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Abstract
The Great Financial Crisis ushered unorthodox financial policies that would have been unfathomable before 2008. Perhaps unexpectedly, some of the boldest measures on this unorthodox spectrum were adopted in semi-peripheral and therefore theoretically vulnerable countries such as some of the European Union’s new member states from East-Central Europe. Why did policy makers in some of these countries (Hungary, Romania) embark on rolling back financialization and resort to financial repression in ways that targeted foreign banks in contexts in which this seemed a very risky strategy? Why did such bold moves generally re-established state-finance relations in some countries (Hungary) while comparably milder ones left them generally unaltered in others (Romania)? Finally, why have some countries refrained altogether from such forms of financial unorthodoxy (Latvia)? The paper explains the varieties of policy responses in these countries, with three factors: the role of finance in the national growth model, the capacity of the state to protect itself against adverse bond market reactions and international constraints and opportunities.
Correction Statement
This article has been republished with minor changes. These changes do not impact the academic content of the article.
Acknowledgements
We gratefully acknowledge the invaluable support and constructive comments we received from Waltraud Schelkle on several drafts of this paper. Earlier versions of the paper were presented at the 2019 European Union Studies Association (EUSA) in Denver, May 9-11 2019. We are grateful to the participants and especially Rachel Epstein for detailed comments. We also gratefully acknowledge the thorough comments of three anonymous reviewers.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 With the exception of the Czech Republic, all ECE countries had significantly higher interest rates than the euro area during the 2000s. In Hungary, Poland and Romania, exchange rate volatility was high. It is this background that foreign banks engaged in risky foreign currency lending, either in euros – in those countries that had pegged their exchange rate to the euro, or in Swiss Franc in those countries with high exchange rate volatility.
3 Trade by enterprise characteristics, http://www.oecd.org/sdd/its/trade-by-enterprise-characteristics.htm
4 We borrow the term global wealth chains from Seabrooke & Wigan, Citation2014; 2017.
5 https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjjq7iL6qTqAhWz5KYKHbRkCD8QFjAAegQIBxAB&url=https%3A%2F%2Fwww.imf.org%2Fexternal%2Fpubs%2Fft%2Fscr%2F2014%2Fcr14155.pdf&usg=AOvVaw0wHXLiPQ0eQecvORfuUGHj
7 Two of the Magyarized banks (BB and MKB) had been put for sale by their troubled American (GE Capital) and respectively German (Bayerische Landesbank) mother banks and this proved to be an enabling factor for the ease with which the government purchase was carried out. See Mérő and Piroska (Citation2017).
9 Statement by BNR’s Florin Georgescu, February 2019.
10 Page 3 in the Ministry of Finance’s Public Debt Management Strategy, http://discutii.mfinante.ro/static/10/Mfp/resurse/buletin_executii/strategia_2018_2020_engleza.pdf
11 Interviews with PSD strategists (2018-2019).
12 In the Judgments Vodafone Magyarország (C-75/18) and Tesco-Global Áruházak (C-323/18), delivered on 3 March 2020, the Grand Chamber of the ECJ held sectoral taxes to be compatible with EU law. The rulings did not apply to the bank levy but to telecom and retail yet the principle of the bank levy as a sectoral tax was upheld by the Court.
Additional information
Notes on contributors
Cornel Ban
Cornel Ban is associate professor of International Political economy at Copenhagen Business School. He wrote two books and a dozen articles and book chapters on the politics of economic expertise and income distribution, macroeconomic policy shifts and organizational shifts in international financial institutions and capitalist diversity in Brazil, Spain and Romania. His most recent book (Ban, Citation2016, Ruling Ideas: How Neoliberalism Goes Local, Oxford University Press, 2018) received the political economy award for 2017 of the British International Studies Association. He is currently working on growth regimes, finance and the climate crisis, and the political economy of the entrepreneurial state.
Dorothee Bohle
Dorothee Bohle is Professor of Political Science at the European University Institute, Florence. She has widely published on the comparative political economy of East Central Europe. Her book Capitalist Diversity on Europe's Periphery (Cornell University Press 2012, with Béla Greskovits) is the winner of the 2013 Stein Rokkan Prize for Comparative Social Science Research.