Keio Jean Monnet Workshop for EU Studies“European Crisis from the Japanese Point of View
: Fiscal or Financial, which is the problem?”-Hideki Hayashi
EUSI / Keio University
J l 28th, 2012
July

Index1. Greek Crisis and its withdrawal from EMU
2. The Contagion of the Crisis to Spain
3. The architecture of the financial Safety Net
4 How will “the4.
the vicious circle between Fiscal
and Financial issues” stop?
Conclusion－Future Direction－1

1. Greek Crisis and its withdrawal from EMU
・ Before the reelection in June, the withdrawal ofGreece from EMU was one of the realistic
alternatives
・ Towards the next redemption period of Greek
Government scheduled to be on Aug 20th,Government,
the worries for ‘Sudden Death’, instead of ‘Deathquietly’, have increased
・ Still, Greece is different from Algentina ;for example, the procedure of the withdrawal fromEMU andd theth EU
EU.
2

2. The Contagion of the Crisis to Spain
・The rescue package for Spanish banks offered by
the EU commission shows they never want theCrisis will affect Spain・IrelandI l d anddP
Portugall are relativelyl i l recoveringi・The contagion to Cyprus or Slovenia could beabsorbed in the present rescue package

53. The architecture of the financial Safety Net
The EU / Euro Area Summit on 28th and 29th, June
was accepted as successful one
one, in which the newmeasures were taken・But
B theh didirect recapitalizationi li i bby theh ESM may b
bepossible only when the integrated only when aneffective
ff i single
i l supervisory
imechanism
h iiinvolving
l i
the ECB is established・Following points are still not concrete:((1)) Howow thet e otothere papartt oof tthee Banking
aguunion,theo ,t e
Deposit insurance and the resolution institutions
willill b
be fformedd6(2) How and when ESM will start actually3. The architecture of the financial Safety Net
Who will take the responsibility of the Banking
Supervision?
（１）The central bank should be ppreferable,, as theyy
act as the lender of last resort, who will supply
the funds to banks in case of financial crisis（２）But the conflict of interest might happen, if theyneed to rescue or protect some banks（３）When the resolution institution works, it may
affect the fiscal policy of each country（出所）”Wh t ki（出所）”Whatkindd off B
Bankingki UUnion?”i ?”June 2012, BRUEGEL, Policy Contribution）7

4. How will “the vicious circle between
Fiscal and Financial issues” stop?
（１）Th Vi
（１）TheViciousiCiCircle
l off threehffactors
Slowing Economy

Debt Crisis

Banking Crisis（Source）European commission
6

4. How will “the vicious circle between
Fiscal and Financial issues” stop?
Presently more focus on Banking Crisis
Slowing Economy

Debt Crisis

Banking Crisis（Source）European commission, the Author modified
10

4. How will “the vicious circle between
Fi cal and Financial issues
Fiscali ue ” stop?
top?
“CompactCompact for Growth and Jobs”
Jobs which was decided in EU/ Euro Area Summit provided the fund of 120 billion Euro.
This could be understood as ”Substantial
Substantial Eurobond”
Eurobond
・”The Structural fund” of 60 billion (1) can be applied
to theh poor regioni whichhi h bbelonglto theh countries
inow in correspond to the half of the amout and(2)can be paid rather quickly
・ The investment by EIB on infrastructure is (1) similar
to Eurobonds as its funding is based on the EU but (2)the way of the expense can be specified
11

4. How will “the vicious circle between
Fi cal and Financial issues
Fiscali ue ” stop?
top?
・German attitude is gradually changing,
especially from the industrial sector
・France is afraid of the contagion to Spain,
Italy, then France itself
・Italy is struggling with structural reform as
the time is limited both in economic andpolitical sense12

Conclusion－Future Direction－（１）After the EU / Euro Area Summit, the designfor the new institutional framework is the key
issue, when we discuss the Euro can survive
as the major currency or not（２）Especially the most important issue is thesingle
i l supervisory
imechanism
h illeaddbby thehECB, which should be specified until the end
off 2012（３）Eurobond may be the long term issue which
may be realistic, after the fiscal integration,
which Germany insists,
insists come into true
16