Archive 2011 Topic 'Euro Crisis'

December 2011
Political motives swept economic logic aside
Harald Benink assumes that a few countries will leave the eurozone in exchange for debt relief.

"The history of the euro has been dominated by political motives and, where convenient, economic reality has been ignored," says Harald Benink, Professor of Banking and Finance at Tilburg University. One consequence has been moral hazard, a phenomenon which undermines the disciplinary effect of the financial markets. "Greece was admitted to the eurozone because it was the cradle of European democracy. That is a specious argument."

For a leap forward Europe always needs a crisis
According to Sylvester Eijffinger, the only way to maintain our prosperity is to proceed with European integration.

"The European Union embarked on its common currency project in 1998, long before its member states really had very much in common. "We knew this and there were warnings aplenty," says Sylvester Eijffinger, professor of Financial Economics at Tilburg University. "So the current euro crisis was inevitable. But the same applies to the solution, because there is no alternative to more intense cooperation. The costs will be high, but in ten years' time European integration will have reached a higher level."

Eurobonds are likely to increase the risk of joint defaults in the Eurozone
As government advisors and central bankers race through the different options to save the euro, Tilburg University Professor Wolf Wagner argues that one such proposal, Eurobonds, will actually increase the risk that several Eurozone countries fail together. It shows using basic arithmetic that these bonds, sometimes labelled ‘stability bonds’, may actually be more likely to harm Eurozone stability.

November 2011
The EFSF: Unfinished business
The European Financial Stability Facility was set up eighteen months ago as a response to the then Greek sovereign debt crisis. In a column on Voxeu.org Tilburg University Professor Harry Huizinga and PhD student Bálint Horváth look at the effect of the fund on the financial system in particular bank shareholders, the holders of bank bonds, and the holders of sovereign debts.

Herman Wijffels: "The financial sector is lagging behind"
When it comes to sustainability, the financial sector is still lagging behind other industries. Drastic redesign of the sector is needed. Risk management should no longer be about past performance, but about looking ahead. Putting the needs of clients and society first, not bonuses. According to economist, Worldconnectors co-chair and Tilburg University alumnus Herman Wijffels the real transition to a sustainable financial sector can only be made when we manage to "redesign the software in the heads of bankers."

October 2011
E-book on the future of banking
Banking is back in the headlines. From desperate efforts by governments to address the Eurozone crisis to the 'Occupy Wall Street' movement that is currently spreading across the globe, banks are again at centre stage. Reasons enough for Voxeu.org to publish the e-book The Future of Banking. This new e-book presents a collection of essays by leading European and US economists, including Tilburg University and European Banking Center (EBC) Professors Thorsten Beck, Harry Huizinga, Luc Laeven and Steven Ongena. In it, they provide solutions to the financial crisis and proposals for medium- to long-term reforms to the regulatory framework in which financial institutions operate.

The e-book can be downloaded from Voxeu .org

August 2011
Cross border banking crucial in spread of financial crisis
The financial crisis was able to spread because of a lack of clear policies on how international banks should be dissolved when they can no longer fulfil their obligations. That’s why authorities and financial regulators should now prioritize setting up these policies, together with a regulatory framework, in order to be better prepared for a next crisis. Together with colleagues from U.S. universities, Tilburg University’s Thorsten Beck and Dirk Schoenmaker of the Duisenberg School of Finance conducted a study in which they analyze the financial crisis from the question what is needed for a structurally stable financial system. In their study Cross Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies Beck and his colleagues make ten recommendations on a national, european and global level. The study was issued by the Center for Economic Policy Research (CEPR).

Juni 2011
Eijffinger on The Greek Tragedy: last chance
European leaders should have (and could have) known better in the course of the past decade, argued Professor of Economics Sylvester Eijffinger in front of a packed auditorium at Tilburg University. He gave a lecture for the readership of the Brabants Dagblad newspaper. This was the fourth BD public lecture organized in association with the university. The theme of the lecture was The Greek Tragedy. Six hundred Brabants Dagblad readers listened to a brief consideration of the classical Greek tragedy, after which Prof. Eijffinger transitioned to the current Greek tragedy which has all the characteristics of a classical drama.

Just as in classical drama, we are now waiting for catharsis and purification, after which the protagonists regroup, accept their losses, learn their lessons and start rebuilding for the future. Leadership is an essential ingredient in this process, argued Eijffinger. He used graphs to make perfectly clear that European leaders should have (and could have) known better during the past decade. This week will be the last opportunity for Greece to intervene by slashing spending.

June 2011
Harald Benink on the Euro, Greece and Restructuring
Greece has been a hot topic in the media for the past few weeks. Time for action to be taken. Harald Benink, Professor Banking and Finance, points out the need for a dual track policy: on the one hand a restructuring of the burden of debt and on the other hand a temporary "euro-holiday". Greece would then step out of the euro-zone for a period of ten years, would devaluate its new Drachme and would resolve the remaining burden of dept. It is of vital importance to restructure quickly. In that case, not only the tax payers, but also the banks will bear the loss. Watch the interview:

May 2011
Big banks are dangerous
Large banks tend to be too big to fail, as their failure would have hugely negative repercussions for the overall economy. Saving oversized banks, however, may ruin a country’s public finances. They should be resized according to economist Harry Huizinga. Together with Asli Demiregüc-Kunt of the Worldbank he investigated the results of big banks. Watch the interview:

European Monetary Union hasn't bridged the North-South divide
It’s over a decade since the European Economic and Monetary Union (EMU) was introduced but the financial and economic integration of Europe has failed to fully live up to expectations. That’s the conclusion reached by economist Mary Pieterse-Bloem of Tilburg University in her doctoral research. The differences between the participating countries have increased rather than decreased in terms of bond returns.

March 2011
Omar Salah on Islamic banking
According to Omar Salah (attached to Tilburg University), Islamic banking is based on religious rules that assume a fair division of prosperity, realized by ethically sound means. On 21 February, the VPRO broadcasted an item on the subject as part of the Tegenlicht series about Islamic banking. Watch the video:

February 2011
An emergency fund alone is not enough
Good intentions alone will not solve the euro crisis. The Tilburg economists Sylvester Eijffinger and Edin Mujagic advocate a decisive three-step plan in which the sequence of the steps is of crucial importance.

The European Central Bank's view
Current EU budgetary regulations are too relaxed, according to Jean Claude Trichet. In the television program Buitenhof, the President of the European Central Bank (ECB) called for more stringent financial supervision. Governments need to be considerably more ambitious in this regard.

Save the euro
A temporary 'euro holiday' for problem countries. Harald Benink, Professor of Banking and Finance, feels that a rescue plan for the euro could be based on a measure like this. Strict conditions would apply, however.

Lex Hoogduin, board DNB, about the euro crisis: