By Abraham Shanedling

 

The World Bank has indicated that Russia’s economy could drop by 1.8 percent if the standoff in Ukraine continues and the resulting U.S. and European sanctions stay in place or intensify.

 

Although Russian leaders in the Kremlin have downplayed the impact of the sanctions, economists say that investors have pulled about $70 billion from Russia’s economy since the crisis began. Prices for food and imported items have already risen, and some Russians are reportedly having problems tapping into funds at banks designated by U.S. and European sanctions.

 

Russia’s already weak economy plus the threat of more sanctions even prompted Standard an Poor’s rating agency to change its rating of the situation from “stable” to “negative.”

Voice of America has more on the story.

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April 01, 2014

By Sam Obenhaus

European Union lawmakers struck an agreement with member states that will establish a single resolution mechanism for winding down banks in the event of their failure.  How to structure this authority has been debated for nearly two years.  European Union lawmakers generally support the creation of a centralized rescue fund while member states, most notably Germany, resist any efforts to pool resources into a pan-European Union bailout fund.  Germans fear they will be left on the hook for bailouts of non-German banks.

The agreement reached on Friday creates a bailout fund that will be capitalized by levies on banks.  While some of the money will be put in “national compartments” and not pooled, these divisions will be slowly phased out as the fund is capitalized over an eight-year period.  This is a major victory, at least in principle, for the European Parliament.

While the agreement is a breakthrough, the rescue fund’s €55 billion size strikes many as inadequate.  Another persistent concern is the mechanism’s complexity, which may make the proscribed wind-down process too slow and unwieldy to implement in the context of a financial crisis.

The Financial Times and Wall Street Journal have more on this story.

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March 26, 2014

Mark your calendars for this year's Georgetown Journal of International Law symposium. The topic for 2014 is financial regulation.

Georgetown University Law Center, 

Gewirz Student Center,

Tuesday, April 8, 2014,

8:30 a.m. to 5:30 p.m.

International Financial Regulation (IFR) is concerned with the oversight and supervision of participants in financial markets around the world. To date, IFR has been primarily governed by informal, non-binding agreements, or “soft law,” implemented voluntarily by States at the domestic level. However, in the wake of the 2008 financial crisis, the increasingly interconnected nature of financial markets has become a paramount concern for the international community, raising questions of whether and what reforms are needed to prevent future crises.  

To explore these issues, the Georgetown Journal of International Law (GJIL) and the Atlantic Council will present the 2014 GJIL Symposium, entitled “International Financial Regulation in the Post-Crisis Era.”  This day-long event will take place on April 8, 2014, at the Georgetown University Law Center. The Symposium will feature panels on the prospects for regional and international financial regulation; international financial regulation and the global economy; the intersections of trade and finance; and the topic of economic diplomacy as discussed in the newly released book Minilateralism, by Georgetown Law Professor and Atlantic Council Fellow, Chris Brummer.  

You also can check for updates and take a look at previous symposiums on GJIL's website. 

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February 23, 2014

By Aliza Kempner

Toyota has shown signs of bouncing back and better than ever after several years of setbacks. Healthy sales and an inflated yen helped drive earnings, expected to hit 1.9 trillion yen in net profit for the fiscal year ending in March. 

After the financial crisis, a series of recalls worldwide, and the tsunami in Japan, Toyota has streamlined production, outsourced some manufacturing to less costly countries and strengthened its lineup. The New York Times gives a rich picture of the economics and tactics behind Toyota’s bounce back.

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February 11, 2014

By Joe Vladeck 

Russia's economy is stagnating, and domestic turbulence is not helping. 

The CEO of Uralkali, the world's largest potash company, is under house arrest in Belarus, even as the company is up for sale. Stocks in Tinkoff Credit Systems, a charge card company, modeled after Capital One, fell by 40 percent in a single day on rumors that its business model would be outlawed by the Russian parliament. And the Russian central bank just shut down a large retail bank, Master Bank, which counts among its board members a follower of Nicholas Roerich, a mystical guru and painter influential in early 20th-century Russia. 

These and other revelations are hurting Russian companies seeking to raise much-needed equity. Trading volumes are decreasing as foreign investors look elsewhere, increasing the volatility -- and the risk -- in a cycle that looks hard to break. Euromoney has the report.

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December 09, 2013

By Stephen Kozey

Everyone knows that China has become one of the most important economies in the world, and it plans to keep things that way. But how? On Wednesday, you can find some answers to that question at ASIL’s full-day presentation, featuring top Chinese government officials. The Assistant Minister of Commerce and his team will speak about China’s plan to stay on top, including discussion of clean and renewable energy laws and their affect on entrepreneurship in China.

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December 03, 2013

By Joe Vladeck

Greeks protest austerity cuts by Piazza del Popolo | Flickr

Nations have been defaulting on debt for about as long as nations have been borrowing money. The Greeks went first. In the 4th century B.C., three quarters of Greek city-states defaulted on loans issued by a temple on the island of Delos.

Today, Greece is still struggling. Although it is not the most recent nation to default on its sovereign debt (that dubious honor belongs to Cyprus), Greece's on-going sovereign debt travails nearly led to the collapse of the Euro in 2012 and continue to fester. Granted, the question of whether Greece actually "defaulted" in December 2012 involves complicated semantics, but Greece's track record of debt repayment record is spotty. According to two renown economists, "Greece has been in a state of default about 50% of the time" since the country's independence in the 1830s. 

Modern-day Greeks have recoiled at the policies of domestic austerity that the country's creditors, notably Germany, have insisted upon as part of Greece's debt restructuring. But in historical context, austerity might not seem so bad: When Venezuela defaulted on German, British, and Italian debt at the start of the 20th century, Germany et al sent warships, set up a blockade, sank Venezuelan ships, and shelled Venezuelan military installations. Venezuela got the message, and the parties eventually agreed to U.S.-led mediation of the dispute.

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November 29, 2013

By Aliza Kempner

The United States is pointing fingers for the continued economic depression and the Germans don’t like it at all. 

The U.S. Treasury report on foreign economic and currency policies asserts that Germany’s huge surplus on current account has created “a deflationary bias for the euro area, as well as for the world economy.” 

While European debtor nations have responded with harsh austerity measures, Germany hasn’t made any adjustments. The New York Times explores the repercussions of Germany’s asymmetrical approach to the trade surplus. 

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November 12, 2013

Former Mississippi Gov. Haley Barbour.

By Elizabeth Gibson

It’s not a revolutionary concept, but the United States needs to start thinking about how immigration can benefit the country, and former Mississippi Gov. Haley Barbour says that means thinking of immigration in terms of economics.

“We are in a global battle for capital and labor,” he told a crowd of immigration policy makers and legal practitioners today.  “We need good immigration reform. What we’ve got now is terrible. It doesn’t work for anybody.”

The former Republican governor of Mississippi was speaking at the 10thAnnual Immigration Law and Policy Conference at the Georgetown University Law Center. The event, co-sponsored by Georgetown and the Migration Policy Institute, is being webcast, including an address at 2:45 this afternoon by Republican Sen. John McCain of Arizona.  

During Barbour’s address, he said Americans need to stop worrying that immigrants are stealing jobs. He told a story about a chicken processing factory in Mississippi that is almost entirely staffed by Hispanic workers. The government tried to use the factory as a site for a program that puts inmates at work in the community and lets them keep their earnings. The program is usually very popular with inmates, but they never lasted more than a week in the chicken factory before deciding they would literally rather be in prison because the work was so difficult. Barbour said the moral of the story is that immigrants are doing the work that Americans need done but don’t want to do.

As the populations of Western countries age, there is increasingly a need to import labor, and how well the United States competes for that labor will shape the future of the U.S. economy, Barbour said.

Although he was not speaking on behalf of the Bipartisan Policy Center, Barbour co-chairs the think-tank’s immigration task force and said the task force’s new report has the economic statistics to back him up. The Migration Policy Institute's research on immigration and labor also is worth a look.

But what do you think?

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October 31, 2013

By Aliza Kempner

There’s a new sheriff in town at the World Trade Organization (WTO), but some think Director General Roberto Azevedo’s plan to add hundreds of billions of dollars to the world economy and instigate wide trade reforms might just be too little, too late. In light of WTO’s consistent failure to agree to any new global trade deal since it was founded in 1995, Azevedo’s plan, the first global trade deal in two decades, has a lot of hurdles to clear. The desired agreement covers several areas, most notably including trade facilitation — a global standardization and simplification of customs procedures that could cut trade costs by 10 percent for developed countries and by 14 percent for developing countries.

Reuters examines the stakes as the countdown to the deadline continues.

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October 06, 2013