Archive for the ‘Financial crisis’ Category

27
Aug

Why worries about China make sense

Written on August 27, 2015 by Waya Quiviger in Asia, Financial crisis, Global Economy

James Ferguson illustration

I am neither intelligent enough to understand the behaviour of “Mr Market” — the manic-depressive dreamt up by investment guru, Benjamin Graham — nor foolish enough to believe I do. But he has surely been in a depressive phase. Behind this seem to be concerns about China. Is Mr Market right to be anxious? In brief, yes.

One must distinguish between what is worth worrying about and what is not. The decline of the Chinese stock market is in the second category. What is worth worrying about is the scale of the task confronting the Chinese authorities against their apparent inability to deal well with the bursting of a mere stock market bubble.

Stock markets have indeed been correcting, with the Chinese market in the lead. Between its peak in June and Tuesday, the Shanghai index fell by 43 per cent. Yet the Chinese stock market remains 50 per cent higher than in early 2014. The implosion of the second Chinese stock market bubble within a decade still seems unfinished. (See charts).

The Chinese market is not a normal one. Even more than most markets, this is a casino in which each player hopes to find a “greater fool” on whom to offload overpriced chips before it is too late. Such a market is bound to be extremely volatile. But its vagaries should tell one little about the wider Chinese economy.

Nevertheless, events in the Chinese market are of wider significance in two related ways. One is that the Chinese authorities decided to stake substantial resources and even their political authority on their (unsurprisingly unsuccessful) effort to stop the bubble’s collapse. The other is that they must have been driven to do so by concern over the economy. If they are worried enough to bet on such a forlorn hope, the rest of us should worry, too. Read more…

By Martin Wolf; Published on Aug. 25 in the Financial Times

8
Jul

 What Are the Geostrategic Implications of a Grexit?

At the the moment, it is unclear how Greece will ultimately fare in the current duel of wills with the Troika over its technical default, the upcoming referendum, and the possibility of a continuation of the long-running bailout drama. The two sides are locked in acrimonious finger-pointing, Greek banks are shuttered for the week, and the logical but ever elusive diplomatic and economic solution — a reasonable negotiation between the parties — seems further away than ever. As a proud Greek-American, I am saddened by the situation.

Meanwhile, the July 5 referendum is judged too close to call at the moment, and most Greeks will likely be confused about the implications and uncertain how to vote. Macroeconomic theory appears to have been the first casualty of the process, and the doomsday economic scenarios — a crashed Greek economy, a battered if not broken euro, and a deeply shaken European project — are looming large on the horizon.

But in the midst of all of the appropriate Sturm und Drang of the Greek financial and economic crisis, it is worth considering the geostrategic implications of the “Grexit” — which have been largely ignored.

Let’s face it: A Greece that goes crashing out of the eurozone will be an angry, disaffected, and battered nation — but one that will continue to hold membership in the European Union and NATO, both consensus-driven organizations. (“Consensus-driven” means that without unanimous consent among all members, the organization cannot take decisions or execute effective operational actions.) Many times in NATO councils as the supreme allied commander I watched the agonizing process of building consensus, one compromise at a time. In both the EU and NATO, an uncooperative Greece in the future could time and time again put the organizations “in irons,” which is to say becalmed and not moving effectively forward.

This could manifest itself very quickly in, for example, decisions about sanctions against Russia (from which Greece is avidly courting support and funding, logically enough). It could easily affect day-to-day governance in the European Union over issues from negotiating the Transatlantic Trade and Investment Partnership to agricultural subsidies to what should be done about refugee flows across the Mediterranean. Greece could become a troublesome and obstructionist actor in complex negotiations involving the EU, such as the Iranian nuclear treaty efforts.

 Read more…

James Stavridis is a retired four-star U.S. Navy admiral and NATO supreme allied commander who serves today as the dean of the Fletcher School of Law and Diplomacy at Tufts University. He recently gave a well attended seminar at the IE School of International Relations.

 

Published on 1 July, 2015 in http://foreignpolicy.com/

11
Dec

Waya Quiviger, Executive Director of the Master in International Relations, interviews Josep Borrell, former President of the European Parliament, on the role of the European Parliament throughout the crisis, the agenda of the new European Commission, and Europe’s energy challenges. 

2
Dec

Josep Borrell_26122014 (2)On November 26th, the IE School of International Relations welcomed Josep Borrell, former President of the European Parliament, for an enlightening lecture on the euro crisis and the future of the EU. Mr. Borrell began his talk by recalling the evolution of the European Union:  from its origins to the current crisis it faces, the worst one since its inception.

Historically, there have been four main forces that have driven the European integration process: the “never again” commitment based on the  scarring memory of war; the Soviet threat; the need for German rehabilitation, and the Fall of the Berlin Wall. Today there is only one  seemingly clear-cut driver for European integration, and this is embracing globalization. In the 21st Century, size will matter because Europe’s  economy will no longer be the world’s largest economy and because today Europeans are twice as old as their neighbours. Only by acting  united, Europe will be able to compete in a world of great powers.

 

Read more…

17
Nov

Arantza de Areilza, Dean of IE School of International Relations, interviews Jean Pisani-Ferry, former Director of Bruegel (2005-2013), professor at the Hertie School of Governance and current Commissioner-General of the French Prime Minister’s Policy Planning Staff, on some of Europe’s major challanges: From the consequences of the eurozone crisis to the economic impact of the conflict in Ukraine.

 

** This interview was recorded several months ago. 

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