Appendix: the Information Crisis and the Need to Improve the Availability and the Use of Relevant Statistics

Appendix: The Information Crisis and the Need to Improve the Availability and the Use of Relevant Statistics

The international monetary and financial crisis has also been a major information crisis at both the national and international level. This was true for Stage I of the crisis (the “subprime crisis”) and for Stage II (the “debt crisis”). Decisions are about the future—information is about the past. There is a broad agreement that the availability, the quality and the timeliness of qualitative and quantitative information have a major impact on the quality of the decisions of both private and public actors in the modern economy. Yet, the general disaffection following the outbreak of the financial crisis in 2007–8 for the so-called theory of rational expectations has to do with the (belated) dual recognition that (1) all information (or the most relevant information) is not available or correct, and (2) statistics from the past are far from being a perfect guide for the future, especially when it comes not only to projecting “trends” but predicting major “events” that disrupt trends. The importance of this information and expectation issue has been dramatically demonstrated on two occasions since 2008: the suddenness and magnitude of the “subprime crisis” and the outbreak and brush-fire effect of the following “debt crisis.” The so-called information age or information society has been as much of a problem as an improvement when dealing with data relating to the com- plex economic structures of a globalized economy. As noted in Chapter 1, the great progress in hardware and software for collecting, storing, process- ing and distributing information that has occurred during the last 20 years has not prevented serious gaps in information or outright misinformation at the macro as well as at the micro level. Many claim, not without justifica- tion, that the “subprime crisis” was to a large extent an “information crisis” where the information problems were a combination of incompetence and of deliberate attempts to mislead markets and regulators. The Stage II debt crisis—with the outbreak of the “Greek debt crisis”—was a textbook example of negligence with respect to crucial information at all levels: government authorities, EU and ECB experts as well as leading international financial advisors and managers. The “information crisis” has multiple aspects. The most common problems included: lack of availability of data, lack or insufficient comparability, insufficient diffusion or access, and the ignoring or misinterpretation by

240 Appendix 241

official and private observers and decision makers of the message coming from the data. There was, however, also: deliberate distortion or falsifica- tion, restricting access or diffusion by both private and official bodies to essential information that could have attenuated or even prevented some of the worst consequences of the crisis, as well as systematic disinformation of investors, of authorities and the general public at large. The most fundamental and most widespread “information breakdown” was the systematic ignoring of the storm warnings coming from the data—deliberately disre- garding the “handwriting on the wall.” These problems have been recognized, although belatedly, by many people within national and international organizations, in the corporate world and in the research community. Since 2009–10 there have been notable efforts to improve the quality and the volume of the data relevant for the analysis of the debt situation at any given moment and of the trends and likely future developments. There has been a series of initiatives by organizations such as the IMF, the World Bank, the OECD, the BIS, the ECB, the European Commission as well as the national monetary and economic authorities, to speed up the availability of data and most importantly to better coordinate their availability. Further, the definition and use of tailor-made “warning packages” (such as the IMF “Fiscal Monitor”) have increased. Four major general lessons for the future should be mentioned here:

1. It is necessary to narrow the scope of “proprietary information,” both for “ business-sensitive” and “politically restricted” data. 2. There is a need for much closer and effective cooperation as well as competition and “redundancy” in data collection and diffusion. 3. Market transparency has to be enforced independently and much more systematically than in the past. 4. Finally, it is important to recognize that the prevailing confusion about what is available and to whom and on what conditions ( subscribers, cli- ents, government officials) represents a major source of future problems and has to be addressed as an urgent issue at the highest levels.

There remains much to be done on all four accounts. Some of the problems are technical, others are due to the unwillingness by both private and official actors to share information: “information is a key source of power” and tends to make the difference between success and failure, both for individu- als and for organizations. It should be remembered, however, that discrimination in the access to essential information is contrary to the very nature of an open, liberal and competitive economic system. If there is no “level playing field” in terms of transparency and information the market economy cannot function properly. It is no exaggeration that recurring breakdowns in the access to relevant information could become a major economic and political threat to the very survival of “globalization” itself. Bibliography

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A Attali, Jacques, 151, 158n67, 227, 230, “acquis communautaire,” 61 235, 236n4 AD (see aggregate demand) austerity (package, plan, policy, adjustment (balance of payments, programs), 7, 72, 92n84, 99, 100, 103, economic, exchange rate, fiscal, 104, 106, 107, 131, 140, 152, 160, policy, structural), 27, 28, 43, 67, 75, 161, 193, 195, 234, 238 104, 136, 142, 148, 152–154, 160, Austria, 14, 15, 16, 17, 45, 96, 101, 106, 169, 191, 232 117, 123, 202, 212 Adjustment Facility for Sovereign Austrian School, 212 Debtors, 160 automatic correction mechanism, 149, advanced country/economy/nation, 5, 150 31, 50, 82, 109, 110, 112, 113, 117, automatic stabilizer/stabilizer, 74 124, 161 Afghanistan, 97, 99 B Africa, 43, 226, 234 bailout (Greek, Hungarian, Irish, ageing (population, pressures), 67, 68 mechanism, Portuguese), 4, 6, 7, 104, aggregate demand, 75, 100, 207 108n27, 128, 129, 130, 132, 133, 134, Alert Mechanism Report, 66, 90n68 135, 136, 143, 151, 157n45, 197, 198, alternative investment vehicle, 165, see 200, 201, 202, 210, 226, 233, 235 also equity fund, hedge fund bailout mechanism, 6, 129–131, 132, American (left, right), 47 134, 136, 137, 141–143, 151 American Civil War, 230 balance of payments, 9, 13, 22, 23, 24, Anglo-Saxon world, 78 25, 26, 27, 28, 29, 30, 36, 40, 43, 46, Antall, Jozsef, x, 33 70, 73, 102, 130, 131, 160, 206, 231, anti-bank attitude, 66 232, 234, see also deficit, external anti-cyclical policy/spending, 112 accounts arbitration organisation/organization, balance sheet, 44, 70, 75, 91–92n80, ix, 220 106, 191, 193, 198, 200, 207, 208 Argentina, 203, 231–232 balance-sheet recession, 70, 207 arms purchases, 235 balanced budget rule (see fiscal arms race, 229, 232 break) Asia, 15, 31, 36, 229, 235 Balkan countries/Balkans, 113 Asian financial crisis, 38 Baltic countries/Baltics, 113, 115, 117 asset (financial, physical, public), 34, bank (bridge, ailing, illiquid, insolvent, 35, 37, 42, 46, 50, 61, 83, 191, 197, systemically important), 133, 141, 202, 226 153, 159, 165, 175, 176, 177, 179–180, asset destruction, 43, 45, 46, 72 190, 192–198, see also balance sheet, asset price, 2, 23, 42, 44, 45, 47, 50, 73, banking, capital, credit institution, 80, 91–92n80, 114, 115 deleveraging, financial institution, asset price deflation, 50, 73, 75 leveraging, liquidity, rescue, asset price inflation, 2, 42, 47, 50, 75, 80 recapitalisation/recapitalization, Athens, 155n10, 185n49, 227 reorganization/reorganization, Atlantic community, xi, see also Western resolution, shadow banking, solvency, community stress test

259 260 Index

Bank for International Settlements, 67, borrowing (condition, cost, credibility, 74, 87n37, 156n23, 181n3, 182n9, options, requirement), 97, 132, 152, 195m, 230 207, 232, see also funding cost Bank of England, 200 Bowels-Simpson Commission, 98 Bank of Greece, 8, 166, 167, 168, Brady bond, 232 169, 172, 173, 174, 175, 176, 177, Braun-Komission (ge), 72 179, 180, 183n17, 183n19, 183n23, Brazil, 216, 226, 232 183n27, 184n34, 187n79, 209 Bretton Woods system, 21, 23, 24–27, bank of last resort (see lender of last 30, 32, 33, 34–35, 36, 39, 41, 46, 83, resort) 119, 127, 230 bank tax (see levy on financial Breugel, 124–125 institutions) BRICS, 226, 234, 235 banking (model, sector, system), 8, Britain, 32, 60, 63, 79, 100, 133, 150, 46, 61, 117, 164–180, 191, 198, 223, 152, see also United Kingdom/ see also shadow banking, deregulation, U.K./UK regulation, supervision British (debt, economy, government), banking bankruptcy, 7, 37, 39, 45, 32, 52, 53, 72, 79, 141, 157n43, 212, 154n1, 159–163, 170, 229 222, 229, 230, 231, 232 banking union, 153 British Corporation of Foreign bankruptcy (de facto, procedure for Bondholders, 231 sovereign States), 7, 39, 45, 159, see Brussels, 84, 119 also US Bankruptcy Code bubble (see asset price, real estate) Barings bank, 229 Bucheit, Lee C., 198 Barnier, Michel, 211 budget expenditure, 212 Basel Committee rules on capital budget revenue, 120 adequacy, 188n110 budget, 95, 98, 99, 108n11, 132, 140, Basel I/II/III (see Basel Committee rules 152, 154 (EU, Federal/US, Member on capital adequacy) State), see also defense, deficit, BCFB (see British Corporation of Foreign entitlements, Medicare, social security, Bondholders) War on terror Beijing consensus, 235 budgetary (balance, coordination, Belgium, 14, 16, 17, 96, 101, 144, measure, surveillance), 73–74, 145, 155n3, 158n70 146, 147, 148, 151, 154, 228 Bennett, Richard, 217 Bulgaria, 113 Berlusconi, Silvio, 105 Bundesbank, 25, 55, 60, 61, 94n100 Bhagwati, Jagdish, 36 burden-sharing, 35, 45, 84, see also Big Bang deregulation (see solidarity deregulation) Bush, George W., 47, 86n14, 97, 99, BIS (see Bank for International 233 Settlements) business ethics, 217, 221–222 Bismarck, Prince Otto von, 213 Blackrock company, 174 C Boden, Jean, 111, 125 Caballero, Ricardo J., 192 BoE (see Bank of England) CAC (see collective action clause) bond (exchange offer, issue, offering, Cadbury, Sir Adrian, 214 quality, redemption, rollover, swap), Caisse des Dépôts et des Consignations, 7, 8, 41, 105, 106, 109, 118–124, 132, 213 133, 134, 135, 141, 156n26, 157n43, Calmy-Rey, Micheline, 222 170, 193, 208, 232 Calonne, 228 bond market (primary, secondary), 3, Calvin, Jean, 38, 87n33 129, 137, 142, 168 Canada, 14, 16, 17, 230, 231, 232 Index 261 capital (adequacy/inadequacy, base, Communist (country, economic system, controls, flows, ratio, requirements, regime, rule), 32, 33, 41, 43, 87, 118 support), 4, 8, 24, 32, 36, 106, 110, competitiveness, 27, 42, 74, 81, 104, 112, 124, 141, 167, 170, 172, 173, 105, 106, 107, 127, 145, 169, 195, 174, 175, 179, see also recapitalisation/ 206, 208, 227, 235 recapitalization carbon trading “condemned to grow,” 37 scheme conditionality (see policy conditionality) capital movements, 24, 25, 27, 31–33, Confiscation, 229, 235 34–35, 42, 66, 69 Congress (see U.S. Congress) CDO (see collateralized debt obligation) Connell, Carol M., 29 CDS (see credit default swap) Conservatives, 41, 62, 97, 124, 223, 229 CEBS (see Committee of European consumer credit, 167 Banking Supervisors) contagion, 6–7, 60, 115, 140–142, 143, Ceccehetti, Stephen, 50 148, 151, 189, 198 central bank/banker, 1, 2, 8, 13, 15, contamination (see contagion) 18, 20, 22, 23, 26, 30, 37, 48, 49, 50, continuity (principle), 175, 177, 228 51, 52, 53, 57, 59, 60, 61, 66, 70, 75, contraction, 43, 56, 70, 112, 116, 120, 200 86n13, 88n55, 90, 93, 97, 102, 104, conventional/unconventional policy, 106, 112, 123, 124, 138, 166, 169, 48, 91n79, 111, 112, 122, 123, 184 171, 173, 193, 230 convergence (criteria, programmes), 35, Central Europe/European, 56, 117, 213 49, 52, 56, 74, 102, 108n21, 114, 127, Centre of European Policy Studies, 128, 145, 154, 169, 238 101–102 convergence (nominal, real), 35, 49, 52, CEPS (see Centre of European Policy 56, 74, 102, 108n21, 114, 127, 128, Studies) 145, 169, 238 Chili, 232 Converium (class action, settlement), China, 22, 29, 32, 50, 97, 115, 134, 192, 220, 221 219, 228, 233, 235 convertibility (see currency Church, 228, 229 convertibility) CII (see Council of International coordinated bilateral loans see pooled Investors) bilateral loans Clinton, Bill, 46, 99, 227, 233 coordination of economic and Clinton, Hillary, 222 budgetary policies, 145 Cohesion Fund (see EU Cohesion Fund) core country/member/nation/State (of the Cold War, 53, 77, 97, 229 EU/Eurozone), 114, 116, 118, 119, 151 Collapse, 1, 11, 13, 15, 21, 23, 27, 29, “core versus periphery,” 113 30, 41, 42, 43, 45, 46, 70, 75, 91n80, corporate board, 214, 218, 223 105, 112, 122, 136, 201, 211, 229, see corporate citizenship, 212, 218, 223 also crisis, meltdown, shock corporate governance (framework, Collateral, 62, 106, 132, 133, 136, 166, disclosures, principles, 169, 184n28, 198–202 implementation), 9, 119, 165, 191, collateralized debt obligation, 198, 213 196, 211, 212, 213, 214–216, 217–218, collective action clause, 138, 139, 156 221, 223, 225 Commission (see European Commission) corporate responsibility, 216 Committee of European Banking corruption, 61, 117, 118, 209, 221, 222 Supervisors, 173 cost of integration, 56 commodity price, 26, 27, 39, 41 Council (see Council of the European common currency (see single European Union) currency) Council of International Investors, 44 common market, 112, 231 Council of the European Union, 132, Communism, 33 184n31 262 Index counter-cyclical policy/spending (see cross exposure, 201 anti-cyclical policy/spending) Cuba, 230 country risk (see sovereign) currency (convertibility, speculation), Court of Justice of the European Union, 25, 27, 28, 32, 36, see also exchange 91n76, 151 controls crash, 213, 232, 234, see also Great Crash currency (overvaluation, peg, “creative destruction,” 46 undervaluation), 15, 42, 110, 231, credit (default swap, institution, rating, 232, see also “par value” rationing, swap, worthiness), 127, currency union (see monetary union) 140, 166–170, 172, 173, 174, 175, current account, 5, 9, 21, 24, 25, 26, 176, 177, 179–180, 183n17, 184n35, 27, 28, 36, 44, 47, 63, 70, 74, 98, 184n37, 213, 230, see also bank, 103, 124, 190, 206, see also external consumer credit, derivative, financial accounts institution, mortgage credit Cyprus, 107, 144 Credit, 4, 8, 9, 38, 41, 42, 44, 58, 74, Czech Republic, 117, 121, 149 91–92n80, 97, 112, 117, 132, 137, 138, 140, 159, 160, 161, 167, 168, 169, 172, D 175, 176, 177, 180, 181, 184, 191, 192, Dagong Global Credit Rating, 219 195, 200, 201, 206, 212, 213, 219, 224, debt (accumulation, burden, 227, 230, 231, 232, 234 cancellation, creation, default, Creditanstalt, 15, 45 dispersion, financing, haircut, issue, creditor (committee, country, nation, issuance, maturity, moratorium, private, sovereign, unsecured), 4, 8, “mutualisation,” problem, projection, 40, 41, 58, 104, 127, 137, 140, 141, ratio (to GDP), redemption, 159, 161, 162, 175, 192, 195, 227, re-evaluation, relief, repayment, 228, 234, 235 rescheduling, restructuring, rollover, crisis (cyclical, economic, euro zone, schedule, service/servicing, settlement, financial, fiscal, foreign-debt, sustainability, write-down), 1, 2, 3–4, liquidity, international debt, sovereign 5–6, 7, 9, 10, 11, 13, 31, 33, 37, 41, debt, structural, subprime, systemic, 44, 45, 49, 50–51, 67, 69, 70, 72, 73, world-wide, 40-year), 1, 2, 4, 5, 6, 78, 84, 91n74, 91n77, 95–107, 108, 7, 8, 9, 11, 12, 15, 18, 31, 32, 36, 120, 122, 123, 127, 133, 135, 137–140, 37–39, 41, 44, 48–49, 67, 68, 70, 71, 138, 139, 140, 141, 142, 145, 151, 74, 78, 80, 81, 83, 84, 96, 110, 114, 152, 153, 154, 157n38, 161, 190, 125, 127–129, 130, 133, 143, 144, 192–198, 195, 201, 203, 208, 209, 149, 151, 154, 163, 164–165, 167, 229, 231, 233, 234, 235, 238, see also 170, 173–175, 189, 191, 192, 193, borrowing, corporate debt, crisis, dual 198, 206, 212, 226, 233, 240, see also debt, excess(ive) borrowing, external collapse, meltdown, shock debt, international debt, private crisis management, 83, 84, 111, 113, debt, public debt, securitisation/ 125, 176, 177, 239 securitization, sovereign debt crisis, 1, 2, 3, 4–5, 6, 8, 9, 11–12, 13, default (see debt) 15, 18, 31, 32, 36, 38, 41, 44, 48–51, defense budget/spending, 227, 229, 232 63, 64, 66, 67, 71, 79, 83–84, 89n59, deficit (balance of payments, budget, 92n87, 96, 97, 102, 103, 106, 112, fiscal, government, trade, twin), 5, 6, 9, 113, 115, 116, 122, 124, 125, 127, 13, 16, 21, 24, 25, 26, 27, 29, 30, 34, 40, 128, 129, 130, 131, 133, 134, 137, 43, 47, 56, 57, 63, 68, 69, 72, 73, 74, 87, 140, 141, 143, 144, 149, 151, 159, 95, 96, 97, 98, 99, 100, 102, 103, 105, 164–179, 196, 197, 198, 200, 203, 113–114, 120, 121, 128, 131, 132, 135, 205, 206, 208, 209, 210, 212, 226, 143, 145, 146, 150, 151, 155n5, 190, 230, 231, 232, 233, 240–241 191, 202–207, 238 Index 263 deficit country, 25, 27, 28, 30, 70, 95, dual debt, 5, 95–108 106 Dubai, 97, 224 deficit-cutting, 129, 131 deflation/deflationary, 5, 19, 28, 29, 30, E 42, 67, 73–75, 80, 96, 202, 235 Eastern Europe/European, 32, 43, 113, deleveraging, 91–92n80, 189, 190, 193, 117, 118 198, 200, 210, see also leveraging EBA (see European Banking Authority) Delors report, 53, 55 EBRD (see European Bank for Delphi, 227 Reconstruction and Development) democracy/democratic deficit, 33, 56, 62 EC treaty (see Treaty on the European Democratic Party/Democrats, 56, 62, 77, Community) 154, 223 ECB (see European Central Bank) democratic preferences, 62 ECJ (see Court of Justice of the European denationalization of money, 20 Union) Denmark, 14, 16, 17, 133 ECOFIN Council (see Council of the dependence/dependency, 9, 97, 226, 227 European Union) deposit (interest bearing, interest free), economic (coordination, surveillance, 40, 133, 146, 168, 175, 179 union), 69, 143, 144, 145, 147, deposit fund, 170 149, 169, 173, 198, 234, see also deposit guarantee/insurance, 170, 171, adjustment, austerity, contraction, 179, 180 convergence, crash, crisis, depression, depreciation, 20, 120 governance, growth, integration, depression, 2, 10, 64, 70, 71, 72, 75, 76, openness, policy, recession, recovery, 110, 224, 229 stagnation) deregulation/deregulated, 42, 46, 55, 70, Economic and Monetary Union, 6, 47, 191, 227, 233 55, 69, 128, 143, 146, 147, 149–154 derivative, 4, 127, 165, 201 economies of scale, 36, 56 Deutschmark, 52, 60, 81 EDP (see excessive deficit procedure) devaluation, 28, 37, 39, 52, 70, 73, 91, effective demand, 57 105, 130, 226, 228, 232 EFSF (see European Financial Stability developing country/nation, 10, 41, 112, Facility) 233 EFSM (see European Financial Directory, 229 Stabilisation Mechanism) discipline (see fiscal discipline) Egypt, 216, 230 discrimination against the United States, EIB (see European Investment Bank) 26, 32 Eichengreen, Barry, 48, 117, 126n13, division of labour/labor, 57 181n3, 183n14 DM (see Deutsche Mark) EIP (see excessive imbalance procedure) “do nothing” years, 48 ELA (see Emergency Liquidity Assistance) doctrine of passivity, 60 Emergency Liquidity Assistance, 168, 172 dollar (see US dollar) emerging country/economy/nation, 2, “dollar shortage,” 26, 29 9, 45, 110, 111, 112, 113, 114, 115, dollar standard, 21, see also gold 116, 121, 124, 145, 154, 160, 198, exchange standard/system 206, 226, 234 dollar-denominated, 40, 41, 121 emerging market, 112, 113, 121, 124, dollarisation/dollarization, 117 206 “domino effect,” 84, 159, see also Emminger-Tietmayer interpretation, 60 spill-over/spillover EMS (see European Monetary System) Dornbusch, Rudiger, 29, 86n16 EMU (see Economic and Monetary drachma (see Greek drachma) Union; also unofficial acronym for Draghi, Mario, 73, 96, 94n105 European Monetary Union) 264 Index enhanced surveillance, 148 Euro Zone/Eurozone see Euro Area entitlements (mandatory, social), 96, 98, eurodollar, 27, 231 99, see also social protection/security Eurogroup, 135, 136, 138, 142, 153, 154 environmental norms, 235 “Euroisation/euroization,” 117 Environmentalists, 62–63 “Europe is different,” 125 EPU (see European Payments Union) Europe, 5, 9, 26, 27, 31, 32, 36, 43, 47, equal treatment, 59, 223 53, 60, 61, 62, 77, 80, 85, 95–105, equity fund, 63, see also alternative 107, 112, 113, 114, 117, 122, 125, investment vehicle 153, 154, 195, 212, 213, 220, 228, Erhard, Ludwig, 45, 80, 101 234, 239 “Erhardian optimism,” 45 European (banks, bankers, countries, ESFS (see European System of Financial democracies, monarchies, pension Supervision) systems, societies), 15, 26, 49, 68, 74, ESM (see European Stability Mechanism) 76, 78, 83, 101, 137, 154, 202, 203, ESRB (see European Systemic Risk Board) 213, 226, 230, 234 Estonia, 14, 16, 17, 109, 114, 116, 117, European Bank for Reconstruction and 143 Development, ix EU budget (see budget) European Banking Authority, 173 EU Cohesion Fund, 144 European Central Bank, 8, 15, 48, 53, EU Framework for Crisis Management in 57, 59, 60, 61, 73, 75, 88n57, 90n1, the Financial Sector, 176, 177 104, 106, 112, 122, 167, 169n3, 171, EU institutions (see Council of 172, 173, 200 the European Union, European European Commission, 65, 73, 75, Commission, European Council, 89n59, 122, 129, 134, 136, 150, 173, Court of Justice of the European 176, 177, 211 Union, European Parliament) European Council, 102, 129, 134, 136, EU Official Journal (see Official Journal 149, 153, 154 of the EU) European Debt Agency, 151 EU six-pack legislation, 144–148 European Financial Stabilisation EU treaties (see Single European Act, Mechanism, 132 Lisbon Treaty, Maastricht Treaty, Treaty European Financial Stability Facility, on European Union, Treaty on the 132, 200 Functioning of the European Union) European Investment Bank, 140 Euro Area/Euro zone/eurozone, 3, 5, 6, European Monetary System, 46, 51, 7, 8, 9, 11, 13, 14, 15, 16, 17, 18, 22, 52, 59 24, 36, 48, 49, 55, 69, 70, 79, 82, 83, European Monetary Union, 49, 53, 59, 84, 95, 101–107, 114, 115, 117, 125, 61, 79, 193, see also Economic and 128, 129, 130, 132, 133, 134, 138, Monetary Union 141, 142, 145, 148, 149–150, 151, European Payments Union, 26, 36 152, 153, 154, 164, 171, 195, 198, European project, 6, 13, 51, 62, 106, 206, 226, 233, 236, see also Eurogroup, 152, 239 Euro summit European Recovery Program (see Euro membership, 3, 5, 7, 8, 9, 13, 15, Marshall Plan) 22, 25, 48, 51–55, 69, 70, 83, 95, 97, European Semester for Economic Policy 101–105, 107, 112, 115, 118, 124, Coordination, 145 128–129, 131, 132, 134, 141, 145, European Stability Mechanism, 69, 146, 150, 153, 154, 166, 171, 175, 134–135 195, 204 European System of Central Banks, Euro see single European currency 88n57, 112 Euro summit, 133, 134, 135, 138, 141, European Systemic Risk Board, 51, 145, 142, 156n26 173 Index 265

European Union/EU, 4, 5, 8, 13, 27, fermiers généraux (fr), 228 43, 49, 53, 55, 56, 59, 61, 62, 65, 69, “fight against debt,” 111 74, 77, 81, 84, 88, 89, 90n64, 95, financial (actor, aggregate, assistance, 101–105, 112, 113, 114, 115, 117, disturbance, engineering, firm, 118, 119, 120, 122, 127, 128, 130, institution, instrument, intermediary, 132, 133, 134, 135, 140, 141, 149, market, mismatching, order, package, 150, 152, 154, 166, 170, 171, 173, product, programme, sector, service, 176, 195, 197, 208, 211, 238, 239 stability, support, system, turbulence), Europessimism, 51 1, 3, 4, 6, 8, 11, 22, 33, 38, 44, 64, 66, euro-skepticism, 52 73, 84, 96, 97, 100, 105, 106, 110, 118, excess(ive) borrowing, 44–46 122, 124, 129, 130, 131, 132, 134, 135, excess(ive) lending, 44 136, 137, 139, 143, 148, 161, 165, 172, excess(ive) spending, 38 176, 177, 190, 191, 193, 195, 197, 198, excessive deficit procedure, 89n59, 143, 200, 202, 203, 206, 209, 210, 227, 233, 146 235, see also bank, credit institution, excessive deficit, 34, 128, 129, 143, 144, crisis, global finance, governance, 148, 151, 155n3 deregulation, integration, liberalisation/ excessive imbalance procedure, 147 liberalization, regulation, sovereignty, excessive imbalances, 34, 147, supervision 148, see also fiscal imbalances, Financial Accounting Standards Board, macro-economic imbalances 211, 224 excessive indebtedness, 13, 75 financiers (fr), 228 exchange controls, 25, 35, 76, see also fine, 144, 145–148 currency convertibility fine-tuning reverse operation, 53, 168 exchange rate (adjustable, fixed, flexible, Finland, 14, 16, 17, 101, 143 floating), 20, 21, 27, 28, 29, 30, 34, firepower (see lending capacity) 41–43, 45, 47, 52, 53, 60, 67, 110, Firewall, 127, 223 231, see also currency peg, “par value” fiscal (balance, break, compact, exchange rate (arrangement, instability, consolidation, deficit, discipline, movement, stability, regime, risk), 18, devaluation, equilibrium, fine- 23, 24, 34, 43–44, 53, 110, 117, 118, tuning, gap, imbalance, indiscipline, see also adjustment management, paradise, path, plan, executive remuneration, 217, 218, 223 planning, policy, position, prudency, expansionary/expansive policy, 28, 42, situation, stimulus, sustainability, 47, 56, 74, 125 union), 5, 6, 7, 9, 27, 47, 49, 50, 53, expenditure (see spending) 57–58, 59, 63, 66, 68, 69, 70, 72, export market, 66 73–75, 91n77, 102, 104, 105, 110, exposure, 8, 109, 118, 124, 137, 165, 196, 112, 115, 122, 127, 128, 129, 131, 197, 198, 201, see also cross exposure 133, 141, 143–144, 145–147, 148, 149, external accounts, 19, 191, see also 150, 151, 152, 154, 165, 166, 191, balance of payments, current 193, 197, 200, 203, 226, 238, see also accounts, official reserves budget, crisis, deficit, excessive deficit, external debt, 33, 40, 118, 120, 160, governance, indicators, integration, 161, 205 solidarity, sovereignty, tax, taxation, variable F Fiscal Compact/Pact (see Treaty FASB (see Financial Accounting on Stability, Coordination and Standards Board) Governance in the Economic and FDI (see foreign direct investment) Monetary Union) Fed (see U.S. Federal Reserve) fiscal pact, 69, 91 Federal Republic (see Germany) fiscal sovereignty, 7, 59–61, 152, 154 266 Index

Fisher, Irving, 75, 92n91 Generally Accepted Accounting Fitch Rating Agency, 219 Principles (U.S.), 211, 224 flexible exchange rates, 20, 21, 27–29, Geneva Convention on Foreign Arbitral 30, 53 Awards, 219–220 flight of capital, 8, 234 geopolitical shift, 235 foreign (aid, borrowing, direct German (Constitutional Court, Council investment, exchange risk), 32, 33, 97, of Economic Experts, economy, 116, 118, 233, 234 government, leaders, model, monetary foreign currency (borrowing, reform, success story, reunification), denominated loan, position), 30, 41, 25, 28, 32, 33, 52, 55, 60, 61, 77, 78, 69, 117, 118, 120, see also reserves 79, 80, 81, 93n99, 121, 126n22, 130, foreign exchange holdings/reserves (see 132, 155n13, see also Bundesbank reserves) Germany, 6, 7, 14, 15, 16, 17, 25, 31, foreign exchange shortage, 31 32, 33, 39, 52, 54, 60, 61, 63, 68, foreign-owned bank, 115, 117 77–79, 80, 81, 92n87, 93n99, 94n100, “The 40 year crisis,” 11, 37 101, 106, 115, 116, 126n22, 128, 130, France, 6, 14, 16, 17, 26, 33, 54, 55, 63, 132, 137, 141, 149, 150, 152, 153, 76, 78, 96, 100, 101, 102, 106, 114, 155n5, 155n6, 195, 202, 212, 226, 128, 132, 142, 149, 155n5, 157n44, 230, 231 195, 212, 217, 226, 229, 230, 232, Giscard d’Estaing, Valéry, 51 234 Global Corporate Governance Forum, 216 Francis I, 228 global finance, 2, 3, 4, 5, 8, 11, 12, 13, Frank-Dodd (Act of Congress), 210 22, 45, 81, 115, 195, 198, 211–225, Frankel, Tamar, 47 238 free banking, 20 global institutional investor, 211 free market, 55, 56, 90, 93, 239 global pension fund, 213 free rider, 8, 140, 157n36, 161, 162, 163 Global War on Terror (see War on Terror) free trade, 36, 92n87, 234, 235 globalisation/globalization, 3, 6, 9, 13, French (debt, economy), 51, 55, 79, 18, 22, 23, 36, 43–44, 55, 56, 63–66, 93n99, 153, 219, 228, 229, 230, 231, 93n97, 106, 109, 113, 124, 152, 154, 232 226–237, 241 French Revolution, 219, 229 gold reserves (see reserves) Friedman, Milton, 70, 78 gold standard, 20, 21, 26, 27, 29, 81, funding cost, see also borrowing cost 83, 230 FX (see foreign currency) golden rule (see fiscal break) gold-exchange standard/system, 28, 29 G governance (economic, financial, fiscal), G-10/G10/Group of Ten, 86n13, 138, 79, 128, 143, 144, 145, 149, 211–225, 156n28 see also corporate governance G-20/G20, 2, 100, 224, 225, 226, 233, 239 government activism, 112, see also state G-5/G5, 231 activism G-7/G7, 231 government debt (see public debt) G-77/G77, 234 government deficit (see deficit) GAAP (see Generally Accepted government paper, 58 Accounting Principles) Great Crash, 10n2, 71 GATT (see General Agreement on Tariffs Great Depression, 10n2, 64, 67, 71, 72, and Trade) 75, 76, 110, 224 General Agreement on Tariffs and Trade, Great Recession, 70, 71, 75, 110 36 “Great Society Programs,” 27 general government sector debt (see Greece, 1, 6, 8, 13, 14, 15, 16, 17, 49, public debt) 63, 69, 70, 81, 94n102, 95, 96, 101, Index 267

102, 103–105, 106, 107, 113, 114, home loan (see mortgage credit) 115, 119, 125, 129, 130, 131, 132, Hong Kong, 232 135, 138, 139, 140, 143, 151, 155n3, Hoover, Herbert, 230 157n38, 166, 167, 168, 169, 172, 173, household borrowing, 117, see also 174, 175, 176, 177, 180, 184n32, consumer credit, mortgage credit 189–210, 226, 230 HUF (see Hungarian forint) Greek (bailout, banking sector, human capital, 116 Bondholder Act, drachma, Hume, David, 228, 236n12 government, Minister(ry) of Finance, Hungarian (administration, banks, Parliament), 6, 8, 9, 104, 107, economic policy, economy, external 129–131, 135, 164, 166, 169, 170, debt, forint, general elections, 173, 175, 180, 184, 189, 203, 206, government, Parliament, State, 209, see also Hellenic Treasury), x, 6, 33, 43, 117, 118–124, Greece, debt crisis, 8, 240 144 Greens, 62 Hungary, 14, 16, 17, 33, 54, 114, 115, Gross, Daniel, 131 117, 144 Growth and Stability Pact (see Stability Hungary and the IMF, 6 and Growth Pact) Growth compact, 73 I Growth, 3, 5, 7, 12, 21, 27, 32, 35, 46, IASB (see International Accounting 48, 55, 59, 67, 68, 73, 79, 80, 96, 100, Standards Board) 101, 102, 105, 140, 142, 145, 150, ICC (see International Chamber of 153, 191, 203, 209, 235, 238, 239, see Commerce) also anti-cyclical policy, expansionary ICGN (see International Corporate policy, fiscal stimulus, spending, Governance Network) stimulative measures IFC (see International Finance guarantor, 132, 142, 149, 154n1 Corporation) “guardian of stability,” 61 IFRS (see International Financial Gulati, Mitu G., 198 Reporting Standards) Gulf country, 39 IIF (see International Institute of Finance) H Il Monte (it), 228 Hamilton, Alexander, 229 IMF (see International Monetary Fund) Hausmann, Ricardo, 117 “impossible trinity,” 110 Hayek, Friedrich, 20, 85n5, 212 income redistribution, 57n5 hedge fund, 165, 213, 222, see also income tax (corporate, flat, personal), alternative investment vehicle 122, 129, 158 hedging, 37, 118 income transfer, 39 Hellenic (Capital Markets Commission, indebted countries/nations, 43, 70, 95, Council of Systemic Stability, Deposit 97, 106, 117, 161, see also peripheral Guarantee Fund, Deposit and countries/nations Investment Guarantee Fund, Financial indebtedness, 13, 22, 44, 74, 75, 95, 96, Stability Fund, Postbank, Republic), 97, 98, 100, 101 170, 171, 172–173, 177, 178, 179, India, 217, 226 180, 185n40, see also Greek indicators (aggregate, alert, fiscal), Henry II, 228 63–66, 116, 195 herd instinct, 42 Indonesia, 232 herd-like behavior, 34 industrialisation/industrialization, 227, high frequency/high speed trader/ 228, 229–231 trading, 38, 223, 225 industrialized country, 26, 31, 40, 46, Holmstrom, Bengt, 197 226, 233, 235 268 Index inflation/inflationary, 2, 19, 24, 25, International Monetary Fund (Articles 27, 28, 29, 30, 36, 39, 40, 41, of Agreement, Article IV consultation, 42, 43, 46, 47, 50, 51, 55, 60, 61, borrower’s quota, Emergency 77, 80, 107, 120, 228, 230, 231, Financing Mechanism, Evaluation 232, 234 Office, Executive Board/Board, Fiscal information (failure, revolution), 58, Monitor, International Monetary 64–66 and Financial Committee, Stand-by information crisis, 240–241 agreement), 2, 30, 32, 36, 86n13, 99, innovation (see policy) 109, 111, 159, 171, 230, 232 insolvency, 7, 151, 190, 192, 198, 208, international monetary order, 5, 12, 18, 210 19, 22, 24, 26, 37–48 institutional quality, 116 international monetary reform, 60, 81, integration (European, economic, 97 financial, fiscal, international, international monetary system/ political, trade, Western), 19, 26, 27, “non-system,” 2, 5, 11–94, 96 34, 36, 45, 56, 59, 61, 77, 80, 102, international regime, 7, 22, 127, 152 148, 153, 154, 231, see also monetary international reserves, 22, 23, 24, 29–31, union, political union 97, 115, 120, see also gold reserves, interbank market, 8, 115, 168, 184n38 official reserves, reserve currencies interdependence/interdependency, 3, International Securities and Derivatives 10, 76, 114, 125, 152, 226, 235 Association, 157 interest rate (concessional, effective, International Shareholder Services, 213 Euribor, floating, non-concessional, inter-war period, 71 negative, real), 2, 12, 40, 41, 42, 55, investment position, 65 66, 96, 110, 117, 128, 129–130, 132, investor compensation scheme, 171, 179 133, 135, 137, 138, 233, 234 Investor Responsibility Research Center, interest rate spread, 133 213–214 Internal Market (see Single European Iraq, 97, 99 Market) Ireland, 1, 14, 16, 17, 54, 63, 69, 80, International Accounting Standards 96, 101, 102, 103, 106, 107, 113, 114, Board, 211, 224 115, 116, 133, 135, 136, 143, 151, International Chamber of Commerce, 153, 190, 194, 226 216, 219, 220, 224 Irish (bailout, banks, government), 115, International Corporate Governance 116, 133 Network, 214, 216–218 IRRC (see Investor Responsibility “international economic disintegration,” Research Center) 76 ISDA (see International Securities and international economic order, 32, 35, Derivatives Association) see also “New International Economic isolationism/isolationist, 94n100, 234 Order” Issig, Otmar, 57 international economic organisations/ Italian Cities, 228 organizations, 78 Italian State, 105 International Finance Corporation, 216 Italy, 14, 16, 17, 39, 54, 95, 96, 100, international financial architecture, 81 101, 103, 105, 106, 133, 137, 142, International Financial Reporting 151, 153, 155n3, 194, 195, 228, 231 Standards, 211, 224 International Institute of Finance, 138 J international institution, 118, 202, 208, Jamaica Agreement, 31 see also financial institution Japan, 5, 14, 15, 16, 17, 18, 22, 24, 36, international monetary and financial 39, 46, 68, 69, 70, 76, 83, 213, 231, order, 11–18 232, 233 Index 269

Japanese (authorities, economy, libertarianism, 55, 84 example, experience, GDP, story), 39, limited government, 55–57 46, 70, 71, 231, 232 liquidation, 159, 177 Jefferson, Thomas, 228 liquidity, 8, 9, 13, 18, 30, 41, 44, Jensen, Niels, 222 45, 115, 128, 131, 133, 136, 165, Jews, 228 167, 168, 170, 172, 178, 190, 191, job creation, 84 192–193, 197, 198, 200, 201, 202, 209, 210, 233 K Lisbon Treaty, 147, 152 Kaminsky, Reinhart, 112 listed company, 165 Keynes, John Maynard, 31, 32, 65, Lithuania, 114 71–72, 75, 78, 212, 230 Loan Facility Agreement, 129 Keynesian (economists, ideas, issue, loan-to-deposit ratio, 114 model, revolution, theory), 47, 53, 57, London Club, 8, 138, 162 65, 72, 73, 79, 110, 112, 114, 206 Long Term Refinancing Operation, 137 Keynesianism, 71, 77 Louis XVI, 228 Kindleberger, Charles, 76 Louisiana, 229 Kohl, Helmut, 61, 90n65 LTCM (see Long Term Capital Koo, Richard C., 46, 70, 196, 200 Management) Krishnamurthy, Arvind, 192 LTRO (see Long Term Refinancing Krueger, Anne, 160, 163n2 Operation) Krugman, Paul, 126n20, 152 Ludwig Erhard and the social market economy, 80 L Luxembourg/Luxemburg, 14, 16, 17, labor cost, 66, 104, 195, 206 116, 132, 134, 143 laissez-faire, 227 Lamfalussy, Alexandre, 44, 48, 51, 74 M Latvia, 114, 117, 143, 144, 161 Maastricht (consensus, criteria, Treaty), Lausanne conference, 230 6, 7, 55, 59, 63, 115, 128, 143, 151 Law, John, 212, 228 Maastricht criteria (see convergence) legitimacy, 63, 84, 154 Machlup, Fritz, 29, 85n3 Lehman Brothers, 1, 12, 13, 18, 45, 170, macroeconomic (adjustment, 213 discipline, imbalances, performance, lender (official, of last resort), 7, 122, supervision), 56, 65–66, 74, 145, 127, 137, 138, 140, 142, 151, 154, 168 147–148, 191, see also indicators lending (capacity, practices), 31, 132, macro-prudential (see regulation, 133, 134, 142, 143, 154, 165 regulatory, supervision, supervisory) less advanced country, 112, 117 Madison, James, 228 less advanced new member state (of the Magnus, George, 137, 152 EU), 113 Malaysia, 217, 232 less Europe’, 62 Malta, 144 Leveraging, 50, see also deleveraging market (correction, economy, failure, levy on financial institutions, 122 forces, freedom, fundamentalism, Liability Management Facility participants, players, power), 4, Agreement, 139 5, 11, 20, 33, 36, 42, 44, 45, 48, liberal (theory, economists), 72, 212 49, 51, 53, 55, 56, 63–83, 109, liberalisation/liberalization (financial, 110, 111, 112, 113, 114, 117, 118, trade), 18, 32, 34, 35, 36, 42, 45, 56, 122, 125, 127, 128, 238, 239, see 106 also deregulation, liberalisation/ liberalism, 79, 84 liberalization, regulation, Liberals, 47, 62 supervision 270 Index market-based economy (see market N economy) Napoleon, 229 market-dominated system, 23 Napoleonic Wars, 229 market-driven integration, 7, 23 National Association of Insurance “markets are always right,” 125 Commissioners (U.S.), 219 Marshall Plan, 26, 32, 140, 231 National Bank (of France), 229 Marshall, Alfred, 21 national budgetary frameworks, 145 Medicare, 98 national income, 63, 115, 116 meltdown, 2, 5, 12, 18, see also collapse, national institutions, 111, 116, 118, crisis, shock 197, 202, 208 Memorandum of Understanding (MoU), national ownership, 147, 149 130, 131, 136 National Socialism/Socialist, 71 mercantilist (theory/economists), 228 nationalisation/nationalization, 43, 77, Merkel, Angela, 79, 102, 126n22 229, 235 Mexico, 17, 41, 138, 229, 230, 232 nation-state, 36, 113, 114 micro-prudential (see regulation, natural monopoly, 56 regulatory, supervision, Necker, 228 supervisory) Neoclassical (theory/economists), 96 Middle East, 31, 235 neoliberal (theory/economists), 79 military expenditure (see defense) net present value, 138 Millennium Development Goals, 234 Netherlands, 14, 16, 17, 54, 102, 217, 230 Millstein, Ira, 214 New “world economic order,” 40 Mises, Ludwig von, 212 New Deal, 230 mismatch (financial, liquidity, “new economic nationalism,” 21 maturity), 44, 117, 190, 200, 209, New Orleans, 97 210 “new orthodoxy,” 55, 56 modern economics’, 71, 208 New York Convention on the Mohanty, Deepak, 112 Recognition and Enforcement of monetarism/monetarist (theory/ Foreign Arbitral Awards, 220 economists), 21, 53, 70, 77, 96 New York, 97, 220 monetary (authority, framework, New Zealand, 14, 16, 17, 69 history, nationalism, policy, stability, Nixon, Richard, 27 union), x, 1, 2, 5, 7, 9, 11, 18, 23, 29, no-bailout clause/provision, 127, 128, 30, 35, 37, 38, 45, 49, 51, 55, 56, 58, 132, 141, 142 59, see also Economic and Monetary “non system” (see international Union, shock, sovereignty monetary system) monetary sovereignty, 6, 59–61, non-financial corporation/enterprise, 109–125, 152 168, 169 money (“denationalization” of, quality non-financial sector, 42 of, role of), 19–20, 47, 117 non-performing loan, 169 monitoring, 36, 55, 116, 134, 148, Non-Tariff Barrier, 235 210 Northern economies, 233 Monks, Robert A.G., 213 NPV (see net present value) Monti, Mario, 105 nuclear power, 235 Moody’s rating agency, 123, 219, 224 moral hazard, 6, 7, 137, 141, 210 O moratorium (see debt) O.J. (see Official Journal of the EU) “more Europe,” 62 Obama, Barack, 70, 98, 100 mortgage credit/loans, 123, 169, 174 OECD (see Organisation for Economic Mundell, Robert, 21, 26, 110 Cooperation and Development) mutual assistance, 130 OECD Corporate Governance Code, 214 Index 271

OEEC (see Organisation of European Poland, 101, 114, 121, 144, 231 Economic Cooperation) policy (autonomy, conditionality, offices (fr), 228 harmonisation/harmonization, Official Journal of the EU, 90 implementation, innovation, issue, official lender (see lender) maker, manoeuvre, measure, norm, official reserves (see reserves) option, recommendation, suggestion), offshore financial center, 222 6, 11, 19, 22, 26, 28, 36, 46, 48, 50, oil-exporting country, 39 63, 65, 66, 67, 73, 74, 100, 109, 110, oil-importing country/economy, 39 114, 119, 124, 129, 130, 136, 169, oil-price shock (see shock) 189, 190, 191, 192, 196, 198, 239, see Olympia, 217 also adjustment Olympics, 111 political union, 62, 154 “one-way speculation,” 52 Pope, 228 openness, 6, 36, 109, 110, 118 Portugal, 96, 101, 102, 103, 106, 107, optimal currency area/zone, 57, 102, 192 114, 115, 126n22, 135, 136, 143, 151, Orban, Victor, 121, 122 157n45 Organization for Economic Cooperation Portuguese bailout, 132 and Development, 86n13, 214, 226 Portuguese government, 133, 136 Organization of European Economic post-Westphalian era/system, 111 Cooperation, 36 precautionary approach, 136, 142 over-borrowing (see excess borrowing) preferential repayment exchange rate, over-indebtedness (see excessive 123 indebtedness) preferential shares, 123 over-lending (see excess lending) preferred creditor status, 137 overvaluation, 15, 42, 232 price (index, stability), 20, 55, 89, 90, 93, see also deflation, inflation P primary deficit, 208 Padoa-Schioppa, Tomaso, 114 primary surplus, 135, 208–209 Papademos, Lucas, 104 private (creditor, debt, sector), 58, 104, Papandreou, George, 104 137, 140, 159, 205, 232, 234 “par value,” 25, 27 private sector involvement, 6, 7, 8, 134, paradigm shift, 9, 193 135, 137, 151, 168, 169 pari passu, 137 privatisation/privatization, 43, 45, 77, Paris Club, 231 106, 191, 209 payment imbalance, 50 procyclical policy, 112 peer group benchmarking, 218 productivity, 19, 35, 52, 68, 73, 74, 97, Peloponnesian War, 227 101, 102, 105, 195, 206, 209, 234 Peninsular Steam Navigation Company, propagation channel, 43, 44 97 “prosperity for all,” 45, 80 Pentagon (see defense) protectionism/protectionist, 28, 61, 76, performance criteria, 120, 169 112, 231, 234 peripheral country/member/nation/state Protestants, 228 (of the EU/Eurozone), 195, 203 Proton Bank, 177, 178 periphery, 31, 49, 69, 113 PSI (see private sector involvement) permanent bailout mechanism (see public (borrowing, debt, finances, European Stability Mechanism) investment, sector), 5, 48, 50, 58, 59, Peru, 231 67, 68, 74, 77, 95, 96, 99, 103, 104, 105, “petrodollar,” 39, 40 112, 114, 115, 116, 120, 122, 127, 129, Philippines, 232 131, 132, 151, 171, 197, 201, 202, 203, playing-field, 231 205, 206, 207, 208, 209, 210, 226–235, Plaza agreement, 52 see also asset, spending 272 Index

Q research and theory, 66–67 QE (see quantitative easing) Reserve Bank of India, 112 quantitative easing, 113 reserve currency, 86n13 reserves (foreign exchange, gold, R official), 22, 30, 97, 115, 233 Rambouillet, 231 resolution (fund, scheme, tool), 171, Ramel, Dominique, 229 176, 179–180 rating (bank, credit, sovereign), 4, resource shortage, 26, 32, 33 92n80, 132, 165, 166, 191, 192, 201, resource transfer issue (see transfer issue) 206, 212, 219 revaluation, 52 rating agency (credit rating agency, revanche (fr), 229 governance rating agency), 4, 80, 120, Rey Commission, 141, 156n28 122, 123, 125, 128, 129, 132, 152, Rio de Janeiro, 217 190, 210, 212, 219 risk (aversion, exposure, free, premium, Reagan, Ronald, 97, 98, 227, 232 taking), 9, 141, 165, 184, 193 Reaganomics, 77 risk of contagion (see contagion) “real economy,” 5, 12, 26, 35, 37, 47, Rogoff, Kenneth, 68, 96, 159, 163n1, 48, 80, 83, 84, 115, 234 202 real estate, 18, 40, 50, 224, 225, 232 Romania, 113, 114, 117, 143 “real transactions,” 34, 66 Rome, 227 recapitalisation/recapitalization, 8, 135, Roosevelt, Franklin D., 230 138, 141, 153, 157n38, 174, 180, Röpke, Wilhelm, 72, 76, 92n82, 92n84 186n60, 198, 200 Rothschild, 229 recession, 2, 5–6, 39, 41, 50, 70, 76, 78, Roubini, Nouriel, 224 100, 102, 131, 191, 207, 224, 232, Rubik approach/formula, 223 see also Great Recession Russia, 192, 226, 232 recessionary effect, 56 Ryan, Cillian, 116 recovery, 5, 130, 140, 166, 167, 170, 174, 184n35, 234 S re-evaluation (see debt) Sachverstandigenrat (ge), 52 refinancing operation, 168 safeguard mechanism, 49 “reform debate,” 26, 30 sanction, 128, 144, 146, 147, 148 regime change, 33 Sarkozy, Nicholas, 102 regulation, 4, 145, 146, 147, 148, 163, scarce-currency clause, 25 165, 174, 210, 224, 226, 231, 235 Schapiro, Mary regulatory (arbitrage, evasion, failure, Schmidt, Helmut, 51 measure, system), 165, 196, 197, 198 Schröder, Gerhard, 101 Rehn, Olli, 144 Schuldenbremse (ge), 69 Reichmark, 231 Schumpeter, Joseph, 46, 88n45 Reinhart, Carmen M., 68, 96 Schwarz, Anna, 70 remuneration policy, 165 SDR (see Special Drawing Right) rentiers (fr), 228 second tier country, 37 reorganisation/reorganization measure, securities class action, 211, 219, 220 164, 171, 175–180 Securities Exchange Commission, 219, repos, 167 221 Republican Party/Republicans, 15, 62, 98 Securities Market Program, 137, 142 rescue (bank, financial), 167, 170 securitisation/securitization (asset, debt), rescue operation, 133, see also bailout 127, 165 rescue package, 167, 170, see also security spending (see defense, War on financial package Terror) research, current, 67–70 self-preservation, 7, 151, 189 Index 273 self-fulfilling prophecy, 129 Southern economies, 233, see also self-regulation/regulatory, 56 developing countries, emerging semi-peripheral country/member/nation/ countries state (of the EU/Eurozone)., 115 sovereign (borrower, debt, risk, wealth semi-periphery, 115, 116, 124, 125 fund), 1–3, 5, 6–9, 49, 64, 69, 106, Sergeant-Barrow equivalence, 96 113, 114, 118, 119, 120, 122, 124, setting (legal, institutional), 190 125, 127–129, 133, 134, 136, 138, SGP (see Stability and Growth Pact) 141, 142, 144, 149, 151, 154, 160, shadow banking, 165, 182n7 161, 190, 192, 193, 195, 198, 203, shareholders (rights, equitable 213, 221, 227–229, 231, see also treatment), 214, 215 bankruptcy, crisis shock (financial, liquidity, sovereign debt crisis, 1, 5, 6, 7, 49, 114, macroeconomic, monetary, oil-price), 122, 125, 127–154, 212 5, 41, 173, 190, 191–193, 197, 201, 202, sovereignty (economic, financial, fiscal, 208, see also collapse, crisis, meltdown monetary, political, pooled), 7, 59–61, shock therapy, 131, see also adjustment 109–126, 143, 151, 152, 153, 154, 235 Sibert, Anne, 193 Soviet model, 53 siege mentality, 60 Spain, 14, 16, 17, 54, 102, 103, 105, Singapore, 222, 232 106, 107, 114, 126n22, 137, 142, 144, single currency (see single European 151, 153, 194, 195, 203, 228 currency) Spanish banks, 103, 205 Single European Market, 52 Special Drawing Right, 26, 86n13, 232 six-pack legislation (see EU six-pack Special Purpose Vehicle, 132, 133 legislation) speculative attack, 52, 136, 137, 142 Slovakia, 101, 116, 117, 129 speculator, 53, 152 Slovenia, 113 spending (consumer, crisis-related, small and midsize businesses, 100 discretionary, Keynesian, public), snow-balling effect, 42 67, 96, 100, 112, 122, 203, 226, 229, Snowe, Olympia, 217 230, 232, see also budget, defense, Social Democrats, 62 entitlements, Medicare, social security, “social market economy,” 63–83, 85, War on terror 93n97 spill-over/spillover, 5, 115, 124–125, social market economy and Germany, 166, 167, 198, 210, 226, see also 77–80 “domino effect” social market economy and the “way spread (see interest rate spread) out of the crisis,” 83–85 stability (mechanism, program), 132, social security, 95, 131, 209, see also 134, 145, 148, 151, see also financial entitlements stability, monetary stability Sohmen, Egon, 34 Stability and Growth Pact (SGP), 59, solidarity, 5, 7, 13, 32, 77, 79, 84, 85, 143, 144, 150, 154 101, 132, 149, 151–152, 154, 226, Stage I, Stage II, Stage III and Stage IV 234, 239, see also burden-sharing of the monteray and financial crisis, solidarity, European, 101, 151–152 11–18 solidarity, Western, 32–33 stagflation, 231, 232 Solomon, Robert, 46 stagnation, 19, 123 solvency, 8, 9, 128, 131, 151, 170, 190, stakeholders, 9, 215 192, 193, 208, 210 Standard and Poor’s rating agency, 219, Soros, George, 52, 53 224 South Africa, 226 Star Wars, 232 South East Asia, 232 state (activism, interventionism), 56, 77, South Korea, 115, 232 110, 111, 112 274 Index state-controlled economy, 33 T-Bank, 177, 178 state-owned economy, 33 TEC (see Treaty on the European Statutory Sovereign Debt Restructuring Community) Mechanism, 159, 160 technology (diffusion, transfer), 34, 36, stepping-out guarantor (see guarantor) 235 stimulative measures, 74, 75 Templars, 228 stimulus (see fiscal stimulus) terms-of-trade, 39 stock (index, indicator), 213 TEU (see Treaty on European Union) stock market boom-and-bust, 212 TFEU (see Treaty on the Functioning of Stone, Richard, 65 the European Union) “storage of value,” 58 Thai, 232 Strategic Defense Initiative, 232 Thatcherism, 77 stress test, 173–174 Third World, 40, 231, 232 structural adjustment (see adjustment) Tirole, Jean, 182n3, 197 Structural adjustment program, 45, 136, “too much government,” 83 232 too much market’, 83 subprime (see crisis) trade deficit (see deficit) subsidiarity, 62 trade liberalization (see liberalisation/ Sudan, 231 liberalization, integration) Summers, Larry, 46, 47 trade protectionism (see protectionism) supervision (banking, macro-prudential, transfer (issue, union), 32, 106 micro-prudential), 118, 120, 145, 165, transfer of sovereignty, 59–60 167 transition country/economy/nation, supervisory (measures, powers), 173–174 110, 118 supply-side economics, 232 transmission mechanism, 19, 47 supranational authorities/institutions, Treasury Bonds, 225 124 Treaty on European Union, 89n64, surplus country, 25, 26, 27, 29, 30, 43 90n64, 134 surveillance of budgetary positions (see Treaty on Stability, Coordination and budgetary surveillance) Governance in the Economic and surveillance of economic policies (see Monetary Union, 69, 149–151 economic surveillance) Treaty on the European Community, 128 Sweden, 14, 16, 17, 101, 133, 143, 217, Treaty on the Functioning of the 232 European Union, 90n64, 127, 171 Swiss banking secrecy, 222 Trichet, Jean-Claude, 190 Swiss franc, 39, 52, 117, 118, 123 Triffin, Robert, 30 Switzerland, 14, 15, 16, 17, 27, 39, trigger mechanism, 136 90n66, 116, 213, 222 Troika, 103, 104, 131, 135, 136, 140, systemic (crisis, risk), 1, 67, 84, 192, 239 200, see also contagion Turgot, 228 Turkey, 17, 104, 121, 126n17, 231 T twin deficit/twin-deficit (see deficit) Taiwan, 232 tax (base, code, collection, compliance, U cut, evasion, haven, measure, payer, U.S. (administration, balance of rate), 5, 50, 73, 80, 97, 98, 99, 120, payments, dollar, economy, 123, 127, 131, 154, 189, 197, 202, infrastructure, pension funds, 203, 204, 205, 207, 209, 222–223, universities), 9, 13, 22, 24–25, 26, 30, 233, 239, see also fiscal paradise 37, 39, 40, 46–47, 70, 73, 84, 95, 97, Taxation, 57, 96, 111, 190, 202, see also 98, 100, 107, 121, 192, 213, 214, 220, income tax 232, 233 Index 275

U.S. Bankruptcy Code, 159, see also Vienna Treaty, 229 bankruptcy Vietnam War, 27 U.S. Bureau of Budget, 95 Volcker Rule, 223 U.S. Bureau of Labor, 100 Vries, Margaret Garritsen de, 40 U.S. Congress, 42, 217, 223 vulnerability exercise, 124 U.S. Council of Institutional Investors, 213, 216, 217 W U.S. dollar, 22, 24, 25, 26, 39, 42, 97, Wahrungshuter (ge), 60 107, 117, 121, 192, 232 Waigel, Theo, 61, 90n65 U.S. Federal Reserve, 40, 47, 48, 93n99, Wall Street, 47, 213 127, 200 Wallerstein, Immanuel, 113 U.S. House of Representatives–Financial War on terror, 98, 99, 233 Services Committee, 219 Washington consensus, 232, 233 U.S. Senate, 130 Washington D.C., 119, 216, 217, 220, 229 U.S. Treasury, 33, 96, 230 “weapons of mass destruction,” 213 UN/United Nations, 220 Webster University, 5, 9, 13 UNCTAD (see United Nations welfare, 43, 77, 79, 99, 129, 230, 235 Conference on Trade and Werner Report, 59 Development) Western (community, democracies, underdeveloped country, 32, see also model, world), 35, 53, 61, 62, 67, 75, developing country 76, 77, 78, 83, 85, 239 undervaluation, 231 Westphalian era/system, 111 unemployment, 19, 40, 55, 66, 68, 74, wholesale market, 167, 200 100, 103, 120, 232, 233, 238 Wilhelm Röpke and the social market unit labor cost, 66, 105, 206 economy, 72, 76 United Kingdom/U.K., 33, 69, 114, 229, Wirtschaftswunder (ge), 77 see also Britain World Bank, 8, 33, 40, 161, 162, 216, United Nations Conference on Trade 224, 241 and Development, 215–216, 224 World Economic Forum, 216 United Nations Security Council, 234 World Trade Organisation/Organization, United States of America/U.S.A./U.S./US, 109, 235 9, 18, 22, 25, 36, 37, 39, 40, 42, 46, world trading system, 35 47, 84, 95–108, 109, 116, 121, 192, World War, 29, 31, 32, 50, 71, 72, 111, 193, 200, 211, 213, 214, 216, 217, 202, 212, 230 219, 220, 221, 222, 228, 230, 231, WTO (see World Trade Organisation) 232, 233, 234, 235, 239 Wyplosz, Charles, 22 USD (see U.S. dollar) Y V Yen, 39, 231, 232 valuation method, 165 yield curve, 138 variable (fiscal, non-fiscal), 58 Yuan, 97 Vegh, 112 Venice, 228 Z Versailles, 230 Zaire, 231 “vicious circle,” 3, 43, 68 Zettelmeyer, Jeromin, 159, 163n1