This Commentary explores what will happen if Italy is not able to implement structural reforms and if international institutions, such as the EFSF and the IMF, do not intervene with sufficient resources to prevent Europe’s second-largest economy from defaulting on its debt. It warns that the Italian economic system would certainly embark on a perverse path that would follow three phases: liquidity crisis and insolvency; deflationary pressures; and finally inflationary pressures and economic and political instability.

The sharp and widespread increase in most commodity prices has alarmed the world and raised questions around the sustainability of our economies. As shown in this ECMI Commentary, the reasons for this dramatic rise are multiple, and engaging in a witch-hunt benefits neither the market as a whole nor our economies. Solutions need to be more differentiated and oriented towards two factors: preventing price manipulation (through controls on net positions and on anti-competitive market structures) and fostering sustainability.

This Commentary by two researchers with the European Capital Markets Institute (ECMI) reports on the latest state of play in the negotiations over the Alternative Investment Fund Managers Directive (AIFMD), an important body of EU legislation aimed at ensuring financial stability and greater transparency in areas that have so far mostly gone unregulated.

The global financial crisis has put an end to the cosy environment in which the financial industry had operated up to now. In keeping with their G-20 commitment, the European Commission has published draft rules for hedge funds, which bring all non-harmonised funds under the EU’s regulatory umbrella, largely reproducing the rules of existing directives, and adding some new elements in response to the crisis.

During the decade preceding the eruption of the financial crisis in August 2007, rating agencies and market participants, gripped by euphoria, systematically underestimated the risk inherent in a wide range of financial assets. Today the panic that has gripped them leads to an equally distorted view of the risks involved. Private debt is dumped in favour of government debt of just a few countries. How these countries are selected is unclear.

This Commentary by CEPS Chief Executive Karel Lannoo examines the draft directive issued for consultation by Commissioner Charlie McCreevy in July 2008, which proposes very detailed and prescriptive regulation of the activities of rating agencies in the EU. While acknowledging that policy-makers had no choice but to take action, Lannoo asserts that the draft raises fundamental questions about the form of the regulation and its impact on the industry and the markets. Namely:
1) Confronted with a globally concentrated industry, can the EU act alone?

This ECMI Commentary by Piero Cinquegrana considers the phenomenon of the six-fold increase in oil prices over the last seven years and asks whether this massive increase is justified by fundamentals or is the result of a speculative frenzy in commodities driven by bear markets in bonds and stocks.