Essays

Managing International Financial Instability

Turning the Page on an Era of Irresponsibility
Fabrizio Saccomanni
The financial crisis has had some silver linings. The international community has rediscovered the importance of international cooperation and multilateral institutions. The International Monetary Fund, in particular, has been called back to centre stage. But despite the good intentions, the comprehensive action plan worked out by an upgraded G20 to rebuild the foundations for sustainable growth and financial stability in the global economy is unlikely to be strong enough to turn the page on the recent era of irresponsibility.
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The Current Financial Crisis and Reform of the Global Financial Architecture
Anthony Elson
The current financial crisis has sparked an active debate about the adequacy of the global financial architecture (GFA) or the collective governance arrangements for promoting the stability of the international financial system which are mainly centred in the operations of the Financial Stability Forum (now Board) and IMF. There are three areas in particular in which the governance arrangements for the GFA did not work effectively in the lead-up to the current crisis: the oversight of global financial system stability, the coordination of international financial regulation, and the provision of a lender of last resort mechanism. In the light of recent G20 decisions, proposals for reform in each of these areas need to be discussed.
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The IMF and Regulatory Challenges
Edwin M. Truman
The International Monetary Fund (IMF) plays a substantial regulatory role in the international monetary and financial system. It has been assigned a formal regulatory role in a limited number of areas, such as obligations covering exchange rate policies. Yet the Fund has a broader informal regulatory role derived from the voluntary consent of its members, such as in surveillance over members' financial sector policies and international payments imbalances. This regulatory role is unlike that of its member governments within their own jurisdictions. In order to guide the global economy in the wake of the 2007-09 crisis, the Fund's formal and informal regulation will have to be constantly nurtured and renewed via peer-review processes.
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Europe Forum

Is the Larosière Proposal on European Financial Regulation on the Right Path?
Marco Onado
The financial crisis has prompted an extensive debate on the lessons to be learned, particularly from a regulatory point of view, and especially in Europe where the crisis could mean a serious setback for financial integration. The Larosière Report has set out guidelines for improving the European regulatory framework and has inspired a proposal for European legislation. Although the Report has been praised for its effort to overhaul European financial regulation, many details are still vague. In particular, there are seven points at the macro-level of prudential supervision on which clearer and tougher solutions are needed. Furthermore, there are two unresolved problems in the proposals for micro-supervision. It is important to take all of these issues into account in the future discussion on European legislation.
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Opinions

The United States, Iran and the Middle East's New "Cold War"
Flynt and Hillary Leverett
The relationship between the United States and the Islamic Republic of Iran both shapes and is shaped by a new Middle Eastern "Cold War". The United States and the Islamic Republic should transcend the prospects for hegemonial conflict or strategic standoff and seek a fundamental realignment of their relations, along the lines of the realignment in relations between the United States and the People's Republic of China that took place during President Richard Nixon's tenure in the White House. The article examines the imperatives for a comprehensive and strategic realignment of US-Iranian relations from the standpoint of Iranian interests and foreign policy concepts as well as from an American perspective. It also evaluates the actual prospects for US-Iranian rapprochement.
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Conceiving the New Turkey after Ergenekon
Umit Cizre and Joshua Walker
In Turkey a politically autonomous and secular military is pitted against a popularly elected, Islamic-rooted government, which has acquired new energy for domestic and foreign policy agendas and political reform. The election of Barack Obama and the Democrats in the US, as well as reverberations from the ongoing Ergenekon revelations and attempts to address the Kurdish question have brought new influences and players into the game of domestic Turkish politics. This article analyses the possible impact of these changes domestically, as well as from the EU and US perspectives.
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Wielding "Soft Power"

Assessing Turkey's "Soft Power" Role: Rhetoric versus Practice
Eleni Fotiou and Dimitrios Triantaphyllou
Turkey's proactive foreign policy directed at assuming a regional or even global "soft power" role has created heated debate. This development may be explained as the result of the Europeanisation of Turkish political culture and its impact on foreign policy behaviour, as a globalisation trend, as a bargaining card towards the West or even as an alternative foreign policy option. Arguably, the ideas of Ahmet Davutoglu, Turkey's new foreign minister, have contributed at the level of rhetoric; meanwhile, the emphasis of the country's foreign policy on its Eastern neighbourhood seems to have less to do with the ruling party's religious premises, than with a rational choice towards the development of an independent foreign policy agenda. It remains to be seen whether this change in rhetoric in Turkish foreign policy will develop into a substantial shift in practice.
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China's Scepticism of Clean Energy Champion Europe
Jonathan Holslag
While the EU has sought to gain both profit and "soft power" from increased cooperation with China in the field of clean energy, not much of this expectation has materialised. China is unwilling to recognise the European Union as the world's clean energy champion, and is itself trying to secure a larger part of the international market through green power. In this highly competitive sector, Europe should give up its soft power aspiration and should resort to a realist but constructive policy. On the one hand, it should impose more ambitious curbs on its emissions and use this as an incentive to boost its own green technologies. On the other hand, it should develop a two-track approach for its international cooperation: limited aid-based synergies with the least developed countries alongside pragmatic economic bartering with all emerging countries, not just China.
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Italy in World Affairs

Catching the Change of Tide. Italy's Post-Cold War Security Policy
Riccado Alcaro
At the beginning of the 1990s, Italy went through two tectonic changes. Externally, the end of the Cold War called for a redefinition of the roles of NATO and the EU, the pillars on which Italy had built its foreign and security policy for forty years. Internally, Italy's old ruling elites vanished under the huge mani pulite corruption scandal. The new political parties that rose in their place have remained committed to NATO and the EU, but have often met with obstacles in reconciling the national, European and Atlantic components of Italy's security. While this hinges mostly on structural factors - like the rising costs of participation in NATO or EU operations abroad, including in terms of public support - the tendency of the new elites to emphasize their differences and neglect their more fundamental commonalities have multiplied the "grey zones" in Italian security policy.
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Book Reviews

On Naivety and Tolerance
Cesare Merlini
Review of: Reflections on the revolution in Europe : immigration, Islam, and the West, by Christopher Caldwell, Doubleday, 2009
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