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See detailBanking on Sterling: Britain's Independence from the Euro Zone
Howarth, David UL

in Perspectives on Politics (2013), 11(3), 972-74

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See detailA Panacea for all Times: the Politics of the German Stability Culture
Howarth, David UL; Rommerskirchen, Charlotte

in West European Politics (2013), 36(4), 750-770

The German Stability Culture is frequently pointed to in the literature as the source of the country’s low inflationary policies and, at the European Union (EU) level, the design of Economic and Monetary ... [more ▼]

The German Stability Culture is frequently pointed to in the literature as the source of the country’s low inflationary policies and, at the European Union (EU) level, the design of Economic and Monetary Union (EMU). In Germany, the term was regularly wielded by central bankers and Christian Democrat (CDU-CSU) politicians to legitimise the move to EMU in the face of a large majority of public opinion opposed, and subsequent EU-level policy developments, particularly in the context of the eurozone debt crisis that erupted in 2009. An ordered probit analysis is used to demonstrate the depth of the German Stability Culture, showing that support for low inflation cuts across all party and ideological lines. Despite this ubiquity, the term has been wielded with regularity only by the centre-right Christian Democrats and is strongly associated with this party. A strategic constructivist analysis is employed to explain this uneven but persistent usage in German domestic politics. [less ▲]

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See detailFrance and the International Financial Crisis: The Legacy of State-Led Finance
Howarth, David UL

in Governance : An International Journal of Policy, Administration and Institutions (2013), 26(3), 369395

Despite the far-reaching liberalization of the French banking system over the past quarter century, French banks suffered far less in the international financial crisis (2007–2009) than banks in the ... [more ▼]

Despite the far-reaching liberalization of the French banking system over the past quarter century, French banks suffered far less in the international financial crisis (2007–2009) than banks in the United Kingdom and Germany. However, the French system also suffered far more—at least in the first stages of the crisis—than the banking systems of Southern Europe. By several measures, French banks were world leaders in financial innovation, and the French banking system was highly exposed to international market movements. The limited impact of the crisis, however, owed to the specificities of French “market-based banking.” Deliberate state action over the two decades prior to the crisis created a specific kind of banking system and encouraged forms of financial innovation, the unintentional consequence of which was the limited exposure to the securitization that caused the damage wrought during the financial crisis. [less ▲]

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See detailBanking on Stability: The Political Economy of New Capital Requirements in the European Union
Howarth, David UL

in Journal of European Integration (2013), 35(3), 333-346

The Basel III Accord on a ‘Global regulatory framework for more resilient banks and banking systems’ was issued in late 2010 as the cornerstone of the international regulatory response to the global ... [more ▼]

The Basel III Accord on a ‘Global regulatory framework for more resilient banks and banking systems’ was issued in late 2010 as the cornerstone of the international regulatory response to the global financial crisis. Its adoption into European Union (EU) legislation has, however, been met with considerable member state reticence and intra-EU negotiations are ongoing. This paper investigates the political economy of new capital requirements in the EU, arguing that the institutional features of national banking sectors convincingly account for the divergence in EU member state preferences on capital rules. [less ▲]

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See detailIntroduction: Towards a Political Economy of Banking
Howarth, David UL; Hardie, Iain; Maxfield, Sylvie

in Howarth, David; Hardie, Iain (Eds.) Market-Based Banking and the International Financial Crisis (2013)

In this introductory chapter we first review the standard bank–credit/capital markets dichotomy used to describe national financial systems. We examine the influence of this dichotomy in the comparative ... [more ▼]

In this introductory chapter we first review the standard bank–credit/capital markets dichotomy used to describe national financial systems. We examine the influence of this dichotomy in the comparative political economy (CPE) literature, which is the disciplinary focus of most of the contributors to this volume. We explain how effectively scholars of the political economy of finance explain the phenomenon of change and then briefly describe the market-based banking model in the context of the broader national financial systems. In the penultimate section, we consider the impact of market-based banking on the domestic political economy and the impact of the international financial crisis. [less ▲]

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See detailFraming Market-Based Banking and the Financial Crisis
Howarth, David UL; Hardie

in Howarth, David; Hardie, Iain (Eds.) Market-Based Banking and the International Financial Crisis (2013)

This chapter considers market-based banking in more empirical depth across eleven countries. It argues that levels of market-based banking are now a more useful way to compare national banking systems and ... [more ▼]

This chapter considers market-based banking in more empirical depth across eleven countries. It argues that levels of market-based banking are now a more useful way to compare national banking systems and serve, when combined with a focus on other market sources of non-financial corporation (NFC) financing, to provide an alternative to the standard dichotomy of bank-based and market-based financial systems. The chapter considers the degree of market-based assets and liabilities in banks in the eleven banking systems and highlights the differences between systems. It demonstrates how this detail helps explain the differential impact of the financial crisis in terms of timing, the required levels of government support to banking systems, and the impact of the crisis on lending to NFCs. [less ▲]

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See detailA Peculiar Kind of Devastation: German Market-Based Banking
Howarth, David UL; Hardie, Iain

in Howarth, David; Hardie, Iain (Eds.) Market-Based Banking and the International Financial Crisis (2013)

This chapter describes the shift of the German banking industry from the traditional bank-based financial capitalism to ‘market-based banking’, which took place from the late 1990s. German banks have long ... [more ▼]

This chapter describes the shift of the German banking industry from the traditional bank-based financial capitalism to ‘market-based banking’, which took place from the late 1990s. German banks have long had high levels of market-based liabilities, but their borrowing has been from more stable wholesale markets, including via covered bonds. However, the rapid rise of market-based banking on the asset side of the balance sheet for German commercial and public sector banks, eager to expand in the context of cloistered national markets, explains the very high exposure of the German banking/financial system to the early stages of the financial crisis. German banks imported instability from the United States through the large-scale purchase of securitized loans. As a result, the German banking system was among the worst affected early in the international financial crisis yet the impact on total bank lending was limited. [less ▲]

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See detailMarket-Based Banking and the International Financial Crisis
Howarth, David UL; Hardie, Iain

Book published by Oxford University Press (2013)

Economics and political economy lack the analytical tools to explain the differing impact of the recent international financial crisis that erupted in 2007 on developed economies. The principal ... [more ▼]

Economics and political economy lack the analytical tools to explain the differing impact of the recent international financial crisis that erupted in 2007 on developed economies. The principal contribution of this edited volume is to offer a 'market-based banking' framework which transcends the dominant dichotomous understanding of financial systems in terms of credit-based and capital-based. It demonstrates why this dichotomy is obsolete through an appreciation of the activities of banks. Further, it employs 'market-based banking' to overcome the inability of existing typologies to explain financial system change. 'Market-based banking' provides a framework that is more reflective of banking in modern financial systems, and one that provides a more successful explanation of the differential impact of the recent financial crisis. The comparative and single-country chapters compare the extent of 'market-based banking' across eleven countries, including all of the G7 economies. The chapters also consider the impact of the financial crisis in terms of necessary government support and lending to non-financial companies. This volume includes work by authors who are widely respected experts in national political economies, finance, financial regulation, banking, central banking, and monetary policy. It is one of the first book-length comparative studies of the financial crisis and its impact and one of the few recent comparative studies of national banking and financial systems in any discipline. [less ▲]

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See detailThe Ongoing Struggle to 'Protect' Europe from its Money Men
Howarth, David UL; Buckley, James; Quaglia, Lucia UL

in Journal of Common Market Studies (2012), 50(s1), 99-115

This analysis of two of the main pieces of EU financial legislation developed in 2011 demonstrates the extent to which they were designed and subsequently shaped to respond to the preoccupations of ... [more ▼]

This analysis of two of the main pieces of EU financial legislation developed in 2011 demonstrates the extent to which they were designed and subsequently shaped to respond to the preoccupations of powerful EU member states linked to domestic institutional frameworks and national financial systems. On OTC derivatives, EMIR was modified to accommodate German concerns about the incompatibility of the national stock exchange, a major European player in trading and clearing derivatives, with the legislation as initially drafted by the Commission. The CRDIV-CRR was drafted by the Commission to take into consideration European specificities in the implementation of international guidelines on capital requirements and, in particular, French and German concerns on, respectively, the double counting of insurance subsidiary capital and the use of hybrid capital to meet minimum capital thresholds and the definition of liquidity ratios. The Commission’s draft and subsequent positioning directly challenged British and other member state government preference to push for higher requirements in order to reinforce the stability of nationally-based banks and avoid a repeat of 2007-09 when huge amounts of public money were spent to avoid bank collapse. [less ▲]

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See detailUnity and disunity among central bankers in an asymmetric Economic and Monetary Union
Howarth, David UL

in Hayward, Jack; Würzel, Rudi (Eds.) European Disunion: The Multidimensional Power Struggles (2012)

ECB monetary policy making was designed to disguise real, and to counter imagined, disunity within the bank itself, and among its component national central banks (NCBs) and their governors. The unity of ... [more ▼]

ECB monetary policy making was designed to disguise real, and to counter imagined, disunity within the bank itself, and among its component national central banks (NCBs) and their governors. The unity of the Eurosystem of central banks and the appearance of unity depended upon the assumption that central bankers keenly supported the German model – which they endorsed in the Delors Report on EMU in 1989. However, several features of the ECB undermined its unity and reputation for impartiality even prior to the start of EMU: notably, the greater representation of individuals from larger member states in the Governing Council. Crucially, though, the potential for disunity is in the Maastricht Treaty (Treaty on European Union) and the asymmetrical design of EMU. Euro area economic governance was insufficiently developed and, notably, fiscal policy rules were inadequately clarified and enforced. Similarly, in the Treaty, the responsibilities of the ECB to promote financial stability were left imprecise. Notably, due to central banker fears on the monetisation of debt, the ECB was not assigned the typical central bank function of ‘lender of last resort’. The disunity in the Eurosystem of central banks that erupted during the sovereign debt crisis from late 2009, demonstrated that unity relied on consensus around German and notably Bundesbank preferences. Disunity stemmed above all from the absence of a road map for ECB policy making in a context of severe existentialist crisis. [less ▲]

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See detailIn the Vanguard of Globalisation: the OECD and Capital Liberalisation
Howarth, David UL; Sadeh, Tal

in Review of International Political Economy (2011), 18(5), 622-645

A survey of the literature on the political economy of global financial liberalisation shows how little has been written on the role of the OECD, and how the Principal-Agent (PA) theory, complemented by ... [more ▼]

A survey of the literature on the political economy of global financial liberalisation shows how little has been written on the role of the OECD, and how the Principal-Agent (PA) theory, complemented by Constructivist tools, can be applied helpfully to analyse this process.We show that the OECD’s Committee on Capital Movements and Invisible Transactions (CMIT) played an entrepreneurial role in encouraging the liberalization of capital flows. In particular, we argue that the CMIT slipped by acting beyond its core delegation roles and against the preferences of the OECD member states’ governments. This was done by discussing and seeking to expand the list of issue areas on which controls should be lifted to include short-term capital movements and the right of establishment, to adopt an extended understanding of reciprocity, and to eliminate a range of additional discriminatory measures on capital flows. Acting as institutional entrepreneurs, the CMIT members took advantage of the overlap among the networks in which they were engaged to spread their ideas to the member states. The CMIT’s work affected the member states’ willingness to make irrevocable, multilateral commitments through a combination of peer pressure and vertical institutional interconnectedness. Through the work of the CMIT, the OECD was an important actor in capital liberalization, in addition to the role played by other international organizations. [less ▲]

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See detailThe Political Economy of Europe’s Incomplete Single Market
Howarth, David UL; Sadeh, Tal

Book published by Routledge (2011)

Progress in European market integration over the past two decades has come at the expense of growing flexibility, or differentiation, in the laws that govern the Single Market (SM) as well as the way that ... [more ▼]

Progress in European market integration over the past two decades has come at the expense of growing flexibility, or differentiation, in the laws that govern the Single Market (SM) as well as the way that these laws are implemented. This volume examines how the completion of the SM has been held back in the varied implementation of European Union competition policy, variation in national policies on services, corporate law, telecommunications, energy, taxation, and gambling, and the EU’s uneven transportation network. These sectors and issue-areas form the frontier at which the main political struggles over the future shape of the SM have taken place in the past decade. Broadly, progress in economic integration in the EU has been complicated by the need to reconcile perfections to the SM with the global competitiveness of European producers, and efficiency gains with ideational and normative concerns. In services, there is a clash between deregulation and social policy. Financial integration has had to reconcile different institutionalized views among the member states about the place of finance in the economy and society. The SM notion supposedly entails a concrete set of substantive policy commitments that form the basis of the ‘ever closer union’. However, increasing differentiation in the SM undermines the identification of the EU’s core constitutional commitments. [less ▲]

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See detailRegulating the so-called 'Vultures of Capitalism'
Howarth, David UL; Buckley, James

in Journal of Common Market Studies (2011), 49(s1), 123-143

This article analyses the legislative process surrounding the new directive covering hedge funds and private equity firms: the Alternative Investment Fund Mangers Directive (AIFMD), adopted in late 2010 ... [more ▼]

This article analyses the legislative process surrounding the new directive covering hedge funds and private equity firms: the Alternative Investment Fund Mangers Directive (AIFMD), adopted in late 2010. AIFMD merits study as the first effort to create an EU legal framework for increasingly important and controversial elements of several Member State financial systems. This directive also provides a good case study of the difficulties that the politicization of highly technical financial legislation can bring – notably in terms of poorly designed draft legislation. Further, the adoption of AIFMD merits study as an example of the impact of intense industry lobbying at the EU level – despite the determination of several powerful Member State governments and many Members of the European Parliament (MEPs) to adopt far-reaching legislation. Industrial associations, bolstered by the British government, were able to bring about the adoption of a directive that was reworked significantly from previous versions to diminish the additional constraints and costs imposed on AIFM. [less ▲]

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See detailThe ever incomplete single market: differentiation and the evolving frontier of integration
Howarth, David UL; Sadeh, Tal

in Journal of European Public Policy (2010), 17(7), 922-935

Progress in market integration over the past two decades has come at the expense of growing flexibility in the laws that govern the singlemarket (SM) as well as the way that these laws are implemented ... [more ▼]

Progress in market integration over the past two decades has come at the expense of growing flexibility in the laws that govern the singlemarket (SM) as well as the way that these laws are implemented. This differentiated integration comes in four forms: soft; informal; multi-speed; and opt-out differentiation. We examine how the completion of the SM has been held back in the varied implementation of EU competition policy and variation in national corporate law, energy markets, services and taxation. These sectors and issue areas form the frontier in which the main political struggles over the future shape of the SM take place, and in which differentiation is most clearly manifested. The SM notion supposedly entails a concrete set of substantive policy commitments that form the basis of the ‘ever closer union’. However, increasing differentiation undermines the identification of the EU’s core constitutional commitments. [less ▲]

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See detailIndustrial Policy: The Softer Side of Differentiated Integration
Howarth, David UL

in Dyson, Kenneth; Sepos, Angelos (Eds.) Which Europe: The Politics of Differentiated Integration (2010)

Differentiated integration in the area of EU industrial policy is the result of one or more of five factors: differences in ideology among Member States, domestic political circumstances, capacity (level ... [more ▼]

Differentiated integration in the area of EU industrial policy is the result of one or more of five factors: differences in ideology among Member States, domestic political circumstances, capacity (level of economic development), national economic structures, and technical preferences. There is a considerable degree of ‘capitalist diversity’ in the EU (Wilks, 1996). Even among the ‘Original Six’ Member States there are important differences in approach to economic regulation, even if they all embrace the EU system (Gerber, 2000). Ideological difference may contribute to differentiation in that Member States where economic liberalism holds more sway in government circles will pursue different policies than those pursued by Member States where interventionist solutions to industrial problems are more acceptable. Different levels of economic development have repeatedly been used as a justification for temporary derogations for poorer Member States in the implementation of EU legislation. Justifications stemming from ideology, economic development and structures can result in differentiated participation in EU-led or other European R&D projects. Technical preference has been a cited reason for delays in certain national programmes of sector-based market liberalisation. In several areas these five factors overlap, and assessing their relative importance is difficult. Differentiated integration in industrial policy areas is largely ‘soft’ and unofficial and comes in three forms: varying national participation in EU and other European projects; the discretion permitted in the implementation of EU legislation; and varying levels of compliance with EU legislation. Legally entrenched, multi-speed differentiation is present principally in terms of temporary derogation on a limited range of EU legislation. The explicit legal sanction of more permanent differentiation in industrial policy areas is rare. This chapter presents one recent legislative development that effectively entrenches differentiation in energy markets and potentially undermines market integration in this sector. [less ▲]

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See detailGesture Politics?: explaining financial regulatory reform in the European Union
Howarth, David UL; Buckley, James

in Journal of Common Market Studies (2010), 48(s1), 119-141

We accept the insights from several distinct analytical approaches to explain national policy-making and EU-level policy. We apply systemic realism and an approach focused upon interest group preferences ... [more ▼]

We accept the insights from several distinct analytical approaches to explain national policy-making and EU-level policy. We apply systemic realism and an approach focused upon interest group preferences. We also accept the usefulness of insights drawn from comparative political economy (CPE). We agree with CPE approaches to the extent that they insist that government policies seek to protect national political economies (as in Quaglia, forthcoming). However, we also warn against a CPE approach that relies upon a stagnant understanding of Varieties of Capitalism (VoC) (Hall and Soskice, 2001) because such an approach ignores significant changes that have taken place in European financial systems and capitalisms over the past decade (Hancké et al., 2007). We argue that to understand fully the lack of developments on banking regulation at the EU level and EU-level policy co-ordination on international regulation, it is necessary to incorporate other insights, notably from international policy economy (IPE), into an understanding of how national financial systems and economic interests shape national policy. We cannot divorce this study of EU-level responses to the financial crisis from considerations of the obstacles facing financial market integration in the EU. Clearly, support for integration shaped national policymaking on EU-level developments on financial sector matters. However, we argue that integration considerations were secondary. Our focus upon the Member States with the three largest economies and financial sectors – Germany, France and the UK – and the influence of the positions of the financial interests in these countries corresponds to a Liberal Intergovernmentalist (LI) analysis. However, we do not seek to draw broader conclusions about the applicability of LI to explain developments in this policy area. [less ▲]

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See detailDie Krise but not La Crise? The financial crisis and the transformation of German and French banking systems
Howarth, David UL; Hardie, Iain

in Journal of Common Market Studies (2009), 47(5), 1015-1036

This article explores what the financial crisis shows about changes in the German and French banking systems, the two largest in continental Europe. In particular, we highlight processes of ... [more ▼]

This article explores what the financial crisis shows about changes in the German and French banking systems, the two largest in continental Europe. In particular, we highlight processes of financialization – defined here as the increased trading of risk. We focus on an apparent contradiction: why did the supposedly more protectionist and conservative German banking system suffer much higher losses than the more liberalized French system? This article also examines the responses of German and French banks and governments to the crisis and speculates how far these responses might limit future financialization and shape national banking systems. [less ▲]

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See detailBank of France: The challenge of escaping politicization
Howarth, David UL

in Dyson, Kenneth; Marcussen, Martin (Eds.) Central Banks in the Age of the Euro: Europeanization, Convergence, and Power (2009)

This contribution will show that Europeanization since 1993—the independence of the Bank of France in 1994 and the transfer of monetary policy powers to the European Central Bank (ECB) in 1999—had a clear ... [more ▼]

This contribution will show that Europeanization since 1993—the independence of the Bank of France in 1994 and the transfer of monetary policy powers to the European Central Bank (ECB) in 1999—had a clear and direct impact on the power and roles of the Governor and the members of the Conseil de la Politique Monétaire (MPC), but a less obvious impact on the organisation and responsibilities of the Bank itself. Independence and the 1999 transfer have also had a direct impact upon the Bank’s role in public life. Well over a decade since independence, monetary policy remains more politicized in France than in most Eurosystem member states, thus bucking the trend of a politicisation. In terms of the Bank’s core operations, however, political hostility has created only marginal difficulties. [less ▲]

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See detailEuro Area Enlargement and European Central Bank Reform
Howarth, David UL

in Lacina, Lubor; Rusek, Antonin; Fidrmuc, Jarko (Eds.) The Economic Performance of the European Union: Issues, Trends and Policies (2009)

This contribution analyses the December 2002 reform of decision making in the European Central Bank’s (ECB) Governing Council in terms of national economy size reflected in the bargaining power of the ECB ... [more ▼]

This contribution analyses the December 2002 reform of decision making in the European Central Bank’s (ECB) Governing Council in terms of national economy size reflected in the bargaining power of the ECB Governing Council members and member state macroeconomic interest. The National Central Bank (NCB) governors of the largest member states were concerned about the impact upon ECB monetary policy making of equal representation being extended to future member states. By eliminating equal voting rights, the reform distorts the meaning of equality, representativeness and ad personam participation as guiding principles of ECB decision making, moving from equal member state representation towards an emphasis placed upon Euro-zone economy representation. At the same time, two possible concerns watered down efforts to modify ‘representativeness’ and prevent enlargement contributing to inefficiency in Governing Council decision making. First, the current smaller member state NCB governors opposed a significant reduction of their ‘voice’ in ECB monetary policy making. Second, legitimacy concerns ensured persistent support for the maintenance of a large and ‘decentralised’ Governing Council. [less ▲]

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