Shawn Donnelly

Power Politics and the Undersupply of Financial Stability in Europe

ABSTRACT This article analyses the politics of banking and fiscal union in the EU in the context of continued threats to financial stability in Europe. Contrasting the expectations of functional responses and power politics, it finds that the behavior of the states and the outcome of negotiations most closely resembles contemporary realist expectations. Minimal supranationalism takes place to prevent complete collapse, but the main development is that financially powerful member states coerce and impose changes on weaker member states, without committing to the financial transfers that the latter require to survive the financial crisis, with negative consequences for European financial stability.

Explaining EMU Reform

This article develops a model to explain the roles of national governments in the reform process of rules for economic and monetary union (EMU) in Europe. A study of Germany, France and Spain underlines the importance of electoral politics and institutional arrangements in producing distinctive policy triangles on domestic economic and budget policy, and subsequent demands for specific EMU rules. It employs budget policy analysis to illustrate the collapse of stabilization state politics in France and Germany, leading to the reform of the Stability Pact in March 2005.

The International Accounting Standards Board

The International Accounting Standards Board (IASB) is a private organisation of professional accountants that sets International Accounting Standards (IAS) and newer accounting rules known as International Financial Reporting Standards (IFRS). IAS represent a project to harmonise financial reporting requirements that illuminates resources and other information of interest to investors, employees, tax authorities, public regulators and law makers concerned with corporate governance issues. The European Union (EU), South Africa, Australia, Russia, New Zealand (from 2007) and Canada (by 2011) require companies to use them, while over 90 further countries allow their use. The IASB therefore has a great responsibility for ensuring transparency and usefulness of information about companies, and the role that their governance plays in ensuring the stability of financial systems through transparent corporate governance. Between 2000 and July 2005, the IASB transformed itself from a collegial, private interest association dominated by accountants in common law countries and with cooperative links to other professional associations to a hierarchical, centralised international organisation producing standards sanctioned by a number of securities regulators at the national, regional and international levels. It therefore has a significant and global impact on the way that company information is made public. At the same time, the national standard setters and accounting firms now resist centralisation and detailed rule development. This Global Monitor piece provides an introduction to and analysis of the IASB and its relations with these actors. The International Accounting Standards Committee (IASC) Foundation is the umbrella organisation that sets the parameters for the work of the IASB by appointing its members and overseeing its activity. The President of the IASC Foundation chairs the IASB. The Trustees also appoint the members of two other bodies described below that are important to the IASB’s work: the Standards Advisory Council (SAC) and the International Financial Reporting Interpretation New Political Economy, Vol. 12, No. 1, March 2007

Banking union and the future of alternative banks: revival, stagnation or decline?

Abstract Banking union challenges the institutional mechanisms that alternative banks use to retain their status, goals, identity and carry out their operations. Yet the impact of banking union on them varies considerably and systematically: those alternative banks that held most closely to the traditional model fared best in the recent financial crises and have been impacted the least by banking union. In contrast, those banks that strayed from the traditional model and sought rapid expansion into new geographic or financial product markets fared much worse under the adverse conditions of recent years and, consequently, ended up under the full weight of banking union provisions. But even where alternative banks hewed to their traditional model and remain a significant part of national financial systems, we find that the crises and subsequent strengthening of the EU’s financial role have reduced the scope for national control over all banks, not just those directly supervised by the ECB.

Liberal economic nationalism, financial stability, and Commission leniency in Banking Union

This paper demonstrates that protection and promotion of insolvent banks remains a high priority for national authorities in Europe, and the Commission partially accommodates these impulses in the desire to preserve national financial stability. Insolvent banks are kept alive despite Banking Union rules on resolution designed to facilitate their closure at the cost of private investors. Italian and Portuguese cases demonstrate that pressure to relax state aid rules is strongest where problems are the greatest. However, the long-term trend is still an incremental decrease in national leeway to protect and promote national bank ownership.

Power Politics, Banking Union and EMU : Adjusting Europe to Germany

This book examines the politics of Banking Union and EMU reform in the EU, and draws lessons for what it means for international politics, both in Europe, and for international relations more broadly. It demonstrates that most of the reforms in Europe to break free of the Eurozone and banking crises in which Europe continues to find itself focus on building up the capacities of national authorities rather than European ones. The result is that national authorities remain largely in control of the decisions and funds that are to be deployed to prevent economic disaster if a single EU bank fails. The likely outcome is an accelerated balkanization of the European market for the foreseeable future. The book also contends that power politics, and realism in particular, is a defining feature of European politics with coercion and enforced national responsibility at the demand of Germany; the dominant form of institution-building that established the responsible sovereignty model, and shut down the possibility of alternatives. In making this case, the book demonstrates that the dominant view in international relations, that power politics best explains the behaviour of states, also apply to the EU.

Advocacy coalitions and the lack of deposit insurance in Banking Union

This paper shows that advocacy coalitions surrounding the establishment of a European Deposit Insurance System lead to spillovers into incompatible areas. Alternative spillovers were to increased public backstops and state aid. Intent to minimize costs, Germany and the Netherlands have pushed for wide-ranging risk reduction measures: that go to the core of financial practices in southern Europe, while Italy has pushed for greater public backstops and state aid within EMU. Unable to break the deadlock in Council, the EU awaits Basel Committee guidance on how to deal with sovereign risk exposures in its 2017–2018 work program.

Regime der Finanzmarkt- und Unternehmensregulierung in Europa: die Bestimmung gesetzlicher Strukturen und Regulierungsprozesse

In den Jahren 2001 bis 2005 wurden in der Europaischen Union drei Regime im Politikbereich des Binnenmarktes errichtet, die die Zusammenarbeit der Mitgliedstaaten und ihrer regulativen Aufsichtsbehorden mit der Europaischen Kommission zum ersten Mal umfassend regelten, jedoch mit unterschiedlichen Graden der Delegation von Kompetenzen der Mitgliedstaaten an die supranationale Ebene. Es handelt sich um drei Regime: eins fur Gesellschaftsrecht, eins fur Finanzmarktregulierung und eins fur Rechnungslegungsstandards. Mit ihren unterschiedlichen Steuerungssystemen sind sie das Herzstuck eines Programms zur Vollendung des europaischen Binnenmarktes und zum begleitenden Anlegerschutz.