Patrick Leblond

European integration and the crisis: practice and theory

ABSTRACT This is the introduction to a special collection of contributions that analyse the financial and economic crisis through various theoretical lenses. Accordingly, it does four things. First, it describes the EUs institutional response to the crisis in order to provide a reference point for the contributions. Second, it summarizes the contributions. Third, it compares them in order to develop a theoretical dialogue. Finally, it answers the fundamental question at the heart of the crisis and this special collection: why did Economic and Monetary Union become deeper and more integrated when many feared for its survival?

European Financial Integration: Finally the Great Leap Forward?

The recent history of financial integration in Europe can generally be considered a success story, notwithstanding the crisis that has plagued financial sectors in Europe and elsewhere since 2007. There has been significant progress in the area of regulatory integration; however, an in-depth analysis requires also taking into account what happens on the ground – that is, at the market level. As a consequence of this larger and more interactive point of view, this article shows that financial integration is less uniform than a cursory look at the evolution of European Union regulation would have us believe. This is because national contexts continue to bear considerable weight. In particular, any explanation of the current state of affairs in the EUs financial integration needs to take the market–regulation nexus seriously. This implies looking at market structure as well as at the political and institutional context. This article suggest a framework to explain more adequately the contradictions between regulatory and market integration.

EU, US and international accounting standards: a delicate balancing act in governing global finance

Although the European Union (EU) has been a key global actor in international trade governance since the 1960s, it held no such position in international financial governance until the new millennium. Accounting standards represent one important area of international finance where the EU has finally taken a leadership position alongside the United States, as a result of its adoption of International Financial Reporting Standards (IFRSs) and its corresponding delegation of standard setting to the International Accounting Standards Board (IASB). Surprisingly perhaps, neither the EU nor the US has been able to exercise much influence over the content of IFRSs. This is because the IASB has managed to maintain a delicate balance between American and European interests in devising its standards. Using the principal–agent framework, this contribution explains this dynamic between the IASB, the EU and the US in the period 2002–2010.

Is My Crown Better than Your Euro? Exchange Rates and Public Opinion on the European Single Currency

This article examines the influence of exchange rate fluctuations on public support for the euro. Existing studies of the two euro referendums in Denmark and Sweden have explained the outcomes primarily in terms of static factors, thereby ignoring the fact that support fluctuates over time. This article provides an analysis of the short-term dynamics in public support for the euro in the period leading up to the referendums. We argue that exchange rate fluctuations matter, because people attach symbolic value to their national currency and are less likely to surrender a strong currency. They are also less willing to accept the euro when it is seen as weak vis-à-vis other world currencies. Our case-study and time-series analyses of the two euro campaigns corroborate these propositions.

The Political Stability and Growth Pact is Dead: Long Live the Economic Stability and Growth Pact

Euro area countries suspended the excessive deficit procedure (EDP) of the Stability and Growth Pact in November 2003. Surprisingly perhaps, long-term European government bond-holders did not react: yields barely moved. Owing to its political nature, the EDP does not matter for investors. What matters is the implicit economic pact that investors have made with Member State governments.

All in: Market expectations of eurozone integrity in the sovereign debt crisis

ABSTRACT The behaviour of sovereign bond investors stands at the heart of the euro area debt crisis. By pushing upward the yields on the government debts of member states standing in the eurozones periphery, investors caused, in a self-fulfilling way, the crisis that ultimately threatened the eurozones integrity and the euros survival. So how do we explain the behaviour of market investors before, during and after the eurozones sovereign debt crisis? Why did investors not discriminate in their pricing of eurozone sovereign bonds before the crisis? Why did they abruptly change their minds in 2010? And why have they gradually felt reassured enough from mid-2011, depending on the country, to ask for significantly lower yields on sovereign bonds? To answer these questions, the paper argues that investors’ confidence rests to a large extent on the expectation of the eurozones solidarity, which is why large-scale multilateral solutions coming from the euro area were more successful in resolving the crisis than unilateral ones coming primarily from the debtor countries. As a result, this paper improves our understanding of the international political economy of financial (currency, bank and debt) crises by looking at the particular case of a monetary union with a single currency.

The fog of integration: Reassessing the role of economic interests in European integration*

The main theories of European economic integration argue that private economic interests provide the impetus and pressures for integration to move forward. Public policy analyses of the European Unions legislative process, however, show that intense lobbying by such interests can prevent legislative proposals from being adopted, even if economic interests were initially in favour of supranational legislation. How do we explain this apparent contradiction? The answer is that economic interests initially face great uncertainty as to the precise costs and benefits of integrating a particular policy area; only once the ‘fog of integration’ lifts—as a result of concrete legislative proposals being tabled by the Commission—are economic interests able to calculate these costs and benefits and, consequently, decide whether to lobby for or against the proposal. To provide a first-run validation of the argument, the article examines the cases of the Software Patent and Takeover directives.

Closing the Deal: What Role for the Provinces in the Final Stages of the CETA Negotiations?

Why have the negotiations of a Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union taken so long? We argue that the delay is in good part the result of a weakly designed process for intergovernmental decision making: the role for provincial and territorial governments in international trade negotiations is still too limited and does not extend to final decisions about the text of any agreement. The limited role for provinces and the fact that there is no process that requires them to formally commit to an agreement leave open the real possibility that one or more provinces could choose not to fully implement any deal that is concluded. As a result, provinces possess negotiating leverage vis-à-vis Ottawa, thereby making it difficult for the federal government to agree to the trade-offs—which are of a geographical nature in CETA’s case—that are necessary for reaching a positive agreement.

The Other Transatlantic Relationship: Canada, the EU, and 21st-Century Challenges

Canada was the first country with which the European Union signed a cooperation agreement in 1976. Since then, Canada and the EU have gradually extended their cooperation in a number of social and economic areas, though not as much as originally intended. More recently, they have decided to launch negotiations for an extensive economic partnership agreement that aims at the creation of a wider transatlantic partnership, which would include the United States and Mexico. In addition to such bilateral cooperation efforts, Canada and its European counterparts have been actively working together in various international organizations and forums to address numerous international security and economic challenges. Finally, Canada and the EU, which both possess federal-like structures, have tried to learn from each others experiences when devising domestic policies and governance mechanisms to manage these policies. In sum, the relationship between Canada and the EU, though often in the shadow of the EU-US affiliation, is a deep and important one.This issue of International Journal aims to bring the Canada-EU relationship into the limelight to explain how it plays a key role in meeting 21st-century challenges such as financial stability, open international trade, immigration, energy security, climate change, and global security. This role can take various forms. First, Canada and the EU can better manage mutual challenges by learning from each other. Second, Canada and the EU can enhance their bilateral cooperation. And finally, both jurisdictions can contribute to world affairs by working together in various international forums.It is essential that advanced industrial societies share knowledge and build expanded avenues of cooperation. Almost every one of the key challenges facing Canadian society also affects other advanced democracies, and it is through examination and consideration of alternative responses that we can hope to identify best practices for our own society. Furthermore, our reference point must extend beyond our neighbour to the south. Much attention is paid to Canadas connection to the United States and in many cases, Canadian responses to critical problems are crafted against the backdrop of American practices. Canadian policymakers and the Canadian public are less assiduous, however, in looking to Europe for alternative approaches to policy formation, even when European countries have developed innovative approaches through the EU to addressing many of the problems that we face, such as coordinating climate change policy across national borders; harmonizing border control systems and immigration policies; and breaking down trade and financial barriers. With the adoption of the Lisbon treaty, the EU has likewise embarked upon new approaches to transnational governance, including the further empowerment of the popularly elected European parliament and of national parliaments in relation to EU-level decision-making.Transatlantic learning is all the more important because Canada shares with European countries many key values, including those relating to social welfare, international law, and human rights. Like Europeans, Canadians have traditionally favoured multilateral solutions to international problems. Furthermore, historically, Europe - its individual countries as well as the EU - has been a key partner in realizing many of Canadas international objectives, reflected in such concrete efforts as the landmines convention, the protocol to control chlorofluorocarbons, and the International Criminal Court. Not only are Canadians often inadequately inattentive to what they can learn from Europe, but Europeans also often fan to understand the contributions that Canada and Canadians make in seeking innovative responses to vital issues. Just as Canada can learn from the European experience and benefit from a strong transatlantic relationship, Canadian experience can be a model for Europe as well - notably, for example, with regard to our practices of multiculturalism and citizenship as well as in innovations in encouraging citizen participation. …

One for All and All for One: The Global Financial Crisis and the European Integration Project

When the global financial crisis hit the shores of Europe, after crossing the Atlantic, the Eurozone was considered a safe haven. After the first Greek bailout in May 2010, the discourse had now changed completely; the debt crisis was the euros fault. As a result, some argued that Greece and eventually other bailed-out member states should abandon the euro and reintroduce their national currencies. If they did not, then countries such as Germany and the Netherlands would give up on supporting them financially, forcing them to abandon the euro anyway. Yet, no such thing has happened. The euro and the European Union are still with us. In fact, European integration has been deepened as a result of the debt crisis. This paper explains why the doomsayers have been wrong on durability of the Eurozone.