The financial crisis: Impact on and response by the European Union

Global Financial Crisis

Volumn , Issue , 2010, Pages 13-47

  Jackson, James K ^a  

^a NONE

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EID: 84895274102     PISSN: None     EISSN: None     Source Type: Book    
DOI: None     Document Type: Chapter

References (80)

1. Members of the European Union are: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
2. Blair, Dennis C., Annual Threat Assessment of the Intelligence Community for the Senate Select Committee on Intelligence, February 12, 2009.
3. Members of the Euro area have adopted the Euro as their common currency. Member countries are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
4. Pan, Phillip P., Economic Crisis Fuels Unrest in E. Europe, The Washington Post, January 26, 2009, p, A1.
5. Shin, Annys, World Bank to Offer Aid to Eastern Europe, The Washington Post, February 27, 2009, p. A10.
6. To join the Eurozone, countries must keep their government budget deficits, their overall level of government debt, and the rate of price inflation below specified fixed ceilings and hold their currencies within a preset range to the Euro for two years.
7. Forelle, Charles, EU Rejects a Rescue of Faltering East Europe, The Wall Street Journal, March 2, 2009.
8. Bryant, Chris, EU Leaders Push Sweeping Regulations, Financial Times, February 22, 2009.
9. EU Banking Structures, European Central Bank, October 2008.
10. The Stability and Growth Pact (SGP) is an agreement by European Union members to conduct their fiscal policy in a manner that facilitates and maintains the Economic and Monetary Union of the European Union. The Pact was adopted in 1997 and is based on Articles 99 and 104 of the European Community Treaty, or the Maastricht Treaty, and related decisions. It consists of monitoring the fiscal policies of the members by the European Commission and the Council so that fiscal discipline is maintained and enforced in the Economic and Monetary Union (EMU). The actual criteria that members states must respect are: 1) an annual budget deficit no higher than 3% of GDP, and 2) a national debt lower than 60% of GDP, or approaching that value.
11. The Lisbon Strategy for Growth and Jobs is a plan adopted by EU members to improve economic growth and employment among the EU members by becoming the most competitive knowledge based economy in the world by 2010. The comprehensive strategy includes adopting sustainable macroeconomic policies, business friendly regulatory and tax policies and benefits, improved education and training, and greater investment in energy efficient and environmentally friendly technology. Two major goals include total public and private investment of 3% of Europe's GDP in research and employment by 2010, and an employment rate of 70% by the same date. A comprehensive report on the Lisbon Strategy is available at: http://ec.europa.EU/growthandjobs/pdf/kok_report_en.pdf.
12. The Financial Services Action Plan replaced the Investment Services Directive and contains a set of measures that are intended to remove the remaining formal barriers in the financial services market among EU members and to provide a legal and regulatory environment that supports the integration of the EU financial markets. The EU Financial Services Action Plan: A Guide, HM Treasury, the Financial Services authority, and the Bank of England, July 31, 2003.
13. Flash Estimates for the Fourth Quarter of 2008, Eurostat news release, STAT/09/19, February 13, 2009.
14. See CRS Report R40173, Causes of the Financial Crisis, by Mark Jickling; CRS Report R40007, Financial Market Turmoil and U.S. Macroeconomic Performance, by Craig K. Elwell; CRS Report RL34412, Containing Financial Crisis, by Mark Jickling; CRS Report RS22963, Financial Market Intervention, by Edward V. Murphy and Baird Webel; and CRS Report RL34742, The Global Financial and Economic Crisis: Analysis and Policy Implications, coordinated by Dick K. Nanto.
15. Fender, Ingo, and Jacob Gyntelberg, Overview: Global Financial Crisis Spurs Unprecedented Policy Actions, BIS Quarterly Review, Bank for International Settlements, December 2008.
16. Regional Economic Outlook: Europe, International Monetary Fund, April, 2008, p. 19-20; and EU Banking Structures, European Central Bank, October 2008, p. 26.
17. Commercial paper is a short-term unsecured money market security with a fixed maturity issued by large banks and corporations to get money to meet short-term debt obligations and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date. Asset-backed commercial paper is a form of commercial paper that is collateralized by other financial assets.
18. CRS ReportRS22988, Iceland's Financial Crisis, by James K. Jackson.
19. Anderson, Camilla, Iceland Gets Help to Recover From Historic Crisis, IMF Survey Magazine, November 19, 2008.
20. Credit default swaps are insurance-like contracts that promise to cover losses on certain securities in the event of a default. They typically apply to municipal bonds, corporate debt and mortgage securities and are sold by banks, hedge funds, and others. The buyer of the credit default insurance pays premiums over a period of time in return for peace of mind, knowing that losses will be covered if a default happens. They are supposed to work similarly to someone taking out home insurance to protect against losses from fire and theft.
21. Regional Economic Outlook: Europe, International Monetary Fund, November,2007, p. 6.; and Quarterly Review, Bank for International Settlements, December, 2008. p. 4.
22. Chailloux, Alexandre, Simon Gray, Ulrich Kluh, Seiichi Shimizu, and Peter Stella, Central Bank Response to the 2007-08 Financial Market Turbulence: Experiences and Lessons Drawn. IMF Working Paper wP/08/210, International Monetary Fund, September 2008.
23. Bernanke, Ben S., Liquidity Provision by the Federal Reserve, May 13, 2008.
24. Borio, Claudio, and William Nelson, Monetary Operations and the Financial Crisis, Quarterly Review, March 2008, Bank for International Settlements.
25. Financial Stability Report, April 2008, Bank of England. P. 10
26. Summit of the Euro Area Countries: Declaration on a Concerted European Action Plan of the Euro Area Countries, European Union, October 12, 2008.
27. EU Sets up Crisis Unit to Boost Financial Oversight, Thompson Financial News, October 16, 2008.
28. Bradbury, Adam, EU Eyes Next Step on Clearing The Wall Street Journal Europe, January 7, 2009. P. 21.
29. Hilsenrath, Jon, Joellen Perry, and Sudeep Reddy, Central Banks Launch Coordinated Attack; Emergency Rate Cuts Fail to Halt stock Slide; U.S. Treasury Considers Buying Stakes in Banks as Direct Move to Shore Up Capital, The Wall Street Journal, October 8, 2008, p. A1.
30. The original eight banks are: Bank of America, Bank of New York Mellon Corporation, Citigroup Incorporated, Goldman Sachs Group Incorporated, JPMorgan Chase & Company, Morgan Stanley, State Street Corporation, and Wells Fargo and Company. Since this initial injection, nearly 50 banks have participated in the Capital Purchase Program.
31. Hilsenrath, Jon, Joellen Perry, and Liz Rappaport, Fed Steps up Assault on Slump; U.S. is Joined in Rate Cuts by China, Norway; Doubts Linger on Easing's Impact, The Wall Street Journal, October 30, 2008, p. A1.
32. Atkins, Ralph, and Chris Giles, Deep Rate Cuts in Europe, Financial Times, November 7, 2008, p. 1.
33. Atkins, Ralph, ECB Acts and Hints at More to Come Soon, Financial Times, November 7, 2008, p. 2.
34. 78th Annual Report, Bank for International Settlements, p. 104-105.
35. The central banks include: Swiss National Bank, European Central Bank, Bank of England, Bank of Japan, Bank of Canada, Reserve Bank of Australia, Sveriges Riksbank (Sweden), National Bank of Denmark, Central Bank of Norway, Reserve Bank of Norway, Reserve Bank of New Zealand, Central Bank of Brazil, Bank of Mexico, Bank of Korea, Monetary Authority of Singapore, Swiss National Bank, and National Bank of Poland.
36. The G-7 is comprised of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
37. G-7 Finance Ministers and Central Bank Governors Plan of Action, press release HP-1 195, October 10, 2008, United States Department of the Treasury.
38. Summit of the Euro Area Countries: Declaration on a Concerted European Action Plan of the Euro Area Countries, European Union, October 12, 2008.
39. Perry, Joellen, and Marcus Walker, Europe's Central Banks Deliver Sweeping Rate Cuts, Financial Times, December 5, 2008. P. 1.
40. Bank of England Reduces Bank Rate by 0.5 Percentage Points to 1.5%, Bank of England news release, January 8, 2009.
41. Bank of England Reduces Bank Rate by 0.5 Percentage Points to 1.0%, Bank of England news release, February 5, 2009.
42. Perry, Joellen, Nicholas Winning, and Joe Parkinson, Euro-Zone Activity Slows-Large ECB Rate Cut Expected After Data on Inflation, Services, The Wall Street Journal Europe, January 7, 2009. P. 2; Statement by Jean-Claude Trichet, European Central Bank, January15, 2009.
43. Statement by Jean-Claude Trichet.
44. The TARP funds have been used instead to inject capital directly into banks through purchases of newly-issued preferred stock.
45. Financial Stability Plan Fact Sheet, U.S. Department of the Treasury, news release, February 9, 2009.
46. From Financial Crisis to Recovery: A European Framework for Action, Communication From the Commission, European Commission, COM(2008) 706 final, October 29, 2008.
47. The combination of labor market flexibility and security for workers.
48. The European Social Fund, created in 1957, is the EU's main financial instrument for assisting members in implementing their own plans for investing in workers.
49. Hall, Ben, George Parker, and Nikki Tait, European Leaders Decide on Deadline for Reform Blueprint, Financial Times, November 8, 2008, p. 7.
50. Principles for Sound Stress Testing Practices and Supervision: Consultative Document, Bank for International Settlements, January 2009.
51. Munoz, Sara Schaefer, and Alistair MacDonald, U.K. Weighs "Bad Banks," The Wall Street Journal Europe, February 4, 2009, p. 2.
52. Perry, Joellen, and Marcus Walker, Central Bank Mulls "Bad Banks," The Wall Street Journal Europe, February 2, 2009, p. 19.
53. CRS Report RS22850, Tax Provisions of the 2008 Economic Stimulus Package, coordinated by Jane G. Gravelle.
54. Dougherty, Carter, British Central Bank Cuts Its Key Rate, The New York Times, March 6, 2009; March 5, 2009-Monetary Policy Decisions, press release, the European Central Bank.
55. A European Economic Recovery Plan: Communication From the Commission to the European Council, Commission of the European Communities, COM(2008) 800 final, November 26, 2008. The full report is available at: http://ec.europa.eu/commission_barroso/president
56. Benoit, Bernard, Germany Doubles Size of Stimulus, Financial Times, January 6, 2009, p. 10;
57. Walker, Marcus, Germany's Big Spending Plans, The Wall Street Journal Europe, January 13, 2009, p. 3.
58. Benoit, Bernard, German Stimulus Offers Job Promise, Financial Times, December 16, 2008. p. 1.
59. Walker, Marcus, Germany Mulls $135 Billion in Rescue Loans, The Wall Street Journal Europe, January 8, 2009. p. 1.
60. Benoit, Bernard, A Measured Merkel, Financial Times, November 25, 2008, p. 9.
61. Steinbruck, Peer, Germany's Way Out of the Crisis, The Wall Street Journal, December 22, 2008.
62. Parussini, Gabrielle, France to Give Banks Capital, With More Strings Attached, The Wall Street Journal Europe, January 16, 2009, p. A17.
63. Gauthier-Villars, David, Leading News: France Sets Stimulus Plan, The Wall Street Journal Europe, December 5, 2008, p. 3.
64. Hall, Ben, France Gives Renault and Peugeot E.U.R 779m, Financial Times, December 16, 2008, p. 4.
65. Abboud, Leila, France Considers New Measures to Aid Auto Companies, The Wall Street Journal Europe, January 15, 2009, p. 4.
66. Scott, Mark, Is Britain's Stimulus Plan a Wise Move? Business Week, November 24, 2008;
67. Werdigier, Julia, Britain Offers $30 Billion Stimulus Plan, The New York Times, November 25, 2008.
68. Falloon, Matt, and Mike Peacock, UK Government to Borrow Record Sums to Revive Economy, The Washington Post, November 24, 2008.
69. Real Help for Business, press release, Department for Business, Enterprise and Regulatory Reform, January 14, 2009;
70. Mollenkamp, Carrick, Alistair MacDonald, and Sara Schaefer Munoz, Hurdles rise as U.K. Widens Stimulus Plan, The Wall Street Journal Europe, January 14, 2009, p. 1.
71. Watt, Nicholas, British Ambassador Responds to German Economic Criticism, Guardian, December 12, 2008.
72. Parker, George, Brown Suffers as Pound Slides, Financial Times, December 16, 2008, p. 9.
73. OECD Economic Surveys: Europe, January 2009, Organization for Economic Cooperation and Development, p. 47.
74. Benoit, Bertrand, Tom Braithwaaite, Jimmy Burns, Jean Eaglesham, et. al., Iceland and UK clash on Crisis, Financial Times, October 10, 2008, p. 1.
75. Evans, Kelly, John W. Milner, and Mei Fong, Trade Decline Adds to the Global Slowdown-Major Nations Post Big Export Retreats as Demand Falls Off, The Wall Street Journal Europe, January 14, 2009, p. 2;
76. Lyons, John, Trade-Finance Squeeze Hurts the Healthy, The Wall Street Journal Europe, December 22, 2008, p. 10.
77. Members of the euro area are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
78. Davies, Ryan J., July 2008., p. 3. Available online at: http://faculty.babson.edu/rdavies/MiFID_July2008_Davies15.pdf
79. The EU Financial Services Action Plan: A Guide, HM Treasury, the Financial Services Authority, and the Bank of England, July 31, 2003.
80. Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II is to create an international standard that banking regulators can use when creating regulations concerning requirements for capital adequacy that banks must meet to guard against the types of financial and operational risks that banks face.