Greece vs. California – Comparing fiscal crises within the monetary Unions

California is not Greece – but why not? The answer to this question seems simple. To be precise, there are two simple answers. First, California is not Greece because the U.S. state is a vastly successful economy, on its own among the ten biggest economies in the world, good at producing blockbusters, software and computer lifestyle products that cannot easily be replaced by cheaper providers in emerging markets. Unfortunately for California, the private riches goes with public poverty. A populist political system allows voters to act collectively like a schizophrenic person: hedonistic and lavish as regards their own private expenditure, prudish and insanely stingy when it comes to state expenditure for public goods. However well the private economy did before the crisis, it seemed to make Californians just more inclined to starve the beast that is their state government. It has forced the executive repeatedly to resort to creative accounting and outright forging of figures to pass a budget

A double bind: Cameron urges non-discrimination in one policy area, while wanting to discriminate in another

The UK government has entered the final stages of its negotiations with the EU. The issues of immigration control and the refugee crisis seem to overshadow the debate. Yet, as Waltraud Schelkle points out, the “Dear Donald — Yours David” letter of Prime Minister Cameron to European Council President Tusk reveals that the other leading issue is financial integration in a European Union with “effectively two sorts of members”, those in the Eurozone and those outside

The ‘Poundzone’ is just as sub-optimal a currency area as the Eurozone

One of the arguments frequently made against the euro is that the Eurozone represents a ‘non-optimal’ currency area. This derives from the notion that the variations between regions within the Eurozone are simply too large for them to share a single currency without encountering problems. Waltraud Schelkle assesses this argument by comparing the experience of the Eurozone with that of the UK during the financial crisis. She argues that the criticisms levelled at the Eurozone are equally applicable to the UK and that if diverse regions are a reason to break up the Eurozone, then the same conclusion would also have to be drawn about Britain’s currency union

Introduction: up for grabs? Key issues in the negotiations about Britain's membership in the EU

The UK’s negotiating position in the area of ‘economic governance’ started from the assumption that there is a deep dividing line between insiders and outsiders of the ‘Eurozone’. To protect the outsiders, the UK government did not ask for a veto but a safeguard mechanism that can postpone a decision in the euro area. This is exactly what David Cameron achieved in the negotiations with Council President Tusk. The article explains why the UK demands were so modest. It is largely explained by the peculiar situation of the UK being the major financial centre for a currency union to which it does not belong. This means that the UK taxpayer needs protection from the City and EU membership has helped to provide this. There is not much else a UK government could ask for

Risk sharing between member states through migration as a social right

Economists claim that the European monetary union would work so much better if labor mobility were higher. But economic models treat workers’ migration to another member state essentially in the same way as workers’ changing jobs within the domestic economy. The jurisprudence on free movement of persons (workers and services) and non-discrimination that the CJEU developed over the years can show how different cross-border and within-border movements are. For comparative political economists, who conceptualize welfare states as institutionally coherent regimes, this proves that free movement of persons clashes with the “logic of closure” (Ferrera) on which welfare states rest. This paper takes free movement of citizens within the United States as reference point to show how homogenous social security systems are, how contested the social right of free movement is and what role courts play in shaping them. The basis for differentiated regulation of free movement in the euro and the dollar area is that welfare states consist of varied social programs with specific access rights. They operate on principles of discrimination, rather than closure. Judicial interventions can clash with these principles but there is no irreconcilable difference of logics at work. At the same time, labor migration as an economic adjustment mechanism for entire regions is arguably overrated, both in its positive and its negative impact

Book review: the power of inaction: bank bailouts in comparison by Cornelia Woll

Review of: The Power of Inaction: Bank Bailouts in Comparison. By Cornelia Woll. Ithaca, NY: Cornell University Press, 2014. 224p. $32.50

Paul Krugman’s argument that the eurozone is not an optimum currency area could be just as easily applied to the US

In a recent conference, the distinguished economist Paul Krugman repeated the oft-heard critique that the eurozone is not an optimal currency area. Waltraud Schelkle disagrees with this characterisation, and argues that no country or group of countries represents an optimal currency area – one region or country always loses out from a single monetary policy. But countries can use fiscal, social and regulatory policies to overcome these difficulties. When Americans criticise the eurozone’s currency policies, she writes, they are forgetting the US dollar’s shaky start and the adjustments which had to be made to the financial system in the 19th century

The second Greek rescue programme was not merely late, but also insufficient, making a third programme inevitable.

Last week the IMF published a review of the financial assistance given to Greece during its debt crisis. One of the key limitations identified in the report was that debt relief for the country was provided far later than it should have been. Waltraud Schelkle writes on the fallout from the report, which generated angry responses from both the European Commission and the European Central Bank. She argues that while the second Greek rescue programme was undoubtedly late, it was also insufficient: amounting to a write-down of only around 33 per cent of Greece’s debt-to-GDP ratio. As a result Greece is likely to need a third rescue programme

Beyond Cooperation and Competition: What Kind of Federalism for EU Social Policy? CES Germany & Europe Working Papers, No. 00.7, December 2000

The EU has become a loose kind ofsocial federation, a fact that has not been adequately taken into account due to the peculiarities ofthe Maastricht strategy for monetary integration. Yet, a new approach to the economic theory offederalism is required ifone wants to analyze the most pressing issues ofEU social policy. The social insurance view of redistribution and stabilization provides for such an approach. This view supports laboratory federalism in which it is the role ofthe EU Commission to contain systems competition in order to preserve "stability in diversity." The role ofthe EU level would be to promote horizontal and vertical learning processes and to make sure that stability concerns ofthe EU are taken seriously by member countries' governments. The minimum requirements framework for social policy that the EU Commission has adopted must be taken as a point of departure, even though it is a less than satisfactory approach from this point of view. Laboratory standardization, in contrast, would not set specific minimum requirements but meta-standards that protect systems functions and safeguard against systems failures

EU Pension policy and financialisation: purpose without power?

This article asks whether the EU’s pension policy promotes and achieves financialisation of old age security. Financialisation in this context means financial market integration that, in conjunction with pension reforms in member states, creates a market-based mode of governance for old age security. After an overview of how significant private pension funds have become in the EU, the article takes a most-likely case study of financialisation, the Pan-European Pension Product (PEPP), to see how successful the EU’s pension policy proved to be in establishing the PEPP. The findings suggest that EU policymaking in pensions tries to instrumentalise financial market integration for pension provision but this does not necessarily lead to financialisation of old age security. Market integration is a multi-faceted process of creating, emulating and correcting markets that obstructs a single-minded policy thrust like financialisation