien oder Irland, sondern für alle Mitglieder der Eurozone, also auch für Deutschland. Doch Staatsinsolvenzen sind kein neues Thema: Seit der Erfindung des Geldes und des Kreditwesens  und der damit verbundenen Lösung von der rein materialbasierten Tauschwirtschaft sahen sich die Staatsgebilde dieser Welt mit dem Problem einer möglichen Zahlungsunfähigkeit konfrontiert. Der deutsche Politologe Uwe Wagschal geht sogar soweit zu behaupten, dass [d]ie Geschichte der Existenz von Staatswesen […] gleichzeitig eine Geschichte der Staatsverschuldung [ist]. Diese war in den vergangenen Jahrtausenden oft für das Scheitern von Regierungen und für Regimewechsel verantwortlich.  Wie viele es insgesamt gab, kann nur geschätzt werden,  aber wir wissen um die Auswirkungen vieler Staatspleiten auf die Menschheitsgeschichte: Ihretwegen wurden Regierungen gestürzt, politische Systeme ausgetauscht und Kriege geführt.

The following paper examines how the European Central Bank (ECB) has responded to the challenges of the financial and sovereign debt crisis within the EMU. First theory is introduced to get an understanding of the problems that the ECB faces. The theory regards central banking, optimum currency areas, and the monetary transmission mechanism. The theory is followed by an explanation of the crisis that struck the Eurozone in 2008, which revealed macroeconomic imbalances in the Eurozone. This leads to the analysis, which mainly focuses on analysing how the ECB has attempted to re-establish the singles of its monetary policy transmission through non-standard measures. In the light of the macroeconomic imbalances and the non-standard measures introduced by the ECB, two alternative solutions beyond the potential of the ECB are suggested.

The absence of a robust and equitable legal framework for Sovereign Debt Restructuring generates important costs. Sovereigns with unsustainable debt often wait too long before they seek a restructuring, which is currently not within a predictable and transparent legal regime, therefore damaging creditors and debtors alike. This paper proposes a framework to address this problem from its origins: the im-paired liquidity of the sovereign debt securities in the financial markets stemming from the uncertainty on their safe status. This was allegedly the major cause of the recent financial crises and can be resolved through a clear and predictable legal regime, which assigns responsibilities to each of the many stake-holders involved in the management of the sovereign debt from its issuance to its restructuring. By enhancing coordination and transparency between domestic and international legal regimes (based on the subsidiary principle) through international multilateral organisations, this framework would intro-duce checks and balances both at a domestic and international level to enhance the necessary account-ability and trust from all stakeholders in order to shape a safer and more sustainable financial and legal regime.

The financial crisis that has been wreaking havoc in markets across the world since August 2007 had its origins in an asset price bubble that interacted with new kinds of financial innovations that masked risk; with companies that failed to follow their own risk management procedures; and with regulators and supervisors that failed to restrain excessive risk taking.

A bubble formed in the U.S. housing markets as home prices across the country increased each year from the mid 1990s to 2006, moving out of line with fundamentals like household income. Like traditional asset price bubbles, expectations of future price increases developed and were a significant factor in inflating house prices. As individuals witnessed rising prices in their neighborhood and across the country, they began to expect those prices to continue to rise, even in the late years of the bubble when it had nearly peaked.

When the 2008 crisis hit, governments, corporations and individuals defaulted on interest payments. However, government debt defaults are a recurring feature of public finance. These defaults have typically involved low-income and emerging-market economies, although recent cases include advanced-economy sovereigns.

Sovereign states have borrowed money for hundreds of years. Sovereign debt was one of the first financial assets ever traded, and continues to comprise a significant fraction of global financial assets. Unlike private debt, sovereign debt is especially difficult to enforce. For centuries, the legal doctrine of sovereign immunity limited suit against defaulting sovereigns, while few government assets are available for attachment in foreign jurisdictions.

Hrvatska ovršna organizacija zaradi, samo na kamatama, oko pola milijarde na mjesec Zakasnili smo! Milijun ljudi u Hrvatskoj je socijalno isključeno,a nitko ne nudi rješenje napisala Miriam Kervatin ____________________________________________________________________________

Foreign investment is perceived as one of the most significant factors for development and it is no accident that a key criterion for determining that an activity qualifies as an investment under the ICSID Convention is whether it contributes to the economic or other development of the host state. Investment tribunals have in recent years examined both the ambit of regulatory powers of the host state in taking measures in response to an existing debt crisis, and the impact of a negotiated sovereign debt restructuring on the rights of non-cooperative creditors. In both respects, investment tribunals have not conclusively, or unanimously, linked socio-economic rights with investment protection. This chapter examines the sovereign debt-related awards of investment tribunals and suggests how the systemic integration of investment law and human rights might prevent investment arbitration from distorting economically and socially beneficial sovereign debt restructurings and other regulatory measures in the context of sovereign debt crises.

This paper discusses the legal framework for sovereign debt restructuring in the euro area – both de lege lata and de lege ferenda. Sovereign debt restructurings remain exceptional events that come with profound implications for financial stability and monetary policy transmission. However, they may be necessary as part of a financial assistance program to a euro area Member State, as was the case for Greece in 2012. This paper seeks to contribute to the ongoing discussion on how to enhance the functioning of the Economic and Monetary Union (EMU) by exploring the legal aspects of sovereign debt restructuring in the euro area. This includes an analysis on whether and how the procedures for sovereign debt restructuring in the euro area can be made more orderly, fair, and predictable by establishing a European Sovereign Debt Restructuring Framework (ESDRF). Drawing upon international standards for sovereign bond documentation, one may consider the inclusion of enhanced Collective Action Clauses (CACs) as well as certain technical amendment clauses. In addition, two options for a sovereign debt dispute resolution mechanism are discussed: (i) a separate chamber at the Court of Justice of the European Union (CJEU) and (ii) a sovereign debt arbitration mechanism. The paper makes no judgement on the economic or political feasibility and necessity for such changes, but seeks to shed some light on the legal aspects to be taken into account in the context of reforming the euro area's framework for sovereign debt restructuring.

Ο Ευρωπαϊκός Κοινωνικός Χάρτης αποτελεί μια ευρωπαϊκή συνθήκη κατοχύρωσης και προστασίας εργασιακών και ευρύτερα κοινωνικών δικαιωμάτων που παρέμενε επί μακρόν άγνωστη στο ευρύ κοινό. Ωστόσο, η οικονομική κρίση των τελευταίων ετών στάθηκε η αιτία ώστε ο Χάρτης να βρεθεί στο επίκεντρο του νομικού ενδιαφέροντος (και) στην Ελλάδα, οδηγώντας σε πλούσια συγγραφική παραγωγή εκ μέρους της θεωρίας του εργατικού δικαίου αλλά και στην ολοένα αυξανόμενη νομολογιακή επεξεργασία των διατάξεών του. Με την αφορμή αυτή, η παρούσα μελέτη εξετάζει την εφαρμογή του Χάρτη ως διεθνούς συνθήκης για την προστασία των ανθρωπίνων δικαιωμάτων στην ελληνική έννομη τάξη, και ειδικότερα την επίδρασή του στη νομολογία των ελληνικών δικαστηρίων μέχρι σήμερα. Η ανάλυση καταδεικνύει τις δυνατότητες του Ευρωπαϊκού Κοινωνικού Χάρτη και των μηχανισμών ελέγχου εφαρμογής του να προσδώσουν σημαντική ώθηση στην προστασία των κοινωνικών δικαιωμάτων σε εθνικό επίπεδο, και να λειτουργήσουν ως προπύργιο κατά της υποτίμησης της εργασίας και της υπονόμευσης την οποία υφίστανται τα κοινωνικά δικαιώματα εν καιρώ κρίσης.

How do regional changes affect the process of global governance? This article addresses this question by examining how the International Monetary Fund (IMF) responded to the challenges presented by Economic and Monetary Union (EMU) between the signing of the Maastricht Treaty in 1992 and the launch of the euro in 1999. Based on primary research from the IMF archives, the article illustrates how the IMF’s efforts to reconfigure its relationship with European institutions evolved gradually through a logic of incremental change, despite initial opposition from member states. The article concludes that bureaucratic
actors within international organizations will take advantage of informal avenues for promoting a new agenda when this fits with shared conceptions of an organization’s mandate. The exercise of informal influence by advocates for change within an international organization can limit the options available to states in formal decision-making processes, even when these options cut across
state preferences.

The idea of 'anti-vulture legislation', i.e. domestic law dealing with holdout strategies and 'vulture' litigation against a sovereign debtor in financial distress, differs radically from existing and proposed approaches to deal with sovereign debt crises, such as the contractual approach and the proposal for an international sovereign debt restructuring mechanism. Anti-vulture laws adopted in Belgium, in the United Kingdom and, more recently, in France offer an ambitious local solution to a global problem. Motivated by these developments, we investigate the actual or hypothetical advantages attached to anti-vulture legislation compared to other approaches, and we argue that legislative interventions in sovereign debt-enforcement regimes should be made cautiously with the aim of promoting timely, orderly and equitable solutions to sovereign debt crises.

Les récentes crises financières, dont la crise de dette dans la périphérie de la zone Euro, ont mis en lumière les déficiences du régime juridique actuel pour le traitement des emprunts obligataires. Il est utile et opportun de mettre en oeuvre ex ante de nouveaux mécanismes qui faciliteront la résolution ordonnée des crises financières, lorsque celles-ci se déclencheront. L'utilisation d'une nouvelle génération de clauses d'action collective (CAC) dans les emprunts souverains est une réforme importante qui suit cette logique.

Buscando analisar a utilização do termo “soberania” e se ainda é valido a utilização do termo, esse artigo científico aborda a tese, baseando-se na leitura da bibliografia, de que sim, apesar da evolução do conceito ainda é coerente utiliza-lo.

In this thesis I attempted to provide a cause and effect analysis on one of Europe’s systematically most dangerous macro-financial turmoil, Italy’s banking crisis. My work tried to explore the most important roots of the crisis, identify its consequences and examine the domestic and eurozone-level crisis management measures which attempted to clean it up. The thesis was most dominantly building on the analysis of qualitative sources, but I also carried out a quantitative, statistical test to audit the relationship between the increase of public debt and the deterioration of Italian banks’ equity prices. My research confirmed that Italy’s banking crisis was the consequence of the country’s domestic structural deficiencies and the interaction of global and regional economic-financial crises. The quantitative test of the thesis registered a negative correlation between the motion of Italy’s 10-year government bond yields and the equity prices of the biggest Italian banks. Last, but not least, I came to the conclusion, that the current framework based on the hierarchy of eurozone and domestic authorities, is unable to provide a sterling solution for Italy’s banking crisis. I designed my research to be able to fill the gap in the already existing literature, as I could not find any other work which aimed to serve with the  detailed, 20-year overview of the crisis, while also trying to provide a casual chain between the crisis components.

Since global financial crisis broke in Europe in the end of 2009, European economic policy was almost entirely reformed with intergovernmental agreements and international "parallel" treaties that have had a significantly impact on EU legal order. Starting from the analysis on the "hybridisation" of European economic governance caused by that approach, this paper is focused on the integration of European stability mechanism and Fiscal Compact Treaty into EU legal order in the light of the two Commission proposals of 6 December 2017

Με αφορμή το ευρωπαϊκό πλαίσιο απόφασης για το πρόγραμμα προσαρμογής των μακροοικονομικών δεδομένων της Κυπριακής Δημοκρατίας, σκοπό του άρθρου αποτελεί η διασύνδεση της δομής εξουσίας με την εξωτερική πολιτική και τη γεωπολιτική γεωγραφία μιας ευαίσθητης χώρας. Αναλύοντας τις δυναμικές που διαμορφώνονται στο εγχώριο, ευρωπαϊκό και διεθνές περιβάλλον, αλλά και τις μεταξύ τους αλληλεπιδράσεις, ξετυ-
λίγεται το κουβάρι ενός πλέγματος σχέσεων ανάμεσα σε πολιτικά κόμματα, εθνικά κράτη και διεθνείς οργανισμούς.

The paper attempts to recover the common determinants of yield spreads of European Monetary Union sovereign bonds before and during the financial crisis. Following the research of academics upon the yield spreads of bonds, data from 2002 to 2009 examined as a whole and then it divided into two periods: a) the pre-financial crisis and b) after the financial crisis. The results show that there is a common factor as a moving force of yield spreads but it was not possible to be identified. The regression analysis displayed global and European economy’s variables as well as an equity premium variable with significant explanatory power of two teams’ yield spreads.

While it is early to mourn the euro, it would be unwise to ignore the magnitude and significance of the changes now taking place in the Eurozone. No doubt, the economic and financial problems in the Eurozone are serious and plentiful. The area is in the midst of multiple, frequently overlapping and mutually reinforcing crises. First, a fiscal crisis is centred
in Greece but visible across the southern Eurozone and Ireland. Governments in Greece and Italy have been replaced in the space of a week because they were unable to guarantee the
rapid implementation of economic reforms. Second, a competitiveness crisis is manifest in large and persistent pre-crisis current-account deficits in the Eurozone periphery and even larger intra-Eurozone current-account imbalances. Italy has accepted IMF and EU monitoring of reforms including deep liberalisation measures that had so far seemed out of reach, notably on labour legislation. Third, a banking crisis was first evident in Ireland but is now spreading throughout the Eurozone via accelerating concerns over sovereign solvencies. Spain, Ireland, Portugal and Greece are undertaking fiscal and structural adjustment measures – in Ireland, these are already paying off in terms of economic performance and credibility. However, one of the fascinating aspects of the European debt crisis has been the resilience of the euro, suggesting
these fears are overblown. The euro is still a reserve currency, oblivious to the chaos ravaging European economies. As the Euro zone debt crisis enters a new uncertain year, the
question about whether the euro can survive rises. This paper argues that the European crisis is political, and even largely presentational. The paper shows that the Euro can survive as the policymakers in the Eurozone still have various tools to use. These tools include creating exit rules, implementing new stabilisation rules and instruments, adopting new fiscal policy, introducing conditional Eurobonds, using inflation differentials and providing more independence to the European Central Bank.

The Cyprus crisis is one of the most complex in the Eurozone -although in absolute terms it is a minor crisis. An analysis of the ongoing developments from different perspectives leads to the conclusion that we are witnessing a perfect storm of a financial crisis at the confluence of sovereign debt and banking crisis together with debt overhang of business and households and a severe decline of competitiveness. As a result Cyprus has amassed a large external debt that cannot be repaid, no matter what fraction of the country’s real domestic economic output is appropriated through austerity measures. Hence, fiscal austerity leads to deflationary stagnation and alone does not work. We advocate a policy response that addresses multiple dimensions of the problem with policy options of (1) austerity deleveraging, (2) structural reforms, (3) financial innovations, (4) selective privatizations and (5) debt restructuring. These options are drawn from lessons of what worked well, and what not, in crises of other countries and these lessons are summarized in lieu of conclusions. A postscript discusses the potential impact of the Eurogroup decision of March 2013 on the Cyprus crisis.