Talking point
The financial drawbacks of being an emerging economy
The US today, like Britain under the gold standard, acts as the world’s banker. It is the most important source of international liquidity, leading countries to hold USD-denominated assets. Not only does this allow the US and especially the US Treasury to tap into a large investor base ready to finance current account and fiscal deficits at a lower cost. To the extent that the demand for international liquidity and USD assets exceeds the US balance-of-payments deficit, it allows the US to recycle short-term foreign liabilities into long-term assets. [more]
European integration
Small is beautiful? Capital market funding for sub-sovereign authorities on the rise
Sub-sovereign bonds are a segment that has attracted little attention to date. Bonds are the dominant form of funding for Germany's Länder, though, and they also play an important role for the regions in Spain. While the Länder benefit from Germany’s excellent sovereign rating, only those Spanish regions not forced to request financial assistance from the central government at the height of the debt crisis have recently been able to obtain financing via the capital market. In France the issuance by the municipalities is likely to increase due to the newly established Agence France Locale. A local authority finance agency is also in the process of being introduced in the United Kingdom. The importance of the sub-sovereign bond market crucially depends on country-specific institutional arrangements. [more]
European integration
Balance-of-Payments Facility: Current profile and future challenges of non-euro area financial assistance
The Balance-of-Payments Facility of the European Union is a medium-term financial assistance mechanism for non-euro area member states suffering from a balance-of-payments crisis. This Research Briefing reviews current challenges in the ongoing negotiations between the European Parliament, the Commission and the Council on a recent legislative proposal which aims to streamline the facility with the current institutional framework of the ESM. Still, there is a particular need for reconciliation regarding the facility's volume, economic conditionality and the future role of the IMF. [more]
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