For decades before the Global Financial Crisis of 2008, West European nation-‐states maintained ... more For decades before the Global Financial Crisis of 2008, West European nation-‐states maintained close political ties to their banks. Banks enjoyed regulatory forbearance and limited competition, while states cultivated national banking champions and a ready constituency for government debt. Europe’s economic crisis and the regulatory response have largely upended this erstwhile symbiotic relationship between many banks and their home states, however. In the debate since 2012 over European Banking Union, even within a framework of stricter regulation and centralized supervision in the European Central Bank, a surprising source of support for supranational authority has been from Europe’s multinational banking groups. This paper explains why banks, once beholden to and beneficiaries of national regulation and supervision, have opted instead to lobby for much more European-‐ level oversight. I argue that states sowed the seeds of their own political marginalization vis-‐à-‐vis bank...
... The European Union's (EU's) membership cond... more ... The European Union's (EU's) membership conditionality, employed most intensively in the run-up to the 2004 ... of international institutions to be weakest in areas in which the EU never applied ... that are neither part of the acquis, nor explicitly included in its accession conditionality. ...
ABSTRACT This introduction summarizes the findings of nine research articles that examine the con... more ABSTRACT This introduction summarizes the findings of nine research articles that examine the consequences of the European Union's eastern enlargement ten years on. The volume reaches three surprising conclusions: since 2004, the EU's economic effects have been more far-reaching than its political effects; all of the new Member States (NMS) have had problems with democratic consolidation; and, despite four years of intense crisis in the eurozone, both the EU's enlargement and neighbourhood-shaping efforts have continued. We set these economic, political and institutional developments in the context of the long-standing east–west divide in Europe, and ask whether EU membership for post-communist countries upends the continent's traditionally persistent divisions. Notable achievements of EU enlargement notwithstanding, the volume points to the continuing important differences between east and west and highlights the issue areas in which the EU transcends but also reinforces the centuries-old partition.
In the context of transition, nine out of the 10 post-communist countries that ultimately joined ... more In the context of transition, nine out of the 10 post-communist countries that ultimately joined the European Union reluctantly privatised the bulk of their banking sectors with foreign capital. The financial crisis of 2008–2009 therefore sparked fears that foreign banks would remove their operations from their Central and East European markets because of a ‘home bias’ in lending. Such fears were predicated on the widely held beliefs that banks' loyalties lie with their home markets and that it is therefore desirable to protect domestic bank ownership to help combat an economic downturn. This essay casts doubt on the value of banking sector protectionism by comparing foreign and domestic bank behaviour in Central and Eastern Europe during the crisis. The essay finds no consistent relationship between domestic control and either limited economic vulnerability or countercyclical lending.
... Two types of political change in Eastern Europe since 1989', East European Politics and ... more ... Two types of political change in Eastern Europe since 1989', East European Politics and Societies 11(1): 1–35. Top of page About the Author. Rachel A. Epstein is an Assistant Professor at the Graduate School of International Studies at the University of Denver. ...
In Central and Eastern Europe, economic reform consistent with Bretton Woods and European Union (... more In Central and Eastern Europe, economic reform consistent with Bretton Woods and European Union (EU) demands has replicated not only the rules and institutions that prevail in Western societies but also their patterns of consensus and conflict. Although central bank policy has been largely depoliticized in the 2004 accession states through the institutionalization of central bank independence, agricultural interests were mobilized—in some instances against the EU—in the course of accession negotiations. This article argues that as they engage in the explicit transfer of economic policy to post-communist states, international institutions simultaneously transmit beliefs about who has legitimate claims on the state. The methods through which international institutions help construct new markets in transition states have consequences for the development of domestic cleavages and for the cultivation of political support for economic integration.
European banking union and Capital markets union have emerged as two of the key pillars of Europe... more European banking union and Capital markets union have emerged as two of the key pillars of European integration since the post-2008 financial crisis. Neither were anticipated prior to the financial crisis, nor was the rapidity of their construction. Both imply the same critical shifts in Europe’s institutional political economy. The first relocates national oversight and authority to supranational institutions (a political shift), while the second increases the power and responsibility of market actors by reducing national controls (an economic shift). If banking union aims to break the hold of national governments over banking entities to foster a less fragmented and more efficient European union banking market, capital markets union aims to remove national-level impediments to a single market for capital in which jurisdictional differences are minimized, investor freedoms maximized and business gains access to a greater range of financial resources.
States and banks have traditionally maintained close ties. At various points in time, states have... more States and banks have traditionally maintained close ties. At various points in time, states have used banks to manage their economies and soak up government debt, while banks enjoyed regulatory forbearance, restricted competition and implicit or explicit guarantees from their home governments. The political foundations of banks have thus been powerful and enduring, with actors on both sides of the aisle reluctant to sever relations. The central argument of this book, however, is that in the world’s largest integrated market, Europe, political ties between states and banks have been transformed. Specifically, through a combination of post-communist transition, monetary union, and economic crisis, states in Europe no longer wield preponderant influence over their banks. In the East, high levels of foreign bank ownership have disrupted politically infused bank–state ties, while in the Eurozone, European Banking Union has supra-nationalized bank governance. Banking on Markets explains ...
Global data on foreign bank ownership shows that the advanced industrial and major emerging econo... more Global data on foreign bank ownership shows that the advanced industrial and major emerging economies have low levels of foreign bank ownership—a clear rebuke to marketized bank–state ties. Among developing and smaller emerging economies, however, foreign bank ownership levels are significantly higher on average. The chapter explains the divergence, highlighting both perceived advantages of banking sector protectionism, as well as specific pressures brought to bear on weaker states that forced banking market opening in the context of crisis or transition. Mirroring global trends, West European protectionism juxtaposed against East Central European openness appeared to be a case of stronger states exploiting weaker ones. But the consequences were in fact more complicated. West European banking nationalism was a key source of the European debt and currency crisis and financial fragmentation. And while West Europeans were paying trillions to save their banks, East Europeans largely esc...
This chapter examines the developmental consequences of highly marketized bank–state ties in East... more This chapter examines the developmental consequences of highly marketized bank–state ties in East Central Europe. The literature suggests that catching up in the global economy requires—among other things—access to capital and control over its allocation. East Central Europe, as a region, therefore, is not poised to catch up with its West European counterparts, measured in terms of income convergence. But this chapter also highlights why not all, or even most, of the post-communist countries would be well-served by asserting more political control over their banks. Measures of domestic banks’ risk containment and credit provision through the US and European economic crises show which countries had the institutional and ideational wherewithal to deploy their banks for political goals. While domestically controlled banks in Poland and Hungary served as countercyclical stabilizers, their counterparts in Latvia, Slovenia, and Bulgaria did outright damage to their economies.
1. Beyond Conditionality: International Institutions in Postcommunist Europe after Enlargement Ra... more 1. Beyond Conditionality: International Institutions in Postcommunist Europe after Enlargement Rachel A. Epstein and Ulrich Sedelmeier 2. After Conditionality: Post-Accession Compliance with EU Law in East Central Europe Ulrich Sedelmeier 3. The Remains of Conditionality: The Faltering Enlargement of the Euro Zone Juliet Johnson 4. The Politics of EU Conditionality: The Norm of Minority Protection During and Beyond EU Accession Gwendolyn Sasse 5. Tempered by the EU? Political Parties and Party Systems Before and After Accession Milada A. Vachudova 6. The Social Context in Conditionality: Internationalizing Finance in Postcommunist Europe Rachel A. Epstein 7. Out-Liberalizing the EU: Pension Privatization in Central and Eastern Europe Mitchell Orenstein 8. EU Political Accession Conditionality after Enlargement: Consistency and Effectiveness Frank Schimmelfennig 9. A Governance Perspective on the European Neighbourhood Policy: Integration beyond Conditionality? Sandra Lavenex
Foreign financial institutions bought overwhelming stakes in central and east European (CEE) bank... more Foreign financial institutions bought overwhelming stakes in central and east European (CEE) banks during the postcommunist transition. Recent estimates suggest that foreign banks, mostly western, own over sixty percent of all CEE banking assets, and in seven CEE states, the figure is over eighty percent. This outcome is surprising because at the outset of transition, no CEE government wanted to hold internationally competitive tenders for their state-owned banks. Rather, CEE politicians preferred to protect domestic ownership. Stemming from their interwar experience, CEE transition states feared that foreign domination in finance could lead to economic instability, dependence on external borrowing and foreign interference in political decisions. In the event, significant international pressure and a series of bank crises in the 1990s resulted in the privileging of foreign capital in CEE bank privatization for most of the region. The central question this study will answer is whether transition states that sold their banks to foreigners benefited as the international institutions promised they would.
The Forum examined the various ways in which the European Union's policies and practices are expo... more The Forum examined the various ways in which the European Union's policies and practices are exported to neighbours, partners and associates. Over the year Fellows involved in the Forum looked at particular policy issues, particular patterns of association, especially the enlargement process, and some elements of the transatlantic relationship. Papers presented explored the range from substantive policy to broad norms and values as they impact on how the EU addresses the challenge of partnership with third countries.
For decades before the Global Financial Crisis of 2008, West European nation-‐states maintained ... more For decades before the Global Financial Crisis of 2008, West European nation-‐states maintained close political ties to their banks. Banks enjoyed regulatory forbearance and limited competition, while states cultivated national banking champions and a ready constituency for government debt. Europe’s economic crisis and the regulatory response have largely upended this erstwhile symbiotic relationship between many banks and their home states, however. In the debate since 2012 over European Banking Union, even within a framework of stricter regulation and centralized supervision in the European Central Bank, a surprising source of support for supranational authority has been from Europe’s multinational banking groups. This paper explains why banks, once beholden to and beneficiaries of national regulation and supervision, have opted instead to lobby for much more European-‐ level oversight. I argue that states sowed the seeds of their own political marginalization vis-‐à-‐vis bank...
... The European Union's (EU's) membership cond... more ... The European Union's (EU's) membership conditionality, employed most intensively in the run-up to the 2004 ... of international institutions to be weakest in areas in which the EU never applied ... that are neither part of the acquis, nor explicitly included in its accession conditionality. ...
ABSTRACT This introduction summarizes the findings of nine research articles that examine the con... more ABSTRACT This introduction summarizes the findings of nine research articles that examine the consequences of the European Union's eastern enlargement ten years on. The volume reaches three surprising conclusions: since 2004, the EU's economic effects have been more far-reaching than its political effects; all of the new Member States (NMS) have had problems with democratic consolidation; and, despite four years of intense crisis in the eurozone, both the EU's enlargement and neighbourhood-shaping efforts have continued. We set these economic, political and institutional developments in the context of the long-standing east–west divide in Europe, and ask whether EU membership for post-communist countries upends the continent's traditionally persistent divisions. Notable achievements of EU enlargement notwithstanding, the volume points to the continuing important differences between east and west and highlights the issue areas in which the EU transcends but also reinforces the centuries-old partition.
In the context of transition, nine out of the 10 post-communist countries that ultimately joined ... more In the context of transition, nine out of the 10 post-communist countries that ultimately joined the European Union reluctantly privatised the bulk of their banking sectors with foreign capital. The financial crisis of 2008–2009 therefore sparked fears that foreign banks would remove their operations from their Central and East European markets because of a ‘home bias’ in lending. Such fears were predicated on the widely held beliefs that banks' loyalties lie with their home markets and that it is therefore desirable to protect domestic bank ownership to help combat an economic downturn. This essay casts doubt on the value of banking sector protectionism by comparing foreign and domestic bank behaviour in Central and Eastern Europe during the crisis. The essay finds no consistent relationship between domestic control and either limited economic vulnerability or countercyclical lending.
... Two types of political change in Eastern Europe since 1989', East European Politics and ... more ... Two types of political change in Eastern Europe since 1989', East European Politics and Societies 11(1): 1–35. Top of page About the Author. Rachel A. Epstein is an Assistant Professor at the Graduate School of International Studies at the University of Denver. ...
In Central and Eastern Europe, economic reform consistent with Bretton Woods and European Union (... more In Central and Eastern Europe, economic reform consistent with Bretton Woods and European Union (EU) demands has replicated not only the rules and institutions that prevail in Western societies but also their patterns of consensus and conflict. Although central bank policy has been largely depoliticized in the 2004 accession states through the institutionalization of central bank independence, agricultural interests were mobilized—in some instances against the EU—in the course of accession negotiations. This article argues that as they engage in the explicit transfer of economic policy to post-communist states, international institutions simultaneously transmit beliefs about who has legitimate claims on the state. The methods through which international institutions help construct new markets in transition states have consequences for the development of domestic cleavages and for the cultivation of political support for economic integration.
European banking union and Capital markets union have emerged as two of the key pillars of Europe... more European banking union and Capital markets union have emerged as two of the key pillars of European integration since the post-2008 financial crisis. Neither were anticipated prior to the financial crisis, nor was the rapidity of their construction. Both imply the same critical shifts in Europe’s institutional political economy. The first relocates national oversight and authority to supranational institutions (a political shift), while the second increases the power and responsibility of market actors by reducing national controls (an economic shift). If banking union aims to break the hold of national governments over banking entities to foster a less fragmented and more efficient European union banking market, capital markets union aims to remove national-level impediments to a single market for capital in which jurisdictional differences are minimized, investor freedoms maximized and business gains access to a greater range of financial resources.
States and banks have traditionally maintained close ties. At various points in time, states have... more States and banks have traditionally maintained close ties. At various points in time, states have used banks to manage their economies and soak up government debt, while banks enjoyed regulatory forbearance, restricted competition and implicit or explicit guarantees from their home governments. The political foundations of banks have thus been powerful and enduring, with actors on both sides of the aisle reluctant to sever relations. The central argument of this book, however, is that in the world’s largest integrated market, Europe, political ties between states and banks have been transformed. Specifically, through a combination of post-communist transition, monetary union, and economic crisis, states in Europe no longer wield preponderant influence over their banks. In the East, high levels of foreign bank ownership have disrupted politically infused bank–state ties, while in the Eurozone, European Banking Union has supra-nationalized bank governance. Banking on Markets explains ...
Global data on foreign bank ownership shows that the advanced industrial and major emerging econo... more Global data on foreign bank ownership shows that the advanced industrial and major emerging economies have low levels of foreign bank ownership—a clear rebuke to marketized bank–state ties. Among developing and smaller emerging economies, however, foreign bank ownership levels are significantly higher on average. The chapter explains the divergence, highlighting both perceived advantages of banking sector protectionism, as well as specific pressures brought to bear on weaker states that forced banking market opening in the context of crisis or transition. Mirroring global trends, West European protectionism juxtaposed against East Central European openness appeared to be a case of stronger states exploiting weaker ones. But the consequences were in fact more complicated. West European banking nationalism was a key source of the European debt and currency crisis and financial fragmentation. And while West Europeans were paying trillions to save their banks, East Europeans largely esc...
This chapter examines the developmental consequences of highly marketized bank–state ties in East... more This chapter examines the developmental consequences of highly marketized bank–state ties in East Central Europe. The literature suggests that catching up in the global economy requires—among other things—access to capital and control over its allocation. East Central Europe, as a region, therefore, is not poised to catch up with its West European counterparts, measured in terms of income convergence. But this chapter also highlights why not all, or even most, of the post-communist countries would be well-served by asserting more political control over their banks. Measures of domestic banks’ risk containment and credit provision through the US and European economic crises show which countries had the institutional and ideational wherewithal to deploy their banks for political goals. While domestically controlled banks in Poland and Hungary served as countercyclical stabilizers, their counterparts in Latvia, Slovenia, and Bulgaria did outright damage to their economies.
1. Beyond Conditionality: International Institutions in Postcommunist Europe after Enlargement Ra... more 1. Beyond Conditionality: International Institutions in Postcommunist Europe after Enlargement Rachel A. Epstein and Ulrich Sedelmeier 2. After Conditionality: Post-Accession Compliance with EU Law in East Central Europe Ulrich Sedelmeier 3. The Remains of Conditionality: The Faltering Enlargement of the Euro Zone Juliet Johnson 4. The Politics of EU Conditionality: The Norm of Minority Protection During and Beyond EU Accession Gwendolyn Sasse 5. Tempered by the EU? Political Parties and Party Systems Before and After Accession Milada A. Vachudova 6. The Social Context in Conditionality: Internationalizing Finance in Postcommunist Europe Rachel A. Epstein 7. Out-Liberalizing the EU: Pension Privatization in Central and Eastern Europe Mitchell Orenstein 8. EU Political Accession Conditionality after Enlargement: Consistency and Effectiveness Frank Schimmelfennig 9. A Governance Perspective on the European Neighbourhood Policy: Integration beyond Conditionality? Sandra Lavenex
Foreign financial institutions bought overwhelming stakes in central and east European (CEE) bank... more Foreign financial institutions bought overwhelming stakes in central and east European (CEE) banks during the postcommunist transition. Recent estimates suggest that foreign banks, mostly western, own over sixty percent of all CEE banking assets, and in seven CEE states, the figure is over eighty percent. This outcome is surprising because at the outset of transition, no CEE government wanted to hold internationally competitive tenders for their state-owned banks. Rather, CEE politicians preferred to protect domestic ownership. Stemming from their interwar experience, CEE transition states feared that foreign domination in finance could lead to economic instability, dependence on external borrowing and foreign interference in political decisions. In the event, significant international pressure and a series of bank crises in the 1990s resulted in the privileging of foreign capital in CEE bank privatization for most of the region. The central question this study will answer is whether transition states that sold their banks to foreigners benefited as the international institutions promised they would.
The Forum examined the various ways in which the European Union's policies and practices are expo... more The Forum examined the various ways in which the European Union's policies and practices are exported to neighbours, partners and associates. Over the year Fellows involved in the Forum looked at particular policy issues, particular patterns of association, especially the enlargement process, and some elements of the transatlantic relationship. Papers presented explored the range from substantive policy to broad norms and values as they impact on how the EU addresses the challenge of partnership with third countries.
Uploads
Papers by Rachel Epstein