Sponsored by the Ford Foundation, the Associazione Paolo Sylos Labini and the Ivie are organizing a seminar on the relationship between public finance and banking crisis. The current crisis has shown the importance of public finance in generating financial instability and banking crises but at the same time that bank bailouts have led to deterioration in public finance. As the title of the seminar summarizes “Ponzi finance, public debt and financial crisis: the European case and how to prevent it from happening again”, the seminar aims to discuss the current crisis, that started with the socalled subprime crisis in Summer 2007, and has entered now a new phase with the sovereign debt crisis, after the rescue of Greece in May 2010. Special emphasis will be given to studying the relationship between public finances and the financial system.

One of the lessons of the crisis is the close relationship between public finance and the soundness of the banking sector. The sovereign debt crisis, which originated in the deterioration of public finances, has struck at the solvency of the banking sector, both directly because of the exposure of the banks to the public debt of the rescued countries (especially Greece) and indirectly through the loss of value of other assets affected by the contagion effect. In addition to solvency, the sovereign debt crisis has also had an impact on the liquidity of banks due to the difficulties in the access to finance in the wholesale markets. Just taking a look at the last co-ordinate action of several central banks injecting liquidity into the system or the growing demand, by some banking sectors, for ECB liquidity reveals the current liquidity constraints.

But there is another direction of causality between the behavior of the banking sector and the public finance. The bank bailouts undertaken have shown that the risk appetite and the financial innovation have deteriorated the soundness of the banking firms. For this reason, governments have injected billions of capital in the banking sectors, which has caused an important increase in the public debt.

In this context, the seminar aims to analyze the recent experiences in Europe in order to learn how to prevent the impact of new crises in the future. Thus the seminar counts on the participation of a panel of recognized experts in macroeconomics, public finance and banking from 11 different institutions (research centers, universities, central banks, etc.). The participants will discuss issues as relevant today as the impact of the crisis on financial integration, the financial regulatory reform, the importance of external imbalances in the management of the crisis, etc., as well as the specific experiences of some countries such as Germany and Spain.

Javier Andrés (Universitat de València)
Leonardo Burlamaqui (State University of Rio de Janeiro and Ford Foundation)
Santiago Carbó (Universidad de Granada and Ivie)
Manuel Illueca (Universitat Jaume I and Ivie)
Jan Kregel (Levy Economics Institute of Bard College)
Joaquín Maudos (Universitat de València and Ivie)
Elisabetta Montanaro (Università di Siena)
Soledad Núñez (Dirección General del Tesoro y Política Financiera. Ministerio de Economía y Hacienda)
Arturo O’Connell (Banco Central de la República Argentina)
Francisco Pérez (Universitat de València and Ivie)
Javier Quesada (Universitat de València and Ivie)
Vicente Salas (Universidad de Zaragoza and Banco de España)
Mario Tonveronachi (Università di Siena)
Peter Wahl (WEED (World Economy, Ecology and Development))

Fundación Universidad – Empresa, Adeit
Plaza Virgen de la Paz, 3
46001 Valencia