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The Old and the New Politics of International Financial Stability
Author(s) -
PAULY LOUIS W.
Publication year - 2009
Publication title -
jcms: journal of common market studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.54
H-Index - 90
eISSN - 1468-5965
pISSN - 0021-9886
DOI - 10.1111/j.1468-5965.2009.02030.x
Subject(s) - politics , financial crisis , market liquidity , european union , economics , financial system , european debt crisis , economic policy , financial market , political science , finance , business , european integration , macroeconomics , law
The cross‐border financial crisis that began in the United States in the summer of 2007 tested a 30‐year experiment in international integration. In the background were expanding macroeconomic imbalances that leading states had neglected to address. Spawned by imprudence and regulatory failures, the crisis soon deepened and the collaborative impulse that might have prompted earlier and more fundamental macro‐policy action became focused on emergency management. Ad hoc policy co‐ordination ensued as liquidity was injected into turbulent markets and troubled financial intermediaries were recapitalized or reorganized. The collective performance was inelegant, not least inside the European Union. The crisis shed a harsh spotlight on the weak fiscal foundations of the Union and on the now‐pressing need for collaborative adjustments in national macroeconomic policies. Since overt political innovation on such matters remains difficult, both within Europe and globally, the crisis underlined the crucial importance of much better collaborative instruments for the oversight and stabilization of integrating financial markets.