2012 has been an important and very successful year for Open Europe, with Prospect Magazine judging us “International Affairs” think-tank of the year in recognition of our research and analysis’ increasing influence in the UK, Europe and beyond. This year, many of Open Europe’s research publications and ideas have had a direct influence on policy and decision making regarding the UK’s relationship with the EU.
We also hosted prominent figures from the world of politics, economics and business in our 2012 events programme, discussing a range of topics from the UK’s future role in Europe, Anglo-German relations to the finer points of the eurozone crisis. Perhaps the icing on the cake, in October this year, was the launch of a new independent partner organisation in Germany, Open Europe Berlin gGmbh.
To read the full review of our year, click here. Below we would like to focus on some of the predictions we made about the eurozone over the last 12 months (always a dangerous undertaking). Here is how we fared in predicting some of the key developments:
The bailouts for the Spanish banking sector and Spanish regions: In April, Open Europe’s Head of Economic Research Raoul Ruparel argued that Spanish “banks may be forced to tap the eurozone bailout fund” and highlighted that the build-up of debt by Spain’s regions would mean that they too could require bailouts. In June, Spain announced that it would request €100bn from the eurozone’s bailout funds to recapitalise its banks, while in July, several Spanish regions requested bailouts from the state which sent sovereign borrowing costs to record highs.
Second Greek bailout falling short...: In March, Open Europe predicted that, coming in at just 2% of GDP, the debt write-down of Greek debt under the country’s second bailout would be “far too small to allow Greece any chance of recovery”, with further assistance required in the future. In July, it became apparent that the second bailout had failed and in October, Greece received a two-year extension to its bailout programme, duly confirmed in late November.
...but with Greece staying in the euro for now: While others put the risk of Greece imminently leaving the euro at 80%, Open Europe’s Mats Persson argued in January 2012 that “I doubt eurozone leaders will have the nerve to force Greece out this year.”
Credit rating of France and eurozone bailout funds downgraded: In January, we predicted that “France could well be downgraded at least one notch…this would [also] hit the creditworthiness of the euro bailout funds”. On January 16, S&P downgraded France’s triple A rating, with Moody’s following suit on November 19, and on November 30 it also downgraded the eurozone’s two bailout funds.
LTRO would run out quickly: In December 2011, in a briefing looking at the potential impact of the ECB’s programme bank liquidly provision (LTRO), Open Europe’s Raoul Ruparel argued that while it may be welcome in the short-term, “hopes, and plans, that this funding will lead to a boost in purchases of sovereign debt look misguided.” By the summer of 2012, both Spain and Italy were seeing their funding costs rise quickly, and eventually the ECB would have to take additional action.
Monti would struggle to fundamentally reform Italy’s labour market: In March, Open Europe’s Vincenzo Scarpetta warned of the risk that Mario Monti’s lack of a popular mandate could undermine his efforts to reform Italy’s labour market. With Monti set to step down in the coming months, the OECD has recently highlighted that Italy has undertaken limited labour market reforms, with its labour costs now amongst the highest in the eurozone.
So not a bad record for 2012, click here to check out our predictions for 2013.