On a Reformed Stability and Growth Pact

In March 2005, the Council of Economics and Finance Ministers (Ecofin) presented its own suggestions for a possible Stability and Growth Pact (SGP) reform in a Report to the European Council. The Council Report divides its proposals into three parts, namely improving governance, strengthening the preventive arm and improving the implementation of the Excessive Deficit Procedure (EDP). The present paper contains a critical analysis of the ideas contained in the Report, accompanied by comparisons of the suggestions with earlier proposals for reform in the literature and the Commission Communication of September 2004.

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*Professor of European Financial Economics and Jean Monnet Professor of European Financial and Monetary Integration, CentER, Tilburg University, The Netherlands; Research Fellow, CEPR, London, UK; Member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament to which the article was first presented as a Briefing Paper in May 2005.     

The EU on the 50th Anniversary of the Treaty of Rome

March 25, 2007 marks the 50th anniversary of the Treaty of Rome, the signing of which is considered to be the birth of the European Union. On this occasion the following articles discuss past and present developments in a number of important European policy fields. *Member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament to which the article was first presented as a Briefing Paper for the Monetary Dialogue with the President of the European Central Bank in December 2006.     

The Communication Policy of the European Central Bank

In January 2004, the euro celebrated its fifth anniversary. How did the communication work of the European Central Bank (ECB) perform in these first five years? What could still be done to improve acceptance of the euro?

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Britta Kuhn, Professor of Economics, University of Applied Sciences, Wiesbaden, Germany. Financial support by the Deutsche Bundesbank, Hauptverwaltung Frankfurt, is gratefully acknowledged. The author would also like to thank Lars Kerkmann, Sascha Riedel, Karsten Stieler and Julia Waldorf for their extensive research which made this article possible. She is also grateful to Jasmin Smalls and Tam Ngyen for their first draft translation. The usual disclaimer applies.     

Treaty Reform: Consequences for Monetary Policy

The proposed reform treaty, aimed at enhancing the efficiency and democratic legitimacy of the enlarged Union as well as its position on the global stage, has a number of important implications for monetary policy and the status of the European Central Bank. Can the reforms be expected to make euro area governance more efficient? Could they potentially jeopardise the ECB's independence and European monetary policy? Member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament, to which the article was first presented as a Briefing Paper for the Monetary Dialogue with the President of the European Central Bank in October 2007. The author gratefully acknowledges the helpful comments of Edin Mujagic and the excellent research assistance of Rob Nijskens.     

Book Reviews

Informal Financial Markets in Developing Countries by PETER J. MONTIEL, PIERRE-RICHARD AGENOR and NADEEM UL HAQUE (1993), pp. xi & 212, £40.00 hardback, ISBN 1 55786 357 1. Protectionism and World Welfare by DOMINICK SALVATORE (ed.) (Cambridge, New York: Cambridge University Press, 1993), pp. xiv & 447, £45.00, US $69.95 hardback, £16.95, US $19.95 softback, ISBN 0 521 41455 5, 0 521 4 2489 5. The Bias Against Agriculture, Trade and Macroeconomic Policies in Developing Countries by ROMEO M. BAUTISTA and ALBERTO VALDÉS (San Francisco: Institute of Contemporary Studies, 1993), pp. xxii & 339, ISBN 1 55815 245 8. The British Economy Since 1945 by N.F.R. CRAFTS and NICHOLAS WOODWARD (eds.), (Oxford, New York: Oxford University Press, 1991, pp. 549, £15.00 softback, ISBN 0 19 877273 4. European Monetary Integration, From the European Monetary System to European Monetary Union by DANIEL GROS and NIELS THYGESEN (London, New York: Longman, 1992), pp. xiii and 495, £19.99 softback, ISBN 0 582 07921 7. The Growth of the Public Sector, Theories and International Evidence by NORMAN GEMMELL (ed.), (Aldershot, Brookfield Vermount: Edward Elgar Publishing, 1993), pp. xiv and 261, £49.95 hardback, ISBN 1 85278 525 X.     

Recent developments in European business ethics

In the first part of the paper, factual information is given about developments in European business ethics since it started on a more or less institutionalized basis, five or six years ago. In the second part some comments are presented on the meaning of the developments and the possible causes. Attention is given to resemblances and differences between American and European business ethics. In the short last part some suggestions are proposed about tasks business ethics will face in the next decade.Henk J. L. van Luijk is Professor of Ethics at Nijenrode, The Netherlands School of Business, Breukelen, The Netherlands, and at the University of Groningen, The Netherlands. He is chairman of the Executive Committee of EBEN, The European Business Ethics Network. His special field is business ethics. He is the author of three books on various philosophical subjects. In his special field he published several articles, mainly in Dutch philosophical and professional journals.     

How can the Stability and Growth Pact be improved to achieve both stronger discipline and higher flexibility?

Conclusion  While we are sceptical of re-opening the debate on the SGP,²⁶ we think that its functioning can nonetheless be improved. Our main proposals concern redefining the medium-term budgetary targets, improving transparency, tackling the pro-cyclical fiscal bias in good times, moving towards non-partisan application of the rules and improving transparency in the data. This set of ideas allows the achievement of both stronger discipline and higher flexibility and can be implemented without requiring any major revision of the existing rules. These proposals do not provide a recipe for tackling the problems encountered by countries still in transition towards lower deficits in the event of a cyclical slump. Nevertheless, if implemented, they would limit the type of behaviour which is largely responsible for the current fiscal tensions. He is also a member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament for which this article was written as a Briefing Paper (November 2002).     

The Euro-Mediterranean Partnership

The Euro-Mediterranean Partnership (EMP), a framework for political, economic and social relations between the European Union and its Southern Mediterranean neighbours, saw daylight in Barcelona on 27-29 November 1995. Ten years on, the international conditions in which the EMP operates have been radically altered by events in the Middle East as well as the enlargement of the EU. How well has the partnership performed in this changing environment and what are its prospects for the future?

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* Research Fellow at the United Nations University—Comparative Regional Integration Studies (UNU—CRIS), Bruges, Belgium.     

Der neue Kurs der Europ?ischen Zentralbank

In September 2012, the European Central Bank (ECB) announced its new “Outright Monetary Transactions (OMT)” programme, which entails unlimited purchases of member states’ government bonds. Following an idea by George Soros, Goldman Sachs and Citigroup, the ECB intends to sterilise these purchases through the liabilities side of its balance sheet, i.e. through the issuance of ECB bonds. The article analyses this plan and argues that the ECB is introducing a second unlimited European Stability Mechanism (ESM). This clearly violates European law and is likely to be punishable under German criminal law.     

The ethics of going private

In this paper, we analyze some of the ethical dimensions of going private transactions (GPTs), wherein publicly traded firms are taken private. Financial theory suggests that efficiencies may be realized in these transactions such that outside shareholders are made better off. Empirical evidence supports this theory. We therefore argue that GPTs are not inherently exploitive or unethical. The issues of the fiduciary duty of corporate managers to shareholders and their obligations to non-shareholders are also explored. Douglas A. Houston is Associate Professor of Business Economics at the University of Kansas. He has written several articles which have been published in journals such as Cato Journal and Kansas Law Review. John S. Howe is Assistant Professor of Business at the University of Kansas. In 1985 he was awarded Outstanding Educator in the MBA Program. His articles have appeared in Journal of Banking and Finance and Journal of Financial and Quantitative Analysis.     

American political values and agency theory: A perspective

This paper explores the historical American political values which have shaped modern financial theory and agency theory. Financial agency theory's intellectual roots are shown to be located in the liberal tradition which espouses the instrumental nature of property and property rights. The paper also argues that financial theorists should recognize that, historically, economic efficiency was not a value or end in itself but merely a means by which more fundamental social goals might be achieved. Fred R. Kaen is a Professor of Finance at the University of New Hampshire. He has written many articles about financial markets and international financial management. His work has appeared in The American Economic Review, The Journal of Finance and The Journal of Money Credit and Banking. He will be spending next year at the Norwegian School of Economics and Business as a Visiting Professor of Finance. Allen Kaufman is an Assistant Professor of Business Administration at the University of New Hampshire. He has written a number of books including Capitalism, Slavery and Republican Values and his work has been published in the California Management Review, the Journal of Political and Military Sociology, and Business Horizons.Larry Zacharias is an Associate Professor of Management at the University of Massachusetts. He holds a law degree and has written many articles about corporate law and anti trust.     

The CSR-Quality Trade-Off: When can Corporate Social Responsibility and Corporate Ability Compensate Each Other?

This paper investigates under what conditions a good corporate social responsibility (CSR) can compensate for a relatively poor corporate ability (CA) (quality), and vice versa. The authors conducted an experiment among business administration students, in which information about a financial services company’s CA and CSR was provided. Participants indicated their preferences for the company’s products, stocks, and jobs. The results show that for stock and job preferences, a poor CA can be compensated by a good CSR. For product preferences, a poor CA could not be compensated by a good CSR, at least when people thought that CA is personally relevant to them. Furthermore, a poor CSR could be compensated by a good CA for product, stocks, and job preferences. Guido Berens is Assistant Professor of Corporate Communication at Rotterdam School of Management, Erasmus University Rotterdam, the Netherlands. His research interests include corporate branding, corporate social responsibility, and reputation management. His research has been published in the Journal of Marketing and the Corporate Reputation Review, as well as in several international books. Cees B. M. van Riel is Professor of Corporate Communication at the Rotterdam School of Management, Erasmus University Rotterdam, the Netherlands. His research interests include organizational identity, reputation management, and corporate branding. He is the author of several books, and his research has appeared in the Academy of Management Journal, Journal of Management Studies, and Journal of Marketing, among others. He is Editor-in-Chief of the Corporate Reputation Review, and has been working as a consultant for many large international companies in the last 15 years. Johan van Rekom is Assistant Professor at the Rotterdam School of Management at the Erasmus University, Rotterdam, the Netherlands, where he also received his PhD. His research interests include organizational identity, the effects of organizational identity on the motivation of organization members, cognitive structures at the individual and at the organizational level, and the essence of brands. His research has appeared in the Journal of Management Studies and the European Journal of Marketing, among others.     

Index of Perceived Inflation or EU Consumer Surveys?

After the euro changeover at the beginning of 2002, a marked discrepancy emerged between perceived inflation and inflation as measured by the consumer price index. To what extent are consumers still overestimating price developments even now? How reliably is this phenomenon measured by the “Index of perceived inflation” developed by Professor Brachinger? What are the findings of the consumer surveys conducted on behalf of the European Commission?

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This article represents the personal opinions of the authors and does not necessarily reflect the views of the Deutsche Bundesbank.     

Who Supports the ECB? Evidence from Eurobarometer Survey Data

This paper studies the determinants of the support for the European Central Bank (ECB) in the member countries of the European Monetary Union (EMU) and their evolution from 1999 to 2015. Our contribution is to examine micro‐level sociodemographic characteristics from the Eurobarometer surveys jointly with macroeconomic indicators of trust in a central bank in order to evaluate econometrically their relative importance over time. Pseudo‐panel logit estimates reveal that the former have a dynamically stable, and generally stronger influence taken altogether, when compared with the latter. Interestingly, we find that while expected inflation becomes a positive determinant of trust in the ECB after the global financial crisis (GFC), actual inflation gets no statistical significance. Having taken centre stage in the monetary policy debate in the Euro‐area post‐GFC and especially since 2013, excessive disinflation and risk of deflation attracted strong attention by the public and have consequently affected its perceptions about the ECB. Accordingly, our results emphasise forward lookingness of the EMU population with regard to ‘deflation scares’ in determining trust in the ECB, in addition to disentangling the contributions of the key individual‐level sociodemographic factors, and can duly inform ECB's communication strategy.     

Gender differences in determining the ethical sensitivity of future accounting professionals

This paper explores possible connections between gender and the willingness to tolerate unethical academic behavior. Data from a sample of 285 accounting majors at four public institutions reveal that females are less tolerant than males when questioned about academic misconduct. Statistically significant differences were found for 17 of 23 questionable activities. Furthermore, females were found to be less cynical and less often involved in academic dishonesty. Overall, the results support the finding of Betz et al. (1989) that the gender socialization approach dominates the structural approach. Elsie Coker Ameen is an associate professor and chair of the Department of Business at Coker College. Professor Ameen has published articles in The Journal of Business Finance and Accounting, Auditing: A Journal of Practice and Theory, Review of Financial Economics, and other journals. Daryl M. Guffey is an assistant professor at East Carolina University. He joined the faculty at East Carolina University in 1995. Dr. Guffey has published several articles in such journals as The Financial Review, Journal of Business Finance and Accounting, Review of Financial Economics, Quarterly Journal of Business and Economics, and The Accounting Educators' Journal. Professor Guffey's research has been supported by a grant from the Ernst & Young Foundation. Jeffrey J. McMillan, Jr. is an associate professor of accounting at Clemson University. He joined the faculty of Clemson University in 1990. Dr. McMillan has published articles in such journals as The Accounting Review, Advances in Accounting, Issues in Accounting Education, and The CPA Journal.     

Progress or Stagnation?

Progress in the negotiations in services trade is to be reviewed at the sixth WTO Ministerial Meeting in Hong Kong in December 2005, this date being crucial for successfully concluding the Doha Development Round. However, the way to a meaningful agreement on services will not be easy. The following article explains the challenges facing the negotiations and the reasons why progress in this field is so difficult to measure.

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*John F. Kennedy Institute for North American Studies at the Freie Universität Berlin, Germany.

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**Professor of International Economics, International University Bremen, Germany.     

The unethical exploitation of shareholders in management buyout transactions

The accurate pricing of securities in the capital markets depends upon the markets being both efficient and fair. In management buyout transactions (MBOs), the price bid by inside managers enhances the efficient pricing of securities but raises a reasonable doubt about the fairness to existing shareholders. This study addresses this fairness question in MBOs and offers short-term and long-term legal alternatives which allow both the efficiency and fairness criteria to be met. In the short-term the case law established in the Basic v. Levinson decision for merger negotiation disclosures should be applied to MBO transactions. Over the longer horizon, legislative changes should be made to existing securities laws. Applying the investor protection principles of the 1933 and 1934 securities acts to MBO transactions will suppress the temptation of managers to extract shareholder wealth for their personal gain. Frederick P. Schadler, Assistant Professor of Finance at East Carolina University, in Greenville, North Carolina. Research interests include security issuances, investment banking, and ethical issues related to securities regulation. He has presented papers at regional and national meetings and has published in the Journal of Financial and Strategic Decisions and the Memphis State University Law Review. Jack E. Karns, an Associate Professor of Business Law at East Carolina University. Research is directed toward corporate law, securities, and government regulation of business issues including ethical considerations. He has published in numerous legal journals including the Dickinson, University of Richmond, and Memphis State University Law Reviews.     

The role of ethics in global corporate culture

Whatever ethnic, religious, or other cultural boundaries may have evolved through history, a global corporate culture is increasingly subsuming these traditional divisions. Multinational corporations, internationally linked securities markets, and omnipresent communication networks characterize this global corporate culture. The dynamics of corporate culture centres on the intricate web of contractual relations between stakeholders. This study addresses the question of how these stakeholder contracts can be most efficiently enforced. Three alternative contractual enforcement mechanisms are identified: the legal system, a generally accepted moral code, and stakeholders' desire to build and maintain reputations. Each alternative is critically evaluated and conclusions are drawn as to the relative feasibility and desirability of each enforcement mechanism. John Dobson is an Assistant Professor of Finance at The University of Mississippi. As a member of The Centre for Industrial Planning and Strategy (CIPS), he co-authored a study on the global man-made fibre industry. He has recently presented papers on reputation effects at the Southern Finance Association annual meeting, and has had articles and letters published in various academic journals including Business and Society and Financial Management. He is currently developing a curriculum for a course in Financial Contracting at the University of Mississippi. An earlier version of this paper was presented at the 1988 Southern Finance Association meetings in San Antonio.     

What Type of Regional Policy for Europe?

In promoting European regional development, policymakers tend to pursue either an offensive, future-oriented or a defensive, tradition-preserving type of policy. Backed by theoretical notions and case evidence from an “ordinary” region, i. e. the Italian island of Sardinia, the following paper argues that European regions could benefit more from a “connective” type of policy that aims to connect lobal trends with local traditions.

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This paper was prepared during Paul Benneworth’s visiting fellowship at the University of Twente. The authors wish to thank Henk Donkers, the Regione Sardegna and I&O-Research for input and comments and gratefully acknowledge BBT and IPP for their support.     

The strategic position of consumers in the information society

In this paper, a conceptual framework is outlined for examining the strategic position of consumers in a society in which computer networks are assigned an increasingly important role in the distribution of goods and services. The framework deals with relationships among consumers as well as relationships between consumers and other actors in the distribution system, and in both cases the relationships can be based on either common or conflicting interests. With the aid of the framework, the author characterizes the strategic position of consumers in terms of influence and power or powerlessness.The technological impacts dealt with are related to both the consumers' own use of computer technology, and its use by other parties such as suppliers and retailers. Examples of developments discussed in the paper are computerized checkout registers, electronic funds transfer systems, and home computers connected to central information systems.The author predicts that the strategic position of consumers will be weakened as the new technologies become more commonplace while the strategic position of the most powerful commercial and institutional actors is likely to be strengthened. A number of strategies for collective consumer action which could countervail this tendency, are outlined at the end of the paper.

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Die strategische Position der Verbraucher in der Informationsgesellschaft

Zusammenfassung Der Beitrag entwickelt zunächst einen Bezugsrahmen für die Beurteilung der strategischen Position von Verbrauchern in einer Gesellschaft, in der Computer-Netzwerke eine immer größere Rolle auch bei der Vermarktung von Gütern und Dienstleistungen spielen. Dieser Bezugsrahmen unterscheidet zwischen Beziehungen, die innerhalb der Konsumentenschaft bestehen, und solchen, die zwischen Konsumenten einerseits und anderen Akteuren im Verteilungssystem andererseits bestehen; in beiden Fällen können Beziehungen auf gemeinsamen Interessen wie auf einander entgegenstehenden Interessen beruhen. Mit Hilfe dieser Unterscheidung kennzeichnet der Autor die strategische Position von Verbrauchern durch die Möglichkeit ihrer Einflußnahme und durch ihre Machtstellung bzw. Machtlosigkeit.Die technologischen Wirkungen, mit denen sich der Beitrag beschäftigt, beziehen sich auf die Nutzung der Computertechnologien durch die Verbraucher selbst wie auch durch andere Marktparteien wie Hersteller und Händler. Als Beispiele werden Entwicklungen im Bereich der elektronischen Ladenkassen, des elektronischen Zahlungsverkehrs und der an zentrale Informationssysteme angekoppelten Home-Computer diskutiert.Der Autor gelangt zu der Prognose, daß die strategische Position von Verbrauchern mit zunehmender Verbreitung neuer Technologien tendenziell abnehmen wird, während die strategische Position der mächtigeren kommerziellen und institutionellen Akteure gestärkt werden dürfte. Der Beitrag schließt mit der Diskussion einiger Möglichkeiten kollektiver Verbraucheraktionen, die dieser Entwicklung entgegenwirken könnten.

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Sigmund Grønmo is Research Director, The Norwegian Fund for Market and Distribution Research, Fredensborgveien 24, N-0177 Oslo 1, Norway, and Professor of Sociology at the University of Oslo. During the academic year 1986–1987 he is a Visiting Professor at the Department of Marketing, Illinois State University.This article is a revised version of a paper presented at the symposium New Challenges for European Consumer Policy, held at Heiligkreuztal, FRG, on March 17–20, 1986, under the sponsorship of the European Cultural Foundation, the Commission of the European Communities, and IBM Deutschland. The author received very useful comments from other participants at the symposium, in particular from Klaus G. Grunert, Carl-Heinz Moritz, and Hans B. Thorelli. Furthermore, the author is grateful for comments received from several colleagues at the Norwegian Fund for Market and Distribution Research, at the University of Oslo, and at Illinois State University.