Building a hidden investment state? The European Investment Bank, national development banks and European economic governance

Mertens, Daniel; Thiemann, Matthias

doi:10.1080/13501763.2017.1382556

Cited by 116 publications

(58 citation statements)

References 22 publications

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“…Following a wave of new entrants across the Union, development banks seem to enjoy increasing attention from policy makers, but less so from academic debate (cf. Mertens and Thiemann, 2017).…”

Section: In This Issue)mentioning

confidence: 99%

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union

Mertens

Thiemann

2018

Competition & Change

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This paper examines the European Union's strategy of governing the economy through financial markets by focusing on the largely unacknowledged role of public development banks, including the multilateral European Investment Bank. It argues that these state-owned financial institutions have moved into a key position in the recent evolution of the European financial system and economic governance. Since the crisis, policy makers have used them to address the intrinsic volatility and excess liquidity of contemporary financial markets, as well as offset the constraints on public investment imposed by institutionalized fiscal austerity. The paper provides evidence for this claim through an analysis of the emergent policy nexus between the Investment Plan for Europe and the Action Plan on Building a Capital Markets Union. Based on official documents and interview data, it specifically traces the risk-sharing devices for small-and medium-sized enterprise and infrastructure finance set up by development banks within these initiatives. Equipped with public guarantees, they have been instrumental for the promotion of securitization markets and publicprivate partnerships through increased multilevel collaborations among development banks. The anchor role of such quasi-fiscal state actors in shaping capital markets, the paper concludes, has profound political implications, and therefore warrants further scholarly attention.

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Section: In This Issue)mentioning

confidence: 99%

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union

Mertens

Thiemann

2018

Competition & Change

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“…Public development banks have historically been a key tool of industrial policy in both developing and advanced economies, including Korea, Japan, China, India, Brazil, the US, and France to name a few. Development banks acted as the state's agent for allocating long-term (often subsidised) credit to targeted industries considered vital for growth, but which the private sector was too risk-averse to finance (Amsden 2001;Kindleberger 2015;Mazzucato and Penna 2016;Mertens and Thiemann 2017;Verdier 2000). These banks do not necessarily need to have a large financing volume to be effective in influencing the sectorial allocation of resources 6 ; their finance is often concentrated in very large, economically important projects that have spill-over effects for the rest of the economy (Hopewell 2017), and they often play a catalytic role in attracting private sector finance to otherwise unattractive projects (Griffith-Jones 2016).…”

Section: Globalisation and Policy Space In Advanced And Developing Ecmentioning

confidence: 99%

Kicking away the financial ladder? German development banking under economic globalisation

Naqvi

Henow

Chang

2018

Review of International Political Economy

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“…Moss 2002). Rather than relying on risk-averse, short term-oriented private investors to allocate capital, public development banks and public wealth funds could play a much more prominent role (Mertens and Thiemann 2017;2018; Mazzucato and Penna 2016; Griffith-Jones and Cozzi 2017). Similarly, the fickleness and procyclicality of private capital markets cast doubt on their ability to serve as societal risksharing mechanisms in areas such as pension policy and macroeconomic stabilization.…”

Section: Conclusion: the Political Economy Of Governing Through Finanmentioning

confidence: 99%

Fiscal fault, financial fix? Capital Markets Union and the quest for macroeconomic stabilization in the Euro Area

Braun

Hübner

2018

Competition & Change

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This paper argues that Capital Markets Union-the EU's attempt to establish a more marketbased financial system-is a result less of financial policymaking than of macroeconomic governance in a politically fractured polity. The current governance structure of Economic and Monetary Union (EMU) severely limits the capacity of both national and supranational actors to provide a core public good, macroeconomic stabilization. While member states have institutionalized fiscal austerity and abandoned other macroeconomic levers, the European polity lacks the fiscal resources necessary to achieve stable macroeconomic conditions: smoothing the business cycle, ensuring growth and job creation, and mitigating the impact of asymmetric output shocks on consumption. Capital Markets Union, we argue, is an attempt by European policymakers to devise a financial fix for this structural capacity gap. Using its regulatory powers, the European Commission, supported by the European Central Bank (ECB), seeks to harness private financial markets and instruments to provide the public policy good of macroeconomic stabilization. We trace how technocrats, think tanks, and financial-sector lobbyists, through the strategic use of knowledge and expertise, established securitization and market-based finance as solutions to EMU's governance problems.

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Building a hidden investment state? The European Investment Bank, national development banks and European economic governance

Cited by 116 publications

References 22 publications

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union

Kicking away the financial ladder? German development banking under economic globalisation

Fiscal fault, financial fix? Capital Markets Union and the quest for macroeconomic stabilization in the Euro Area

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