This is an archived version of the PW Sources newsletter from Saturday, June 15, 2024. Sign up to receive PW Sources directly to your inbox here.

EUROPEAN PARLIAMENT

The far right’s gains in the European Parliamentary elections reflect a weakening of partisan attachments and a strengthening of populist sentiments in Europe. Most notably, Marine Le Pen’s Rassemblement National became one of the chamber’s largest delegations, leading President Emmanuel Macron to dissolve parliament and call for snap elections in France.

In a 2021 essay, SERGIO FABBRINI examines how the EU approaches political agendas, national preferences, and democratic quality:

“Heuristically, one can argue that the process of institutionalisation of the EU has led to a basic differentiation between two decision-making or governance regimes, one dealing with issues concerning single market regulatory policies and the other dealing with policies close to national sovereignty’s prerogatives that entered the EU agenda after the end of the Cold War. The 1992 Maastricht Treaty was the turning-point for this differentiation in governance structures. The Treaty introduced three distinct pillars, or decision-making regimes: the supranational pillar for the single market (organised around the triangle of the Commission, endowed with the monopoly of legislative initiative, and the Council of Ministers or Council and the European Parliament or EP, with the power to approve the Commission’s proposals) and the two intergovernmental pillars of Common Foreign and Security Policy (CFSP) and Justice and Home Affairs Policy (JHA), where the main decision-making institutions are the Council and the (then informal) European Council of the heads of state and government. Through that Treaty it was formally recognised that the EU could proceed in the integration process into crucial policies (the CSP policies, i.e. policies touching national sovereignty’s prerogatives) provided that the Member State governments were guaranteed an exclusive or predominant decision-making role (through the Council and European Council). The differentiation of the decision-making regimes was further consolidated with the start of the Economic and Monetary Union (EMU) in 1994, the economic policy side of which was put under the control of the intergovernmental institutions, whereas the monetary policy side was assigned to the full control of a supranational institution, i.e. the European Central Bank or ECB.”

+  “It’s hardly surprising that around half of Europeans didn’t even bother to vote. Ultimately, the EU was built precisely to resist populist insurgencies such as this one.” By Thomas Fazi. Link. And Susi Dennison, Mats Engström, and Carla Hobbs on the EU’s climate agenda after the vote. Link.

+ “Just as the debt crisis threatens to destroy the painstakingly cultured solidarity of the EU, the disintegrating state of its patchwork asylum regime could prove fatal to the principles of mutual trust and cooperation that theoretically bind its member states.” By Lillian M. Langford. Link. And see Ariadna Ripoll Servent’s essay on the role of the European Parliament in the EU’s asylum crisis. Link.

+  “France’s left-wing parties have succeeded in laying the foundations of a new alliance in record time, ahead of the snap elections on June 30 and July 7.” By Sandrine Cassini and Julie Carriat. Link. And see Elias Dinas and Pedro Riera on how European Parliamentary elections impact national party system fragmentation. Link.

NEW RESEARCHERS

Heterogeneous Fiscal Space

STEFAN WALZ is a Finance PhD candidate at Columbia Business School. In a working paper, he studies the implementation and subsequent relaxing of bank capital requirements in 2018 to show that stricter requirements lead banks to shift their portfolios toward long-term bonds.

From the paper:

“The main finding of our paper is that persistent ex-ante differences in the levels of legacy public debt across members of a monetary union can cause an asymmetric response of national economies to union-wide shocks, and to monetary shocks in particular. The economic mechanism behind our finding is the following. In response to symmetric aggregate disturbances, the centralized monetary authority responds to inflation according to a standard Taylor-type rule. The monetary policy response, in turn, transmits differentially across the member states via their budget constraints. In response to a monetary contraction, high-debt countries have limited fiscal ammunition to act counter-cyclically, which translates into a muted response of transfers to households. As a result, they experience a more severe economic recession. Low-debt countries, on the other hand, contract by less than the union-wide average. This implies that the monetary authority faces a trade-off between macroeconomic stabilization and synchronization of economic activity across its members. The more hawkish the central bank is, i.e. the more aggressively it responds to inflation, the starker the increase in the cross-country dispersion of economic activity. We represent this trade-off as a stabilization-synchronization possibility frontier which, to the best of our knowledge, is a novel dimension that monetary authorities within currency unions might want to pay attention to.”

+ + +

+  “When it comes to Soviet ideology, what I see is an abiding respect for market discourse and for markets themselves.” New on PW, Jamie Martin and Oscar Sanchez-Sibony on Soviet access to Western markets and the coming and going of Bretton Woods. Link.

+  On July 8, JFI and the Yale Project on Financial Stability are hosting a symposium, organized by Elham Saeidinezhad and Steven Kelly, with support from the Volatility and Risk Institute at NYU Stern. Link to an announcement with the program of speakers. Seating is limited. Email editorial@jainfamilyinstitute.org if you would like to attend. 

+  Perry Anderson on the European Union, the literature surrounding it, and Brexit. Link.

+  “China’s SOE system attempts the difficult balancing act of harnessing the forces of competition while intervening to ensure a robust field of competitors.” By Kyle Chan. Link.

+  “Our findings run against a popular narrative that “trade wars are class wars” (Klein and Pettis, 2020). Rather, trade causes winners and losers at all income levels. The large magnitude of horizontal distributional effects may lead to waning support for free trade.” By Kirill Borusyak and Xavier Jaravel. Link.

+  Adéwálé Májà-Pearce on the Economic Community of West African States and French interests in the region. Link.

+  “Compared to Mauritania, where the question of the Haratine has larger national implications, Moroccan debates about Black people are very local and restricted to the Draa valley and the Anti-Atlas.” By Aomar Boum. Link.

+  “The centrality of oil to the reproduction of the wage makes the ‘necessity’ of cheap oil a matter of economic survival for the majority of workers in the United States.” By Matt Huber. Link. 

+  “The Constituent Assembly had taken three crucial decisions in 1789. No sooner was it established than it de facto relinquished the right to collect the taxes of the Ancien Regime, while at the same time it announced that it would honour all past debts. At the end of the year, the assignats—in their first form, as state bonds—would, it was hoped, open up new opportunities for borrowing. The Treasury’s financial difficulties were thus exacerbated, for the first of these decisions further reduced the state’s already inadequate fiscal revenues, the second maintained in existence the heavy burden of the royal debt, whereas the third could only yield fairly limited resources. In this situation, there was only a limited number of possible choices. The Treasury could, for example, levy the necessary taxes. Since the Revolution had been made precisely in order to oppose taxation, this possibility was never even entertained. The Treasury could, on the other hand, postpone settling up with its creditors until the advent of better days, but such a decision would certainly cause grave displeasure to the latter, and furthermore could not be regarded as a lasting solution while the country’s finances were in disarray. Thirdly and lastly, it could persevere with the time-honoured method of borrowing heavily and settling old debts with what the new ones yielded, but public opinion was concerned that there be some change in policy.” By Florin Aftalion. Link.

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org