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1881. Resilience or Relocation? Expectations and Reality in the City of London since the Brexit Referendum

Author:
Manolis Kalaitzake
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
The fate of British finance following the Brexit referendum revolves around the “resilience or relocation” debate: will the City of London continue to thrive as the world’s leading financial centre, or will the bulk of its activity move to rival hubs after departure from EU trading arrangements? Despite extensive commentary, there remains no systematic analysis of this question since the Leave vote. This paper addresses that lacuna by evaluating the empirical evidence concerning jobs, investments, and share of key trading markets (between June 2016 and May 2020). Contrary to widely held expectations, the evidence suggests that the City has been remarkably resilient. Brexit has had no significant impact on jobs and London has consolidated its position as the chief location for financial FDI, FinTech funding, and attracting new firms. Most unexpectedly, the City has increased its dominance in major infrastructure markets such as (euro-denominated) clearing, derivatives, and foreign exchange – although it has lost out in the handling of European repurchase agreements. Based upon this evidence, the paper argues that the UK’s negotiating position is stronger than typically recognised, and outlines the competitive ramifications for both the UK and EU financial sector.
Topic:
European Union, Brexit, Resilience, Financial Services, and Relocation
Political Geography:
United Kingdom, Europe, and London

1882. The Political Economy of Industrial Policy in the European Union

Author:
Fabio Bulfone
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
The Great Recession renewed calls for a return of state activism in support of the European economy. The widespread nationalization of ailing companies and the growing activism of national development banks led many to celebrate the reappearance of industrial policy. By reviewing the evolution of the goals, protagonists, and policy instruments of industrial policy since the postwar period, this paper shows how state intervention never ceased to be a crucial engine of growth across the EU. It argues that the decline of the Fordist wage-led production regime marked a turning point in the political economy of industrial policy with the transition from inward-looking to open-market forms of state intervention. The main features of open-market industrial policy are then discussed referring to the cases of the internationalization of national champions in public service sectors and the proliferation across the EU of industrial clusters. Finally, the paper reviews postcrisis instances of state intervention and highlights how, rather than breaking with past tendencies, the Great Recession further accelerated the shift towards open-market industrial policy.
Topic:
Development, Industrial Policy, European Union, Capitalism, Regional Integration, and Banks
Political Geography:
Europe and Germany

1883. Who Are These Bond Vigilantes Anyway? The Political Economy of Sovereign Debt Ownership in the Eurozone

Author:
Tobias Arbogast
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
This paper examines the ownership structure of eurozone public debt and the distributional consequences thereof. Through both a comparative perspective and an explorative case study of Italy, this paper asks two research questions. Firstly, it asks who holds government debt in Spain, France, Germany, and Italy. I focus in on Italy to provide, to the author’s knowledge, the first highly disaggregated view of the holding structure of public debt. Secondly, for Italy I study distributional effects by examining who benefits from the interest received on government debt. This is accomplished through an investigation of the various stakeholders associated with public debt. Results indicate that most of the public debt is held by private and public financial institutions but rarely directly by households. Both direct and indirect beneficiaries of the interest received on government bonds in Italy turn out to be largely wealthy households, reflecting the unequal ownership of wealth more generally. However, prominent public financial institutions are also significant beneficiaries, which likely ameliorates a possible regressive distributional effect of the public debt holding structure. The paper discusses the results with an eye on inequality and contributes to further study of the political economy of public debt.
Topic:
European Union, Inequality, Public Debt, Bonds, Public Finance, and Ownership
Political Geography:
Europe