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Archive for the ‘Crisis’ Category

Confronting financial crises under different monetary regimes:  Spain in the Great Depression years

This is the title of the paper I have written with my friend and colleague Professor Pedro Schwartz, which is being published in May 2018 as a chapter in a book, Money, Currency and Crisis. In Search of Trust, 2000 BC to AD 2000, edited by R. J. van der Spek and Bas van Leewen (Routledge). As we put it in the first section of the chapter, “the thesis of the present essay is that the recession was much lighter in Spain than in the US, Italy, Germany or France (see Figure 1); that the causes of the contraction were domestic rather than epidemic; and that the relative shallowness of the contraction in Spain, and of the UK after abandoning gold, may have been due in some measure to similarly flexible monetary arrangements.

 

The exchange rate system does matter in coping with a major crisis, and both the 1930s and the 2000s crises are good examples of this. Spain in the 1920s and 1930s, free of exchange rate commitments, and thus with full monetary sovereignty, led the Peseta float  in response to quite dramatic changes in both domestic and international market conditions. Being a very rigid economy at the time, the depreciation of the Peseta was an effective and timely tool to cut down costs and prices. This is not to say that depreciation is panacea; it is not! If not followed by orthodox both fiscal and monetary policies, it will just lead to greater and greater inflation over time, and we have plenty of examples of this. It is useful though to compare the adjustment of the Spanish economy to the Great Depression in the 1930s to that to the Global Financial Crisis in the 2000s via ‘internal devaluation’ (i.e. cutting domestic wages and prices); the charts below are quite revealing of the effects of these two alternatives (see Figures 15 and 16) and do provide a textbook case-study on the advantages and disadvantages of each.

 

As figures 15 and 16 above show, the depreciation of the Peseta carried most of the burden of the adjustment to the 1930s crisis, while it has been domestic costs (Unit Labour Costs) in the 2000s crisis.

Over the medium to the long term, both an internal devaluation and a standard (external) devaluation achieve the same (necessary) goal: to cut down costs, prices and spending in the economy in crisis. This is something unavoidable in either policy scenario; the economy cannot continue spending as it used to before the crisis. In addition, an internal devaluation also brings greater competitiveness over the long term, given that the economy will be able to produce with lower costs than its competitors. However, the economic and political costs of this latter policy option are not negligible in the short term. This is the trade-off every economy confronts in a major crisis, (1) either to opt for a quick devaluation to cut down domestic costs and prices almost instantaneously, or (2) to cut down public and private spending (internal devaluation).

  • The external devaluation option, when the country retains its currency and its domestic monetary policy, is the most appealing option in the short term; especially by politicians, as it may be unnoticed by the public for a time. But, if not accompanied by fiscal and monetary restrictive policies, it will surely lead to inflation very soon.
  • The internal devaluation option was the only available for the Eurozone countries in the 2000s crisis, and was the right policy to pursue, however painful as indeed it was. The experience of Spain, and the other Eurozone countries in crisis from 2009 to 2014, shows again how stringent the conditions to remain in a monetary union are in times of crisis: both labour and good and services markets must be as flexible as possible to let prices go up and down whenever needed; otherwise, the adjustment will be even more painful and will take longer, and more jobs and output will be lost.

The preference for one or the other policy will depend very much on how rigid markets are to adjust to new market conditions, and the commitment of policy-makers to run orthodox monetary and fiscal policies. In the absence of committed policy-makers to adjusting costs and prices, an external devaluation will just be a gateway to rampant inflation.

 

Juan Castañeda

 

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For those interested in the chapter, please find the abstract below (more in the book!):

Spain was effectively on silver from 1868 down to the II Republic in 1931. Being off the gold standard and on a depreciating silver standard from the 1890s on helped the economy adjust almost painlessly to the several economic crises it suffered during that period and resulted in a much milder recession than the rest of the world in the 1930s. This proves how relevant is the monetary regime to deal with shocks and economic crises, particularly when confronting financial crises. 

Devaluation corrects past policy mistakes at the cost of making the country poorer; but it will only hold in the longer term if it is accompanied by sound fiscal and monetary policies. During WWI a neutral Spain had accumulated a large gold reserve by selling to all belligerent countries. Pressure to move to gold was resisted but the slow depreciation of the silver anchor after WWI was accompanied by a surprisingly sound Bank of Spain monetary policy. Though the Treasury did use its power to borrow from the Bank from time to time the Board of the Bank correspondingly tightened interest rates to maintain monetary stability. This resulted in quite moderate rates of growth of the money supply that helped keep internal prices in check. In fact, the peseta behaved like a properly managed nominal currency. In the ‘twenties the rate of exchange of the peseta versus the pound sterling fell along with silver against gold, due to a persistent structural deficit in the balance of payments; and though from 1929 to 1935 the peseta fell less rapidly than silver, it did fall more than if it had been on gold.

Being on the silver standard dampened the effects of the Great Depression in Spain. Under a gold standard regime the balance of payments would have rebalanced quickly but with a large restructuring cost such as that suffered by Spain today under the ‘euro-standard’: Then as now, almost immovable structural inflexibility makes external depreciation a more politically and socially acceptable policy than harshly imposed internal devaluation.

Another positive effect of the peseta being anchored on a depreciating silver standard was to allow the Bank of Spain freely to act as lender of last resort in 1931 and thus prevent the deep banking crisis that struck other developed economies.

However one must not exaggerate the effect of a flexible monetary policy in a country like Spain in the 1930ies: Spain still was an agricultural country and she enjoyed two bumper crops in wheat in 1933 and 1935; and in any case the relative smallness of the foreign sector helped dampen the effects of what was happening in the rest of the world.

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This is the title of an article written with my colleague, Tim Congdon (Institute of International Monetary Research and University of Buckingham), published in CityAM on 27/10/2017.

Our main point is that more regulation won’t make banks safer and is counterproductive. It is a sort of an instinctive reaction by politicians, policy-makers and regulators to respond to a crisis with more and tighter regulation, in an effort to tackle the ‘excesses’ in the market economy left of its own will. This is both very naive and irresponsible, as much as empirically and theoretically wrong. The recent announcement and approval of the Basell III tighter bank capital ratios is an example of it: this tougher set of regulations was announced and approved in the midst of a severe financial crisis (2008-2010), and resulted in banks shrinking their balance sheets even more; with the expected dramatic fall in money growth and nominal spending.

It is again a dire example of the running of the law of the unintended consequences of regulation; which would recommend the need to assess in advance the expected consequences of regulation, rather than quickly and desperately calling for more and tougher laws on banks and the rest of the financial system.

As we put it in the article:

Far too many people believe that “better” regulation is the answer to financial crises. But further regulation involves an expansion of the power of the state, and a loss of freedom for the financial system. Remember that Britain had no explicit official rules on bank capital until the 1980s, yet no British bank suffered a run on its deposits over the preceding century. Crucial to the success of British banking in the decades before the Northern Rock fiasco was the Bank of England’s willingness to lend to solvent banks if they were having difficulty funding their assets. Good central banking helped Britain’s commercial banks to run their businesses efficiently and profitably, and to the benefit of their customers.’

There was a time, not that far away, when regulation was not that prominent and financial markets flourished; and when a banking institution failed, that occasionally they did, there were solid policies and institutions willing to intervene in an decisively and orderly manner (the Bank of England had been an example of that, at least until the collapse of Norther rock in the recent crisis).

You will find the article in full here: http://www.cityam.com/274672/tighter-bank-regulation-wont-stop-boom-and-bust-but-damage.

Comments, even more if critical, most welcome!

Juan Castañeda

PS. We will be discussing these issues with the member of the Bank of England’ s Financial Policy Committee, Martin Taylor, in the IIMR Annual Public Lecture on the 7/10 in London: https://www.mv-pt.org/events/public-lecture-the-committee-of-public-safety-the-work-of-the-financial-policy-committee-by-m

 

 

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‘How functional is the Eurozone? An index of European economic integration through the single currency’

This is the title of the paper I have just written with my good friend and colleague, Professor Pedro Schwartz (Camilo Jose Cela University in Madrid and University of Buckingham), which will be published in Economic Affairs (October issue, 2017).

We deal with a quite straight forward question: How can we measure the optimality of a currency area? When does it become more and more difficult to run a single monetary policy? If there are internal asymmetries in the currency area, how do they evolve? To answer, if only tentatively, these questions we have developed the method to calculate the index of optimality of a currency area, which we have split up in four major categories and components: (1) fiscal synchronicity, (2) public finance, (3) competitiveness and (4) monetary. Both the overall index and the above partial indices will inform us about the performance of the currency union and how internal asymmetries have increased or decreased. We have applied it to the eurozone, from 1999 to 2016. The results and calculations give us a metric to identify the building up of internal tensions in the running of the single monetary policy since the inception of the euro in 1999.

If only a chart, this is the summary of what we found in our research; in a nutshell, the adoption of the euro has not increased convergence among eurozone economies. The overall index of dispersion increased by 25% from 1999 to 2005 (see figure below),  and so asymmetries amongst member states even during an expansionary cycle. Of course, as expected, internal dispersion soared during and immediately after the outbreak of the Global Financial Crisis. This increase in dispersion in the crisis years ‘s not a symptom of the malfunction of the euro; what we should rather focus on is on the time taken for asymmetries to resume pre-crisis levels. Overall, even after 10 year since the start of the recent crisis, the optimality index still shows the Eurozone has a long way ahead to resume pre-2007 crisis levels (such as 1999 levels, when even countries joining the Eurozone were far from convergence).

 

 

This is the abstract of the paper:

‘This is a step in empirically assessing how near the Eurozone is to becoming an ‘optimal currency area’, as originally defined by Mundell (1961). For this purpose we have compiled ten indicators, organised them in four chapters, and summarised them in an overall indicator of ‘optimality’. The resulting picture is mixed, with zone optimality not increasing when circumstances were favourable but the trend towards integration returning after the 2008-2014 crisis. The suggestion is that dis-integration during the crisis, rather than an evidence of failure of the Eurozone when the going was tough, showed a self-healing mechanism at work. However our measurements and indices show that optimality is much lower than that in 1999.’

Feedback most welcome, as ever.

Juan Castañeda

 

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This is the title of a research paper I have written with my colleague and leading monetarist, Professor Tim Congdon, and published by the Institute of International Monetary Research (IIMR). This is a brief summary extracted from the paper, which is fully available at http://www.mv-pt.org/research-papers:

The quantity of money matters in the design of a monetary policy regime, if that regime is to be stable or even viable on a long-term basis. The passage of events in the Eurozone since 1999 has shown, yet again, that excessive money growth leads to both immoderate asset price booms and unsustainably above-trend growth in demand and output, and that big falls in the rate of change in the quantity of money damage asset markets, undermine demand and output, and cause job losses and heavy unemployment. This is nothing new. The ECB did not sustain a consistent strategy towards money growth and banking regulation over its first decade and a half. The abandonment of the broad money reference value in 2003 was followed in short order by three years of unduly high monetary expansion and then, from late 2008, by a plunge in money growth to the lowest rates seen in European countries since the 1930s. The resulting macroeconomic turmoil was of the sort that would be expected by quantity theory- of-money analyses, including such analyses of the USA’s Great Depression as in Friedman and Schwartz’s Monetary History of the United States.

This paper argues, from the experience of the Eurozone after the introduction of the single currency in 1999, that maintaining steady growth of a broadly-defined measure of money is crucial to the achievement of stability in demand and output. The ECB did not sustain a consistent strategy towards money growth and banking regulation over its first decade and a half.

The chart below illustrates our point very well:

 

 

 

 

 

 

 

 

 

 

 

As ever, comments very welcome.

Juan Castañeda

 

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Esta es la charla que di el 23 de Marzo de 2017 en una de las sesiones del ‘Free Market Road Show’ organizado por el Circulo Liberal Bastiat en Sevilla. Hablé de las bases del comercio internacional y recordé con ello lo que para muchos serán obviedades, y para muchos otros ideas revolucionarias. Por lo oído en los últimos meses tras la victoria de D. Trump en EEUU, así como las posiciones de unos y otros en el debate de Brexit y las negociaciones que ya se apuntan entre el Reino Unido y el resto de la Unión Europea, los fundamentos del comercio internacional que durante décadas eran conocidos por todos, y casi diría que sus beneficios eran reconocidos por la mayoría de los economistas, han pasado a estar en entredicho. Es frecuente oír a líderes políticos (en incluso a economistas, lo que es de echarse a temblar!) de ambos lados del Atlántico que los puestos de trabajo del país deben ser para los nacionales así como ha de favorecerse a la producción nacional, incluso cuando ésta es más cara e ineficiente que la producida en el exterior.

Dicen los contrarios a la globalización que la protección de la producción nacional beneficia al país que la aplica; y lo hacen sin fundarlo en absoluto en evidencia empírica alguna, ni presentar una explicación teórica alternativa del comercio y sus efectos. Esto no es sólo intelectualmente muy pobre y desolador, sino que la aplicación de su nacionalismo económico llevaría a nefastas políticas económicas que sabemos bien en que terminan; porque se han aplicado repetidamente en varias ocasiones a lo largo del la historia y siempre acabaron en: (1) menos desarrollo de la economía y la riqueza a escala mundial y (2) más pobreza para los países que restringen más el comercio (mayores precios de los bienes y servicios, subsidio de empresas nacionales ineficientes, meso dinamismo e innovación, …). Los bien intencionados parecen no querer aprender y se empecinan en restringir el comercio todo lo que pueden … . Otros, aún a sabiendas de sus efectos sobre la mayoría de la población apoyan estas medidas porque les benefician (me refiero a los sectores productores nacionales menos competitivos que presionan cual ‘lobbies’ al gobierno de turno en búsqueda de protección comercial). De verdad hace falta otra contracción del comercio como la de los años 1930 para dares cuenta de sus efectos tan perjudiciales para todos?

Como digo, es lamentable si bien muy necesario tener que insistir una vez más en los efectos perniciosos para la economía provocados por la imposición de políticas proteccionistas. El nacionalismo económico siempre ha conducido al empobrecimiento de las naciones, y en algunas ocasiones al enconamiento de las rivalidades y conflictos políticos entre naciones que nunca acabó bien … . Recordemos algunas de esas obviedades en cuanto al comercio internacional que cuento en más detalle en la presentación:

(1) El comercio beneficia a las dos partes:

  • No se impone, se acuerda
  • La imposición de aranceles y otras trabas al comercio:
    • Perjudica a los consumidores: encarecimiento de los bienes y servicios
    • Sostiene una industria nacional ineficiente, necesitada de proteccion
    • Aumenta los ingresos del Estado (en el corto plazo)
    • Supone, al final, un impuesto a los exportadores nacionales: menos competitiva en mercados internacional.

(2) Comercian personas y empresas:

  • No hacen falta tratados para comerciar
    • Los tratados comerciales suponen la politización del comercio
    • Son el instrumento de los Estados para dar entrada a ‘grupos de interés’ en la mesa de negociación
  • Los acuerdos generales de comercio multilateral son más eficientes que los acuerdos bilaterales entre Estados

(3) A partir de ello, lo que propongo para el Reino Unido y el resto de la UE es lo siguiente:

  • Reino Unido: Declaración unilateral de libre comercio con el resto de Europa
    • No importa lo que haga el resto de Europa: beneficia a los consumidores y productores británicos
    • Y si el resto de Europa impone aranceles? Perjudicara a los consumidores Europeos
  • Ventajas:
    • Fin a una hipotética ‘guerra comercial’ que perjudicaría a todos
    • Fin a interminables y costosos tratados comerciales …
    • Evita la actuación de grupos de presión que solo buscan intereses corporativos
  • No soy nada original. Esta es la propuesta reciente hecha por Patrick Minford (2016) ‘No Need To Queue: The benefits of free trade without trade agreements’. IEA. London

 

Aquí podréis ver el video con mi presentación. Como siempre, vuestros comentarios serán muy bienvenidos.

Juan Castañeda

 

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On March 2nd (Fundación Rafael del Pino, Madrid) I had the pleasure to join a panel on the future of the European Banking Union (EBU) (and on Brexit) with very distinguished colleagues and friends: Jose Manuel Gonzalez Paramo (BBVA and former member of the ECB Executive Committee), David Marsh (OMFIF, London) and Pedro Schwartz (UCJC, Madrid) (see the video of the seminar here). During the  event I also had the opportunity to launch in Madrid the book I co-edited last year on the European Banking Union. Prospects and Challenges (Routledge). The book is a collection of essays on the EBU by central banks’ analysts, academics and practitioners from different jurisdictions. Each of them addresses the topic from a different perspective, either legal or economic, and highlights the pros and cons of the EBU as well as its expected challenges over the next few years.

It is obvious to all now, but also to many experts at the time of the launch of the euro, that the institutional architecture of the euro was, at the very least, weak and incomplete (see some of the articles in the 1990s written by W. Buiter, C. Goodhart, P. Schwartz, T. Congdon or G. Wood, amongst others). No currency union has survived for long without a political union or a supranational Treasury, with enough powers and policies to back the currency. And this is particularly true in the case of an area, such as the Euro area, which is far from being a flexible and fully functioning monetary area. You may want to check out the results of the research report just published by the Institute of International Monetary Research on the measurement of the integration of the euro area or its ‘optimality’ as a single currency.

The reference to the classical gold standard (1870s – 1913) as a comparison with the current euro standard deserves some attention. We should be aware of the differences between both standards: the gold standard was indeed a monetary union, where member economies fixed their currencies against gold; whereas the euro standard is a currency union, where countries get rid completely of their national currencies and adopt a single currency for all. The latter is much more rigid and demanding during a crisis, since member states have no room to alter the parity of the currency (there is no national currency!), nor to abandon the parity on a temporary basis. Under a currency union member countries have effectively no central bank of issue, as this function has been fully delegated to a supranational central bank. We have experienced since 2008 how demanding this monetary system becomes under a crisis, much more a severe financial crisis, as countries have no other option but to cut costs and prices in an effort to regain competitiveness (the so-called ‘internal devaluation’). This is an option to sort out the crisis, but it has proven to be a painful one our economies (and even more, our populations) seem not to be ready to implement or even to accept.

In a nutshell, the EBU implies the following (more details on the presentation here):

  • The establishment of the European Banking Authority (EBA), which overseas the implementation of the new (much higher) Basel III banks’ capital ratio and the new liquidity ratio across the EU.
  • The establishment of a single banking regulator under the ‘Single Supervisory Mechanism‘ (SSM) for big banks or transnational banks in the Eurozone (around 80% of all), in the hands of the European Central Bank in Frankfurt. In addition the new Single Resolution Mechanism (SRM) has been stablished to deal with the recovery or resolution of a bank (see more details below).
  • According to the new EU Recovery and Resolution Directive (RRD), every bank must draft a resolution plan to be approved by the regulator, in order to resolve the bank if needed be in an orderly and timely manner. In addition, should a bank under the SSM need to be resolved, the government will not use taxpayers’ money in the first place. Actually the resolution or recovery process is going to be handled by the SRM. And only when the bank’s shareholders and creditors’ money has been (mostly) exhausted (so they have absorbed losses of at least 8% of the total liabilities), the bank can benefit from other sources of funding to pay its debt or conduct other operations (such as the Resolution Fund, see below). This is what the literature calls a bail-in rather than the bail-outs of the banks with taxpayers’  money we have seen in the recent crisis.
  • In addition, all member states have agreed to guarantee the deposits up to 100,000 euros per person per bank (however there is not yet a pan-EU deposit guarantee scheme but national schemes).
  • Finally, the EBU would not be complete should we not pay attention to the role of the ECB and the National Central Banks as the lenders of last resort in the Euro area. Modern central banks (particularly since the 19th century, but also earlier in the case of the Bank of England) were established to support the banks in case of a liquidity crisis. If a bank is solvent but illiquid, and thus cannot pay its deposits temporarily, the bank can always request extraordinary lending to the central bank (as W. Bagehot put it in his famous 1873’s seminal book: unlimited lending but always against collateral and at a penalty rate). However, this competence is still in the hands of the National Central Banks in the Euro zone which, provided there is no objection of the ECB, can lend money to the national bank in crisis at request. This division of competences between the ECB and the National Central Bank should be better coordinated so no banking crisis is artificially ‘hidden’ or postponed under the provision of liquidity by the national central bank.

The ‘Euro 2.0’

As Jose Manuel Gonzalez Paramo put it, the European Banking Union is a sort of ‘Euro 2.0‘ as it comes to remedy (at least some) of the Euro 1.0 institutional problems and weaknesses. In this regard, I agree it is an improvement as it helps to create a more consistent and credible institutional setting (*); however it does not tackle important aspects I will just briefly mention below:

  • First of all, the EBU and the new Resolution Fund (paid for by the banks, its amount will be no less than 1% of banks’  guaranteed deposits) will not be completed until 2024. So, should a banking crisis occurs in the meantime the banking sector will not have enough funds to pay for the banks’ liabilities on its own or to fund and implement the decisions made by the SRM.
  • Secondly, if a bank needs to be assisted and finally resolved, a complicated coordination between many actors of divorced nature and aims (political, national and supranational) is required in a question of days/hours. Of course the test to this procedure will come when we experience the next banking crisis (see more details on chapter 2 by T. Huertas, see book mentioned above).
  • But finally and most importantly, in my opinion, the EBU does not resolve the fundamental problems of the Euro zone; which are the abysmal internal asymmetries amongst member states in terms of competitiveness, public finances or costs (see some measurements here), as well as the actual lack in internal and cross-border flexibility as regards labour and good and services markets. Just a view of the asymmetries in Target-2 member states’ balances is as striking as self-explanatory.

The EBU adds consistency and predictability to the supervision and resolution of banks. In this sense, it is an improvement. It also makes banks pay for the losses before applying any other funding, even less taxpayers money; but we are yet to see the robustness of the new institutions established as well as the political commitment to the bail-in option in reality. The EBU is in my view another ‘patch’ on the euro’s structural weaknesses.

 

Juan Castañeda

Notes:

(*) However more consistent, I do not think this type of euro currency, very much centralised and linked to an increasingly powerful supranational State, is the best we could have established to preserve the purchasing power of the euro; I will elaborate further on the alternatives in next posts.

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El 2 de marzo de 12 a 14 horas en la Fundación Rafael del Pino (Madrid) tendré la oportunidad de participar en un coloquio con Jose Manuel González Páramo (BBVA, moderador), Pedro Schwartz (UCJC) y David Marsh (OMFIF) sobre cómo afectará Brexit a la Unión Bancaria Europea y a los servicios financieros que presta la llamada ‘City’ de Londres.

El tema, mejor dicho, los temas que hay sobre la mesa son verdaderamente complejos. Pero por supuesto que pueden tratarse de manera asequible para no especialistas; si hay algo que realmente me disgusta en Economía es cuando especialistas en la materia se enzarzan en un debate utilizando un lenguaje innecesariamente oscuro que no entiende nadie (algo que ocurre con demasiada frecuencia, casi de manera generalizada, con los artículos académicos en Economía …, lo que no les hace mejores sino más alejados de la realidad e incomprensibles). En concreto, seguro se tratará de cómo la salida del Reino Unido de la Unión Europea (UE) afectará a los servicios financieros que Londres, como plaza financiera de referencia en Europa, presta tanto a países como a empresas financieras y no financieras en el continente. Uno de las ideas que sostendré en el debate es que si Londres ha sido durante décadas (siglos) una plaza eficiente en la prestación de tales servicios, que por supuesto cumple con la regulación financiera Europea, por qué no debería seguir haciéndolo? Desde una perspectiva puramente económica, la cuestión no admite controversia: es eficiente y beneficioso para las dos partes aprovechar las ventajas competitivas que cada uno puede aportar en el comercio de bienes y servicios. Esto es algo que un estudiante de primero de Economía debería saber.

Hablaremos también de la union bancaria Europea, y de lo que implica e implicará en los próximos años en lo que se refiere a la regulación y, si fuera necesario, la liquidación ordenada de un banco en una futura crisis bancaria. Se trata de un conjunto de nuevas regulaciones e instituciones aprobadas por todos los países de la UE que tratan de paliar alguno de los fallos observados en las respuestas que los Estados Miembros dieron a las distintas crisis bancarias nacionales en la reciente crisis financieras. Y, aunque no muchos lo sepan, el Reino Unido, aún no siendo parte de la zona del Euro, como miembro de la UE sí ha tenido que cumplir con parte de la regulación que acompaña a la union bancaria Europea.

El evento también servirá para presentar el libro, ‘European Banking Union. Prospects and Challenges’ (Routledge), que hemos editado G. Wood D. Mayes y yo mismo. Se trata de una colección de capítulos que tratan de cómo se ha diseñado la union bancaria, su definición y funcionamiento, así como de algunos de los aspectos que en opinión de algunos de los autores puede poner en peligro su efectividad y viabilidad. Aquí podéis encontrar un resumen del libro, así como más información sobre los temas de los que trata:

‘Recent failures and rescues of large banks have resulted in colossal costs to society. In wake of such turmoil a new banking union must enable better supervision, pre-emptive coordinated action and taxpayer protection. While these aims are meritorious they will be difficult to achieve. This book explores the potential of a new banking union in Europe.

This book brings together leading experts to analyse the challenges of banking in the European Union. While not all contributors agree, the constructive criticism provided in this book will help ensure that a new banking union will mature into a stable yet vibrant financial system that encourages the growth of economic activity and the efficient allocation of resources.’

Quedáis invitados todos!

Juan Castañeda

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