A Timeline for Sequencing the Grand Euro Strategy – No Taboos
EU leaders are often criticised for lacking a clear strategy to deal with the euro crisis. However, very powerful economic governance polices are already enacted, or are under negotiation.
The purpose of this book is to draw them together to illustrate the sequence of steps that have been settled – or are still needed - in a Time Line, as well as to propose some flanking measures.
The general lines of the policies have been clear since May 2010 (and earlier) so the expectation must be that these established lines will be pursued with greater intensity and will be taken to a sufficient, logical conclusion. Remarkably, commentators and markets remain ignorant of the profound changes in economic governance that were launched then, and which are now in operation. This author’s earlier publications analyse how this process is leading rapidly to political union in the euro area.
Many building blocks of an economic, financial and now political union of the euro area are dropping into place including completing the Single Market, especially in financial services – the delivery mechanism of the currency itself. Effective political union flows from the European Union legislative system with its bi-cameral legislature. However, the essential new ingredients creating a genuine euro area political union are the economic governance measures which are giving a collective oversight of the national economies – with powerful sanctions for misbehaviour. In searching for further building blocks, leaders are dropping taboos.
Three proposals to restore confidence, and allow time for the drive to restore competitiveness to bear fruit:
1. Limited mutualisation of short term public debt through a temporary euro Treasury Bill Fund (the ELEC proposal) - designed to maintain powerful pressure on politicians for continuing economic reform. It keeps separate the past debts run up under the sole authority of individual Nation States from future, modest debts which would only be incurred by joint agreement. The Fund would about 15% of GDP – so five times the size of the US TARP.
2. A banking union limited to the 30-40 banks that are genuinely euro area SIFIs: apply Basel III only to these banks, move their supervision to Europe and empower the ESM (i) to backstop a pre-funded deposit guarantee scheme for them and (ii) re-capitalise them if necessary.
3. Reform financial regulation to take proper account of the fragile/risky nature of public debt in a world of PSI – default in ordinary terms - given its new leverage to the economic outlook.
A Timeline for Sequencing the Grand Euro Strategy – No Taboos
Published June 2012
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1. EU Electoral Timeline
2. Existing/Agreed Policy Instruments
3. Policy Instruments Under Development: Eonomic Governance
4. Policy Instruments to be Created
5. Policy Instruments to Bridge the Gap
6. Govenment Bonds
Appendix 1: The Importance of Confidence
Appendix 2: Some Major Fiscal Turnarounds - Setting Ireland's Task in Context
Appendix 3: Press Releases on ELEC -Euro Treasury Bill Fund
Appendix 4: About ELEC
Graham Bishop is renowned as a one-man think tank, with the vision and courage to propose radical ideas, yet ground them in a mastery of the technical details of the financial system. His influence at the meeting point of politics, economics and finance has built up particularly since the early 1990s, when he pointed out to the Maastricht Treaty negotiators that government debt would have a fundamentally different quality in a common currency. He played a key role in designing the changeover to the euro, both of national currencies and of Europe’s capital markets.His influence continues to this day - as the Rapporteur of ELEC’s insightful plan for a Euro-T-bill Fund, which would have profound political implications for the euro area, and for Britain, if implemented.
Graham now approaches his 80th ’Brussels for Breakfast’ meeting in the City of London - attended by a wide array of senior officials and government affairs specialists from major financial institutions.
Graham Bishop graduated from Sheffield University in 1972 with a degree in Jurisprudence. His publications, articles and speeches on the deregulation of Europe's financial markets provide an informed commentary from the practical perspective of a market participant, but with a political grounding.
His City career encompasses Phillips & Drew, S G Warburg, and Salomon Brothers/Citigroup.
He founded GrahamBishop.com in 2000 to bring directly to his clients the insights that flow from his standing as a leading technical analyst of economic and structural developments in the financial markets of Europe, providing an informed commentary from the practical perspective of a market participant, but with a political grounding. He has worked extensively with both European and UK political authorities, including the European Commission, where he was a member of the Consultative Group on the Impact of the Euro on Capital Markets (the Giovannini Group). He was also a member of the Commission's Strategy Group on Financial Services (1998 – creating the Financial Services Action Plan) and the Committee of Independent Experts on the preparation of the changeover to the single currency (1994–95). He was nominated by the European Parliament to be one of its two members of the first Inter-Institutional Monitoring Group, and was Rapporteur for the spring 2003 and November 2004 Reports. He was elected to the Board of the Kangaroo Group in November, 2005 and re-elected in 2007 and 2009.
In the UK’s House of Commons, Mr Bishop was a Special Advisor to the Treasury Select Committee in its examination in 2003 of the implications for United Kingdom membership of the Single Currency. He advised the Treasury Committee on the corresponding reports in 1998 and 1996. He was also a Specialist Adviser to the House of Lords Select Committee on the European Union in its 2003 inquiry into The Barriers to Competition in the Internal Market for Financial Services. He is a Council Member of the Federal Trust and a member of the European League for Economic Co-operation (ELEC). He frequently participates in studies and meetings of research institutes such as Centre for the Study of Financial Innovation (CSFI).