Master of Arts / Department of Economics / Lloyd B. Thomas Jr / The European sovereign debt crisis has had a profound impact on the rest of the world. The “debt crisis” refers to the rapid accumulation of debt within some struggling euro-zone countries. This debt accumulation has resulted in a variety of financial bailouts made to various countries within the European Union and a debt default by the country of Greece. The results of this crisis have changed the way of life for many living within the struggling economies. Division within the euro zone, on both policy and ideology, has begged the question of whether the euro will be able to survive in the long term. The purpose of this report is to investigate the buildup and evolution of this crisis, as well as to highlight various responses and proposed solutions of the future.

The paper empirically tests the relationship between earnings volatility and cost of debt with a sample of more than 77,000 Swedish limited companies over the period 2006 to 2013 observing more than 677,000 firm years. As called upon by many researchers recently that there is very limited evidence of the association between earnings volatility and cost of debt this paper contributes greatly to the existing literature of earnings quality and debt contracts, especially on the consequence of earnings quality in the debt market. Earnings volatility is a proxy used for earnings quality while cost of debt is a component of debt contract. After controlling for firms’ profitability, liquidity, solvency, cashflow volatility, accruals volatility, sales volatility, business risk, financial risk and size this paper studies the effect of earnings volatility measured by standard deviation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) on Cost of Debt. Overall finding suggests that lenders in Sweden does take earnings volatility into consideration while determining cost of debt for borrowers. But a deeper analysis of various industries suggest earnings volatility is not consistently used by lenders across all the industries. Lenders in Sweden are rather more sensitive to borrowers’ financial risk across all the industries. It may also be stated that larger borrowers tend to secure loans at a lower interest rate, the results are consistent with majority of the industries. Swedish debt market appears to be well prepared for financial crises as the debt crisis seems to have no or little adverse effect borrowers’ cost of capital. This study is the only empirical evidence to study the association between earnings volatility and cost of debt. Prior indirect research suggests earnings volatility has a negative effect on cost debt (i.e. an increase in earnings volatility will increase firm’s cost of debt). Our direct evidence from the Swedish debt market is consistent for some industries including media, real estate activities, transportation & warehousing, and other consumer services.

Previous research regarding the European debt crisis has mostly focused on the purely economic aspects of the crisis. However, there is a strong “Protestant-Catholic” dimension in Europe, where historically Protestant countries are more prosperous than their Catholic and Orthodox counterparts. This has especially been a fact since early 2010, when several countries within the European Union had their credit ratings downgraded. Is this phenomenon merely a coincidence? Or could the roots of the recent troubles in Europe have a basis in historic religions? To tackle this question, Max Webers ́s 110 year old study The Protestant Ethic and the Spirit of Capitalism is brought back into light and used as a tool for analysis of the crisis. The results show that not only are Protestant countries in general more prosperous, but they also have lower corruption and their citizens have a higher level of trust towards the government. These results are in line with what Weber called the “bureaucratization” and the “rationalization” of the society from a traditional one into a rationalized one. According to Weber, the “protestant work ethic” had certain features that helped create propitious preconditions for rationalization, which were extremely benign for the rise of capitalism in the Western world. Furthermore, the results in this studies show that the historic religions have had a lasting impact on national politics within Europe and that they remain a driving force behind european culture. Historically Protestant countries are therefore in less risk of getting in debt and capitalism still have a better chance of success in these countries.

The aim of this master thesis is to analyze the development of capital flows within the euro area and within selected Member States, with respect to the hypothesis of a sufficient replacement of private capital flows with official ones. Verification of the hypothesis is based on identifying sudden changes in capital flows, using the model created by Mr.Forbes and Mr.Warnock. The entire work is conceived into three main chapters. The first is dedicated to the development of the crisis in the euro area and the adoption of important reform measures as response to the resulting unfavorable situation. The second chapter deals with the definition of net and gross capital flows and their development in the so-called extra-area flows. The final section is focused on the analysis of intra-area capital flows and flows in selected member countries.

The topic of the final thesis is The Lender of Last Resort. Author of the final thesis has dealt with the issue through the analysis of the European current legislation, available Czech or foreign literature or other relevant sources. The function of the national banks, or other institutions, as a lender of last resort is very complex the final thesis examines from the legal and economical perspective. This matter even has obvious global societal dimension when the adequate performance of the lender of last resort has positive effect on the prosperity of the society. On the other hand when the performance is defective the opposite effect arises. The final thesis is divided into five chapters. First two chapters present and clarify the term of lender of last resort and provide us definitions. Second chapter, which builds upon the first two, is providing the reader with the historical context of the lender of last resort, whose development started on the British Islands at the end of the 18th century. The fourth chapter of the final thesis is dedicated to the criteria for granting financial aid by the lender of last resort and the means of the provision of the financial aid. The author has especially focused on the danger of the systemic risk and the too-big-to-fail doctrine. Last fifth chapter...

The inception of the economic and monetary union (EMU) in January 1999 created new conditions for government debt. By eliminating currency exchange rate risk between the member states, the hope was to achieve a more sustainable and integrated government debt market in the euro area. Even though we witnessed relative stability for several years, the financial turmoil starting in 2008 and more so the European government debt crisis starting in late 2009 led to higher and more volatile yield differentials between the member states. This thesis explores the European government bond market to find the fundamental determinants of yield spreads and to see if the impact of these determinants changed since the start of the debt crisis. Financial theory suggests that there are three main fundamental drivers of government bond yields and as such lay the framework for finding the explanatory variables. By using a fixed-effect panel regression model the empirical findings of this study show that credit risk, liquidity risk, risk aversion all play a significant role in explaining yield spreads in the euro area. Furthermore, we find evidence of increasing marginal effects of all explanatory variables except for global risk aversion since the start of the crisis. We also consider the effect of the statement by the ECB President in 2012 where the ECB committed to quantitative easing as an important reason for the decrease in yields and illustrate this by expanding our model. The contribution of this study is centered around the use of longer timeseries data that provides the significant advantage of fully incorporating the European debt crisis which is something that previous studies were lacking. / Införandet av den ekonomiska och monetära unionen (EMU) i januari 1999 skapade nya villkor för statsskuldmarknaden. Genom att eliminera valutakursrisk mellan medlemsstaterna var förhoppningen att skapa en mer hållbar och integrerad statsskuldmarknad i euroområdet. Trots flera år av relativ stabilitet ledde finanskrisen 2008 och eurokrisen i slutet av 2009 till högre och mer volatila ränteskillnader mellan medlemsstaterna. Denna uppsats undersöker den europeiska obligationsmarknaden för att hitta de grundläggande determinanterna för räntespreads och för att se om effekterna av dessa determinanter har förändrats sedan skuldkrisens början. Genom att använda en “fixed-effects” regressionsmodell visar de empiriska resultaten att kreditrisk, likviditetsrisk, riskaversion spelar en viktig roll för att förklara räntespreads i euroområdet. Vidare finner vi bevis på ökande marginaleffekter för alla determinanter med undantag för global riskaversion sedan krisens början. Vi undersöker också effekten av ECB-Presidentens uttalande 2012 som indikerade en hängivenhet till kvantitativ lättnad som en viktig orsak till fallet i räntespread och illustrerar detta genom att utöka vår modell. Bidraget från denna studie är centrerad kring användandet av längre tidsseriedata som ger den stora fördelen att inkorporera den europeiska skuldkrisen vilket är något som tidigare studier ofta saknat.

2008年全球金融風暴為歐洲債券危機埋下隱患，歐元區國家紛紛進行紓困以提振經濟，導致財政赤字更加嚴重。歐元區各國因採行單一貨幣而喪失獨立的貨幣政策，使得融資工具受限。信用評等機構又先後對周邊國家調降評等，無形中擴大危機。歐洲債券危機不僅讓歐洲經濟暨貨幣同盟的結構缺陷再度浮上檯面，亦引發歐元區解決方案的認知分歧，形成以德國為首的撙節派和法國代表的反撙節派間的對立，政治界興起一片波瀾。 為分析未來歐洲統合的方向和進程，本論文從政治和經濟面了解經濟暨貨幣同盟的建立與歐洲債券危機的發生，並透過自由政府間主義的分析層次，探究未來歐洲統合的發展。經由上述方法，研究發現就德法目前國內情勢和相互交往來看，未來歐洲統合的發展可能維持現狀，而不會開倒車或形成完全的超國家建制。至於理論是否和事實重合，又有待日後持續觀察。 / After the outbreak of the European Debt Crisis since 2009, the necessity and possibility of the further integration is once again highly valued. To analyze the future development of the European integration, the thesis looks into the establishment of the Economic and Monetary Union and the outbreak of the European Debt Crisis. In addition, it looks into the relation between Germany and France through the approach of the Liberal Intergovermentalism to explore the future development of the European integration. The result of the research demonstrates that it is likely European integration will remain at status quo, instead of advancing integration to the establishment of supranational institutions, nor leading to the breakup of the European Union. While Liberal Intergovernmentalism provides the integration analysis with a feasible approach, whether the result of the research coincides with the future development of the European integration still remains to be seen.

This master's thesis deals with the response of the EU to the European Debt Crisis and with the attitude of large European economies (Germany, France, Great Britain) to approved anti - crisis measures. In the first chapter the economic and political tradition of large European economies is described, followed by their attitude to the European integration. After a brief outline of the European Debt Crisis, the second chapter deals with short-term and subsequently systemic anti-crisis measures and puts them into the context of attitudes and interests of large European economies.

The master thesis focuses on the European debt crisis. It first studies the development of monetary integration on the continent. It is followed by the detailed analyses of the debt crisis, how it started, what were the triggers, how it unfolded and at what point is it now. It identifies the fundamental issues of the crisis and the reasons of it. Lastly, it analyzes the implications of the crisis in the Czech Republic and Slovakia. The master thesis contains 73 pages, 25 figures or tables and 1 annex.

Diese Dissertation besteht aus drei Kapiteln, die durch die europäische Schuldenkrise als gemeinsames Thema verbunden sind. Kapitel eins untersucht die Auswirkungen der Finanzintegration auf das Kreditangebot der Banken und die Realwirtschaft. Im Jahr 2007 ersetzt die Europäische Zentralbank die nationalen Sicherheitenlisten durch eine einzige Euroraumliste. Für Banken mit solch neu zugelassene Sicherheiten sinken die Finanzierungskosten. Diese Banken vergeben mehr Kredite, insbesondere an risikoreichere und unproduktivere Firmen in anderen Euroraumländern. Bei diesen Firmen wiederum nehmen Beschäftigung und Investitionen zu. Die Ergebnisse verdeutlichen die unbeabsichtigte Rolle der Finanzintegration beim Anheizen grenzüberschreitender Kreditblasen. Kapitel zwei untersucht die politischen Verbindungen von Bankvorständen in Krisenzeiten. Regierungen beeinflussen nach einer staatlichen Bankenrettung die Zusammensetzung von Bankvorständen, um sich Kontrollrechte zu sichern. Wir stellen fest, dass die Anzahl der politischen Vorstandsmitglieder nach einer staatlichen Unterstützung um 21,4% steigt. Gerettete Banken mit solch neuen politischen Vorständen schneiden in Bezug auf Marktkapitalisierung und Bewertung deutlich besser ab als gerettete Banken ohne solche Verbindungen. Kapitel drei liefert kausale Belege für die Auswirkungen von Kreditklemmen auf politische Radikalisierung. Mit Daten zu Bank-Firmen-Verbindungen und kommunalen Wahlergebnissen zeigen wir, dass Unternehmen mit einer Beziehung zu schwachen Banken einen Rückgang ihres Kreditangebots und des Beschäftigungswachstums erleben. Anschließend schätzen wir die Auswirkungen der Arbeitslosigkeit auf das Wahlverhalten. Wir konstruieren ein Instrument für die Arbeitslosigkeit, das auf der Abhängigkeit gegenüber schwachen ausländischen Banken auf kommunaler Ebene basiert. Ein Anstieg der instrumentierten Arbeitslosigkeit führt zu einer Steigerung der Wählerradikalisierung um 7 Prozentpunkte. / This thesis consists of three chapters linked by the European Debt Crisis as their common theme. Chapter One studies the effect of financial integration on bank credit supply and the real economy. In 2007, the European Central Bank replaces national collateral lists with a single euro area list. Banks holding newly eligible assets experience a reduction in their cost of funding.These banks lend more, especially to riskier and less productive borrowers located in other euro area countries. The borrowers in turn experience growth in employment and investment. The results highlight the unintended role of financial integration in fueling crossborder credit booms. Chapter Two investigates the political ties of too-big-to-fail bank boards in crisis times. After a bailout, governments are likely to influence bank board compositions to secure control rights. Combining two novel datasets on political ties of banks and state aid in the European Union, we find that the number of politically connected board members increases by 21.4% following government support. Bailed-out banks with such new political ties perform better in terms of market capitalisation and valuation than bailed-out banks without such ties. Chapter Three provides causal evidence on the effect of credit crunches on political radicalisation. We combine data on bank-firm connections and electoral outcomes at the city-level during the 2008-2014 Spanish Financial Crisis. First, we show that firms in a relationship with weak banks experience a reduction in their loan supply and employment growth. Next, we estimate the effects of unemployment on voting behaviour. We construct an instrument for unemployment based on the city-level exposure to foreign weak banks. We find that a one standard deviation increase in instrumented unemployment translates into a 7 percentage point increase in the radicalisation of voters.