International institutions and the power of the EU: How has it been affected by the financial crisis?

Table of Contents

1. Introduction
1.1 Purpose of this publication
1.2 Structure of the paper and state of research

2. Conceptual and theoretical framework
2.1 The notion of power
2.2 Power concepts of the European Union as an international actor
2.3 Institutions in international relations theory
2.4 Concluding remarks on the conceptual and theoretical framework

3. The global financial and economic crisis and the reactions of the European Union

4. The power of the European Union in the International Monetary Fund and the G20 during the global financial and economic crisis
4.1 The International Monetary Fund
4.1.1 The function and quota structure of the International Monetary Fund
4.1.2 Development up to and during the global financial and economic crisis
4.1.3 The power of the European Union before and after the crisis
4.2 The G
4.2.1 The structure and function of the G20
4.2.2 Development during the global financial and economic crisis
4.2.3 The power of the European Union before and after the crisis

5. Conclusion: How did the crisis affect the Unions’ power in international institutions like the IMF and the G20?

6. Bibliography
6.1 Primary Sources
6.2 Secondary Works

7. Annexes

8. List of Abbreviations

1. Introduction

1.1 Purpose of this publication

„Power is shifting at the global level but it is doing so unevenly across different dimensions.“^[1] The statement of Giovanni Grevi describes the phenomenon of power shift. Such shifts happened multiple times throughout history.^[2] But they do not occur frequently and are often connected with use of force. At present there is a power shift from the western industrialized states, e.g. from member states of the European Union (EU), to Asian states, in particular China. This shift builds on the fast economic growth of the emerging countries. Yet, in spite of this growth, it is disputed to what extent the rise of these economies already transcended into power and how it will develop in the future.^[3]

The recent global financial and economic crisis was the worst one in post World War II history, because it led to an economic downturn with unprecedented global depth.^[4] The crisis emerged in the United States (US) and then spread to the EU and as well to other countries. It led to steeply rising public debt levels in western industrialized states. Many scholars, like Giovanni Grevi and Roger C. Altman, are of the opinion that the crisis accelerated the recent shift of power.^[5] During this course of time, states like China or India extended their participation within global economic governance foras, such as the International Monetary Fund (IMF) or the G20. This raises the question how the power of the European Union within these international institutions was affected by the crisis? The purpose of this publication is to research this question.

Consequently, the examination ranges within the domain of the global financial and economic crisis, the shift of power and the power of the EU in international institutions. In order to give an answer to the above stated question the power shift in international institutions during the time of crisis is to be assessed. This then allows to identify the trend of EU power. Because the scope of the publication is limited, two institutions, the IMF and the G20 are analyzed in depth in order to shed light on the topic. There are two main reasons to choose especially these institutions for a detailed analysis: Firstly, both were and are the main stages for their members to respond to the consequences of the crisis. Secondly, they reflect the changing economic weights, which are interrelated with the shift of power.

Given this setting, the key research questions are therefore:

1) Did the global financial and economic crisis affect the power of the European Union in the IMF and the G20?
2) How did the global financial and economic crisis affect the Union’s power in the IMF and the G20?

In line with these questions the following hypothesis shall be the guiding frame throughout the paper: The global financial and economic crisis caused a decrease of power of the European Union in the IMF and the G20.

1.2 Structure of the paper and state of research

This paper is structured into five subparts. The first one encompasses the purpose of the publication, its structure and the state of research.

The second one introduces a conceptual and theoretical framework, which provides necessary academic background knowledge, in order to gain a better understanding of the analysis and to be able to connect it with existing research. This chapter discusses various definitions of power and selects one, given by Michael N. Barnett and Raymond Duvall, for the congruent use in this paper. The linking between the definition of power and different power concepts of the European Union is then illustrated, following the argumentations by Annegret Bendieck and Heinz Krämer. This illustration highlights the different facets of EU power and the significance of international institutions for them. Afterwards, international institutions in international relations (IR) theory are analyzed focusing on the point of view of neorealism and neoliberal institutionalism, in order to elaborate the framework of analysis.^[6] This section especially draws on the works of Joseph M. Grieco and Robert O. Keohane, who both dealt extensively with this topic.

The third part covers an analysis of the financial crisis. Main events from the beginnings until present time are examined. The focal point is put on the consequences for the EU and on the European reactions. It is shown that parts of those reactions were just responses to pressing events, while others were longer term oriented. In this part, documents from the European Commission and analyses from scholars like Jutta Frasch and Rebecca M. Nelson are assessed.

The fourth part turns to the selected international institutions. At first, the IMF is examined. A short review gives an overview on its function and quota structure. The following section elaborates on its development before and during the global financial and economic crisis. In order to conduct this analysis, official publications by the IMF are used. Additionally, the works of scholars like James M. Boughton and Ngaire Woods are taken into account. An analysis of the power of the EU within the IMF before and after the crisis follows. Yet, the power of the Union in the IMF is different from the sum of the power of EU member states. Therefore, this analysis is conducted on two different levels: One will focus on the power of EU member states; the other one on the power of the European Union^[7] itself. The analysis of the G20 is similar. First of all, its structure and function is outlined, before turning to the developments during the global financial and economic crisis. The examination of the G20 relies on the work of scholars like Juha Jukela and Peter Debaere, but also on the contributions of the official G20 study group. Then, the power of the EU before and after the crisis is assessed following a similar analytical structure like within the IMF analysis.

The conclusions of these analyses are presented in the fifth part. The outcome is used in order to control the initially formed hypotheses.

This publication deals with a complex research question, which has to take into account different areas of study. While some of these, like the notion of power itself, have been extensively dealt with by political science scholarship, others have not. This is particularly true for the interrelation between the power of the EU in the IMF and the G20 and the global financial and economic crisis. This constitutes the relevance of this paper, because up till now this particular field lacks comprehensive insights.

2. Conceptual and theoretical framework

2.1 The notion of power

“International politics, like all politics, is a struggle for power”^[8] – this is the introductory statement that Hans J. Morgenthau formulated in his famous work ‘Politics among Nations’. Not only Morgenthau, but numerous scholars, like Thucydides and Machiavelli, have been concerned with the notion of power.^[9] The more recent attempts to explore the term ‘power’ often build on the definition given by Max Weber: power is the “opportunity [Chance] to have one’s will prevail [durchsetzen] within a social relationship, also against resistance, no matter what this opportunity is based on”^[10]. Three main findings can be drawn from this definition: firstly, power is presented as a social relationship, i.e. a relational phenomenon. Secondly, the identification of power allows an identification of the position someone is placed in compared to others. Thirdly, this definition encompasses two oppositional aspects, resistance and cooperation.

In order to measure power and power positions of actors in international relations, two broad lines of argumentation have developed. The first one, specified e.g. in the works of Nicholas J. Spykman, Hans J. Morgenthau and Kenneth N. Waltz is called the ‘elements of national power’ approach.^[11] It claims that power can be measured in terms of resources (e.g. military, population). However, this approach has been challenged over the last half of the twentieth century, because it entails several conceptual difficulties. First of all it is problematic that resources are treated as power itself. Power is expressed through the use of resources in a specific situation and therefore dependent on the perspective in which a situation is evaluated. What may be a power asset in one situation can be a power liability in another.^[12] With regard to that, power, in contrast to e.g. money, has a low ‘fungibility’: resources of power in one dimension can hardly be converted or substituted by power resources in another dimension.^[13]

With the power definition of Robert A. Dahl, who built upon the work of Harold D. Lasswell and Abraham Kaplan, a second line of argumentation evolved: “A has power over B to the extent that he can get B to do something that B would not otherwise do”.^[14] This definition not only influenced the evolution of the so-called ‘relational power’ approach, but also triggered the ‘faces of power’ debate.^[15] It was criticized especially by Peter Bachrach and Morton S. Baratz, because Dahl’s definition does not take into account that certain decisions may not take place at all.^[16] In fact they urged for the analysis of what they called the ‘second face of power’ and what came to be known as agenda-setting power. This then stands for certain actors, who are able to limit the choice of topics on which decisions can be taken, if they are capable to use the rules of the game to their advantage. This objection moved the focus of the definition of power from the direct power relation between individuals to one within their environment.

Expanding this shift, Steven M. Lukes introduced a ‘third face of power’, which relates to the concepts of Foucault.^[17] Lukes argues that there is not only agenda-setting power, but also that power is able to influence the more fundamental ‘agreement’ on which an agenda must be based. This means that B and A may agree on an agenda but power may be exercised in the sense, that those agreements are constructed by dominant organs of power in society.

This ‘face of power’ debate, which is connected to the ‘relational power’ approach illustrates that power is relational and multidimensional. The possibilities to exert power are dependent on the context. This means that power can increase in one dimension, while it decreases in another. With regard to David A. Baldwin, there are the following important dimensions of power^[18]: Scope; scope refers to the aspect of B’s behavior affected by A. Domain; the domain of an actor’s power refers to the number of other actors subject to its influence. Weight; the weight of an actor’s power refers to the probability that B’s behavior is or could be affected. Costs; is it costly or cheap for A to influence B and for B to comply with the demands of A? Means; there are many means of exercising influence like symbolic, economic, military and diplomatic ones.

Building on this relational and multidimensional concept of power the approach of Michael N. Barnett and Raymond Duvall, like Baldwin’s, identifies certain dimensions of power^[19]: Compulsory power, which allows one actor to have direct control over another. Institutional power, e.g. when states form international institutions to their advantage. Structural power, which is the composition of social capacities and interests of actors in direct relation to each other. Productive power i.e. is the social production of subjectivity in systems of meaning and signification.

Barnett and Duvall define power generally as “[…] the production, in and through social relations, of effects that shape the capacities of actors to determine their own circumstances and fate.”^[20] With this definition they identify two core analytical levels. The first one highlights the kinds of social relations through which power works. The second one covers the specificity of social relations through which effects on actors’ capabilities are produced. This latter one is focusing on whether the degrees of social relations, through which power works, are direct and socially specific or indirect and socially diffuse. Thus, there are two possible choices. Either there are specific relations of power, which entail some immediate and generally tangible connections between actors. Contrary to that there is the option to see power in indirect and socially diffuse relations, i.e. even if the connections between actors are detached and mediated. This second option highlights the fact that power can be located in the rules of institutions, which are means of mediation between actors, indicating the institutional dimension of power. Actors work with and within the web of rules and procedures that define institutions. Such rules and procedures can shape outcomes in ways that favor some actors over others. Hence, institutional power is actors indirect control over socially distant others.^[21] Thereby, an actor affects the behavior or conditions of others through institutional arrangements.

Having outlined the argumentation of Barnett and Duvall their definition shall be used in the following. This is because of two key reasons: Firstly, they developed their definition with the reasoning not to focus on a single theory of international relations and, to allow considering the multidimensionality of power. Because in the following, international institutions will be assessed through the analytical lenses of two political theories, neorealism and neoliberal institutionalism, the overarching approach is needed. Secondly, their conceptual framework allows to measure institutional power through institutional arrangements. This approach will be taken to analyze the International Monetary Fund and the G20. It presumes that institutional arrangements are of some importance for the power of the European Union as an international actor, which will be reviewed in the subsequent section.

2.2 Power concepts of the European Union as an international actor

The European Union is neither a federation, nor an international organization. It is a kind of ‘sui generis’ being.^[22] In contrast to nation states the EU, in lots of policy fields, is not a homo­genous actor. This makes it difficult to analyze the characteristics of the Union. One metho­dological approach to solve this problem is the concept of ‘actorness’^[23]. The capacity to act thereby is the core element of a political unit. Especially where this capacity is limited, the issue of what Christopher Hill dubbed the ‘capability-expectations gap’ becomes apparent.^[24] This indicates that the expectations towards the Union might be at a point, where the EU is not capable to fulfill them and therefore deemed to fail. To assess the predominant characteristics of the Union as an international actor, scholars developed a variety of concepts. Out of these, three gained widespread attention: the EU as a ‘civilian power’, as a ‘normative power’ and as a ‘hegemonic power’.^[25]

The framing of EU power as a civilian power originates in the work of Francois Duchêne.^[26] In this concept it is assumed that the Union won’t exert its power through military means, but through other ones. Crucial for the status of a civilian power is the orientation of the foreign and security policy alongside particular policy goals.^[27] As a civilian power the Union aims to restrain the use of force, to spread the rule of law in international relations, to intensify multilateral cooperation and to advocate social balance and global justice. One method to reach these aims is multilateral ‘juridification’.^[28] In the aftermath of the institutional creation of the ‘European Security and Defense Policy’ (ESDP) in 1999, the civilian power concept was contested.^[29] While some scholars are of the opinion that this was a step towards its detachment, others argued the contrary. The second position highlighted that only by possessing military capabilities the EU could back up its civilian power and enhance its effectiveness. Thus, this debate focused on capabilities of the Union.

To catch the nature of EU power from another perspective, Ian Manners in 2002 developed the concept of a normative power.^[30] A normative power is a power, which tries to propagate its norms and principles beyond its borders.^[31] The core norms and principles of the Union as formulated by Manners are the centrality of peace, the idea of liberty, democracy, the rule of law and respect for human rights and fundamental freedoms.^[32] In this regard the Union aims to be a role model for other international actors. Thus, the focal point of this concept rests on the conceptual influence of the EU in international relations. However, there remain analytical problems: while the concept is empirically debatable, there is no common definition of the notion of ‘normative’ or ‘normativity’.^[33]

Apart from those two EU power concepts, Adrian Hyde-Price developed an alternative design of the Union as a hegemonic power.^[34] He focuses on the point that the development of the European Union and especially the ESDP is driven by its largest member states. According to Hyde-Price, these actors want to influence their environment in a for them favorable way. In order to do this, they use different sets of instruments one being the export of norms and values, which is because of this an expression of the hegemonial identity of the EU.^[35]

In a synopsis of these positions one can agree with Annegret Bendiek and Heinz Kramer that each power concept shows important facets of the identity of the EU in international relations.^[36] The Union in this context is an ambivalent international actor, who has both normative-civilizing and hegemonial elements and who tries to export democratic values and norms. In order to promote its goals, the Union has to use congruent instruments. One adequate set of tools are institutions. They enable the Union to spread their norms and values and to influence other international actors. It can be concluded, that in order to export norms and values, international institutions are beneficial. This leads to the conclusion that it is the institutional power dimension of Barnett’s and Duvall’s concept, which is of importance for the overall power of the European Union as an international actor. This significance is reflected by different IR theories.

2.3 Institutions in international relations theory

A theory is characterized by reduction, generalization and abstraction.^[37] Given the broadness of IR theory and its relation to ontological questions it does not surprise that there are various approaches towards international institutions.^[38] Consequently, there is no ultimate right or wrong approach.

Two schools of thought shall be examined in the following, neorealism and neoliberal institutionalism. Each one uses their theoretic ‘lenses’ to answer their research questions. However, it has to be made explicitly clear, that both schools are not homogeneous in themselves. Nevertheless, one can agree with Xuewu Gu, that neorealism and neoliberal institutionalism today are mainstream theories of IR.^[39] There might even be a development of a ‘rationalist orthodoxy mainstream’ out of those two approaches.^[40] This is caused, because both theories do approach similar research questions with similar underlying assumptions, whereas their conclusions often differ. But especially this characteristic makes them on the one hand comparable and on the other hand interesting to deal with in order to shed light on the role of international institutions in IR theory.

Neorealism originated in the work of Kenneth N. Waltz’s ‘Theory of International Politics’ in 1979.^[41] Waltz challenged the classical realist approach based on Hans J. Morgenthau. He kept its pessimistic world view and the assumption of anarchy in international relations, but shifted the focus of analysis to the structure of the international system. This structure is marked by anarchy and states may use force at any time. Because of this they all must prepare for themselves: the international system is thus a self-help system. Power in this regard is necessary to guarantee the security of a state. Waltz theory evolved further by the work of others. At present there are at least four different theory strands, which differ in their various focal points, while following the same basic assumptions.^[42]

Neoliberal Institutionalism advanced with the work ‘Power and Interdependence. World Politics in Transition’^[43] of Robert O. Keohane and Joseph N. Nye Jr. in 1977. The neoliberal institutionalists do, like the neorealists, perceive the world as being in an anarchic state. But their focal point is the interest of the actor, not security itself. Actors are egoistic and try to maximize their interests. But, through the exchange of e.g. goods, technology and news, the world is increasingly interdependent. Such interdependence goes along with growing transaction costs unless cooperation diminishes them.^[44] Cooperation through institutions is therefore an element to reduce costs and to get closer to a Pareto optimum state.^[45] This is one of the assumptions of neoliberal institutionalism and a key difference to neorealist theory. Also neoliberal institutionalism developed further and consists today of lots of different strands one of them being e.g. regime theory.^[46]

But, it would not be correct to perceive neorealists as per se dismissive against international cooperation. Especially Joseph M. Grieco points out that states are willing to cooperate if their relative gains are larger than those of their partners.^[47] Given this twist, cooperation is not a contradiction to the neorealist formulation of the international system as a self-help system, but an instrument of such a system. However, for Grieco, international institutions are created to promote the interests of certain actors. The key interest of actors in this regard is that they want to prevent others from increasing their relative capabilities. Therefore, gains for the one are losses for others. In contrast to that Robert O. Keohane states that cooperation in international institutions may not only be about relative, but also about absolute gains. In his mind, this proves especially true for multilateral relations, which are increasingly dominant in the 21th century. Iterative bargaining gets actors to develop trust and decrease the fear of others enhancing their relative capabilities. In that regard cooperation is not a zero-sum game, but all actors can be better off.

Both schools of thought thus agree on the possibility of cooperation by actors through international institutions. They do not differ in the perception that such institutions are about a trade-off between the gains and some political autonomy of an actor.^[48] The key difference is the reasoning for their actions. While it is about security and relative gains in neorealism, neoliberal institutionalism understands cooperation as means to reduce transfer costs and to receive absolute gains. Yet, one can conclude that out of both perspectives a cooperation of actors in international institutions is, to different degrees, meaningful for the power of these actors.

2.4 Concluding remarks on the conceptual and theoretical framework

The chapter elaborated the conceptual and theoretical framework of this publication. At first, the notion of power was explored and the term conceptualized. Power is relational and multi­dimensional. According to the concept of Michael N. Barnett and Raymond Duvall, which is relied upon, institutional power is indirect control of actors over socially distant others through institutional arrangements. By assessing the power concepts of the European Union as an international actor it has been shown that international arrangements are of importance for the EU. The concepts of ‘civilian power’, ‘normative power’ and ‘hegemonic power’ show facets of the identity of the EU in international relations. But exactly because these are important ones, the Union has normative-civilizing and hegemonial elements and tries to export democratic values and norms. For this purpose international institutions are beneficial. Neorealism and neoliberal institutionalism confirm, to different degrees, the significance of cooperation of actors in such institutions for the power of these actors. Both schools of thought agree that cooperation in international institutions is possible. They do however perceive the motivation for such cooperation differently, putting especially either relative or absolute gains in the spotlight. Having elaborated the conceptual and theoretical framework, it will be applied to the subsequent analysis of EU power in the IMF and the G20 during the recent global financial and economic crisis.

3. The global financial and economic crisis and the reactions of the European Union

The global financial and economic crisis that emerged from 2007 onwards is considered as the worst economic crisis in post World War II history, because it induced an economic downturn with unprecedented global depth. But this led not only to massive capital losses all around the world. It also forwarded an unstable global economic state, rising unemployment, and fastly increasing public debts. These debts then induced an EU sovereign debt crisis.^[49] Investors started to distrust governments, like the Greek one, to repay their debts and demanded higher interest rates for government bonds. The following chapter will outline the crisis events and the reactions of the European Union. The time frame of observation is from the offset of the crisis until August 2th, 2011.^[50]

The first signs of the crisis emerged in the United States in February 2007: the US ‘Federal Home Loan Mortgage Corporation’ stopped to buy most risky subprime mortgages and mortgage-related securities.^[51] A long period of credit growth combined with abundant liquidity and strong leveraging had led to the development of bubbles in the US real estate sector. This situation could emerge partly because of increasing imbalances in global trade.^[52] Especially the trade surpluses of China kept the bond yields low in the US and lessened inflationary tendencies. The crisis worsened significantly in the late summer of 2007, when there was an acute liquidity shortage among financial institutions. The basic reactions of especially the US Federal Reserve (Fed) and the European Central Bank (ECB) were trying to secure this liquidity through e.g. the reduction of interest rates and swap arrangements.^[53] However, especially in the EU policymakers hoped that their economies would be able to decouple from the events in the US.^[54] The results show, they were not.

The deeply integrated financial markets, which made large capital flows possible, reacted heavily, after the US bank ‘Lehman Brothers’ declared bankruptcy on September 15th, 2008.^[55] Only one day later the insurance company ‘American International Group’ had to be bailed out by the US government. The governments in the US and the EU reacted to these events with the allocation of additional billions of assets in order to secure the global financial system and the savings of consumers. On October 3th, US President Bush signed the ‘Emergency Economic Stabilization Act of 2008’, which established a $700 billion ‘Troubled Asset Relief Program’, with which the US Department of Treasury could purchase assets from financial institutions.^[56] Profound actions were taken by EU Member States, too, yet they lacked coherence at the Union level at first. Germany, for example, provided 50 billion euro’s as credits for the financial holding company ‘Hypo Real Estate Holding AG’.^[57] It was only when the eurozone leaders and the then UK Prime Minister Gordon Brown met in Paris on October 12th, 2008, that a regulated position emerged.^[58] A short time afterwards, Ireland had to receive a $2.1 billion loan from the International Monetary Fund on November 20th, making it the first IMF loan for a Western European state since 1976.^[59]

On December 11th and 12th the European Council approved a ‘European Economic Recovery Plan’.^[60] Member states and the Union should invest 200 billion euro in order to foster demand. Yet, this Plan was a short-term reaction to the crisis; it did not solve structural problems in the European Union’s economic governance. At this point in time EU member states outside the eurozone were especially shaken by the financial turmoil. In order to improve their situation, the Union granted Hungary a 6.5 billion euro loan on November 4th, 2008 and Latvia a 3.1 billion euro loan on January 20th, 2009.^[61]

One month later the US announced another economic stimulus plan. President Obama signed the ‘American Recovery and Reinvestment Act’ on February 17.^[62] With the objective to create new jobs and to invest into infrastructure, $787 billion were spent. While the US economy afterwards started to recover with the help of these massive investments, the Union’s member states kept on suffering. Their economies were contracting and unemployment soared.

In order to go beyond the short-term actions against fiscal problems, but also to react to the overarching institutional shortcomings of the Union, an EU high level expert group chaired by Jacques de Larosière was set up. It presented its final report on February 25th, 2009, calling among other measures for the better supervision of credit rating agencies and the establishment of a European Systemic Risk Council in order to analyze relevant information for economic stability and to act as an effective risk warning system.^[63] The recommendations of the report were widely followed and thus an overhauled European financial supervision system constructed.^[64] In parallel to these longer term measures the ECB lowered its interest rates to unprecedented one percent until May 7th, 2009. At the end of June the ‘Organization for Economic Cooperation and Development’ (OECD) announced a weak recovery of the financial system to be in sight.^[65]

However, the second stage of the crisis, i.e. the EU sovereign debt crisis, already loomed at the horizon. Although Greece weathered the global financial crisis relatively well, it nevertheless led to increased public spending, decreased tax income and therefore raised the level of public debt.^[66] Apart from that, it became obvious that the official Greek statistics about the fiscal conditions of the country were sugarcoated.^[67] When the Greek government in October 2009 revised their estimate of the government budget deficit from 6.7 to 12.7 percent of the Gross Domestic Product (GDP), investors and financial markets got nervous. As a result the yields on government bonds increased dramatically during the following weeks and aggravated the Greek financial constraints.^[68] To preclude a Greek default, the eurozone together with the IMF compiled a first financial rescue program: In total 110 billion euro of loans were committed to Greece over three years; 80 billion from the eurozone and the rest through the IMF.^[69] This rescue package withheld some pressure from the financial markets. However, other EU member states like Portugal and Spain, which were fiscally crippled by the crisis got into similar troubles.

[...]

^[1] Grevi, Giovanni: The interpolar world: a new scenario, European Union Institute for Security Studies, Occasional Paper, No. 79, June 2009, http://www.iss.europa.eu/uploads/media/op79.pdf, p. 17, 16.09.2011.

^[2] See e.g. Ferguson, Niall: An ottoman warning for indebted America, Financial Times, January 1, 2008, http://www.ft.com/intl/cms/s/0/6667a18a-b888-11dc-893b-0000779fd2ac.html#axzz1WmK0QGlx, 16.09.2011.

^[3] See for this e.g. Youngs, Richard: How will the financial crisis affect EU foreign policy, in: European Security Forum: The Strategic Consequences of the Global Financial and Economic Crisis, Working Paper No 31, March 2009, http://aei.pitt.edu/10742/1/1817.pdf, p. 3, 16.09.2011 and Mahbubani, Kishore: The New Asian Hemisphere. The Irresistible Shift of Global Power to the East, New York 2008.

^[4] European Commission: Economic crisis in Europe: Causes, Consequences and Responses, European Economy 7, Luxembourg 2009, http://ec.europa.eu/economy_finance/publications/publication15887_en.pdf, p. 1, 16.09.2011.

^[5] Grevi, Giovanni: The interpolar world: a new scenario, p. 24 and Altman, Roger C.: The Great Crash, 2008. A Geopolitical Setback for the West, Foreign Affairs January/February 2009, http://www.foreignaffairs.com/articles/63714/roger-c-altman/the-great-crash-2008, 16.09.2011.

^[6] For the purpose of this publication, international institutions are: “[…] institutions, defined as persistent and connected sets of rules (formal and informal) that prescribe behavioral roles, constrain activity, and shape expectations.” See Keohane, Robert O.: The Analysis of International Regimes. Towards a European-American Research Programme, in: Rittberger, Volker: Regime Theory and International Relations, Oxford 1993, p. 29. This definition has two advantages: On the one hand it is broad enough to cover the IMF and the G20, while on the other hand it is useful with regard to both international relations theories that will be discussed, because it does not favor one of those.

^[7] Like it is outlined in the following chapters, it is difficult to describe the EU as a homogenous actor. For this publication the understanding of the European Union refers to the European Union institutions according to the Treaty of Lisbon.

^[8] Morgenthau, Hans J.: Politics among Nations. The Struggle for Power and Peace, Fourth Printing, Norwood 1950, p. 13.

^[9] Landmann, Georg Peter: Thukydides. Der Peleponnesische Krieg, 2. Aufl., Düsseldorf 2006 and Zorn, Rudolf: Machiavelli. Der Fürst, 6. Aufl., Stuttgart 1978.

^[10] Weber, Max: Wirtschaft und Gesellschaft, Grundriss der verstehenden Soziologie, Frankfurt am Main 2008, p. 38, here translated by: Berenskoetter, Felix: Thinking about power, in: Berenskoetter, Felix / Williams, M. J.: Power in World Politics. New York 2007, p. 3.

^[11] Baldwin, David A.: Power and International Relations, in: Carlsnaes, Walter / Risse, Thomas / Simmons, Beth A.: Handbook of International Relations, London 2005, p. 177/178.

^[12] ibid., p. 179.

^[13] Guzzini, Stefano: Power analysis: Encyclopedia entries, DIIS Working Paper 2010:34, Copenhagen 2010, http://www.diis.dk/graphics/Publications/WP2010/WP2010-34-Power%20Analysis%20-%20Encyclopedia-Entries-web.pdf, p. 6, 16.09.2011.

^[14] Dahl, Robert A.: The Concept of Power, Behavioural Science, 1957, vol. 2, p. 202/203.

^[15] Baldwin, David A.: Power and International Relations, p. 178/179.

^[16] Bachrach, Peter / Baratz, Morton S.: Two Faces of Power, American Political Science Review 56, 1962.

^[17] Lukes, Steven M.: Power: A Radical View, Second Edition, Basingstoke 2005 and Foucault, Michel: Power: Essential Works of Michel Foucault1954-1984, Volume Three, London 2002.

^[18] Baldwin, David A.: Power and International Relations, p. 178/179.

^[19] Barnett, Michael / Duvall, Raymond: Power in Global Governance, in: Barnett, Michael / Duvall, Raymond: Power in Global Governance, Cambridge Studies in International Relations, Fourth Printing, Cambridge 2008, p. 3.

^[20] Barnett, Michael / Duvall, Raymond: Power in Global Governance, p. 3.

^[21] ibid., p. 15.

^[22] Fröhlich, Stefan: Die Europäische Union als globaler Akteur. Eine Einführung, Wiesbaden 2008, p. 22.

^[23] For the development of the concept of actorness see e.g.: Sjöstedt, Gunner: The external role of the European community, Swedish Institute of International Affairs, Stockholm 1977 and Jupille, Joseph / Caporaso, James A.: States, Agency and Rules: The European Union in Global Environmental Politics, in: Rhodes, Carolyn: The European Union in the World Community, London 1998, p. 213-230.

^[24] Hill, Christopher: The Capability-Expectations Gap, or Conceptualizing Europe’s International Role, Journal of Common Market Studies, Volume 31, No. 3, September 1993, http://www.aueb.gr/deos/MSc/executives/Bourantonis/expectations-capabilitiesdoc.pdf, p. 305-328, 16.09.2011.

^[25] Bendiek, Annegret / Kramer, Heinz: Interregionale Beziehungen und „strategische Partnerschaften“ – zur Einführung, in: Bendiek, Annegret / Kramer (Hrsg.), Heinz: Globale Außenpolitik der Europäischen Union. Interregionale Beziehungen und strategische Partnerschaften, Baden-Baden 2009, p. 9.

^[26] Francois Duchêne: Europe’s Role in World Peace, in: Richard Mayne: Europe Tomorrow: Sixteen European Look Ahead, London 1972, p. 31-47.

^[27] Bendiek, Annegret / Kramer, Heinz: Die EU als globaler Akteur. Unklare >>Strategien<<, diffuses Leitbild, SWP-Studie, Berlin April 2009, http://www.swp-berlin.org/fileadmin/contents/products/studien/2009_S12_bdk_krm_ks.pdf, p. 16, 16.09.2011.

^[28] ‚juridification‘ is used here in the sense of the German word “Verrechtlichung”. See Habermas, Jürgen: The Theory of Communicative Action: Reason and the Rationalization of society, Boston 1987, p. xxxiv.

^[29] Bendiek, Annegret / Kramer, Heinz: Die europäische Politik der interregionalen Beziehungen und „strategischen Partnerschaften“: Hegemoniale Politik im neuen Gewand?, in: Bendiek, Annegret / Kramer (Hrsg.), Heinz: Globale Außenpolitik der Europäischen Union, p. 222.

^[30] Manners, Ian: Normative Power Europe: A Contradiction in Terms?, JCMS 2002, Volume 40, No. 2, http://www.princeton.edu/~amoravcs/library/mannersnormativepower.pdf, p. 238, 16.09.2011.

^[31] Bendiek, Annegret / Kramer, Heinz: Die europäische Politik der interregionalen Beziehungen und „strategischen Partnerschaften“: Hegemoniale Politik im neuen Gewand?, p. 224.

^[32] Manners, Ian: Normative Power Europe: A Contradiction in Terms?, p. 242.

^[33] Pihs, Susanne: EU Power Examined. An Analysis of the Instigation of ESDP Military Operations, Saarbrücken 2007, p.14.

^[34] Hyde-Price, Adrian: ‘Normative‘ power Europe: a realist critique, Journal of European Public Policy, 13:2 March 2006, http://media.library.ku.edu.tr/reserve/resfall08_09/INTL533_BRumelili/22ndDecember/Normative_power_europe_realistic_wiley.pdf, p. 217-234, 16.09.2011.

^[35] Bendiek, Annegret / Kramer, Heinz: Die EU als globaler Akteur, p. 20.

^[36] Bendiek, Annegret / Kramer, Heinz: Die europäische Politik der interregionalen Beziehungen und „strategischen Partnerschaften“: Hegemoniale Politik im neuen Gewand?, p. 228.

^[37] Gu, Xuewu: Theorien der internationalen Beziehungen. Einführung, 2. Aufl., München 2010, p. 5.

^[38] For an overview about theories of international relations see e.g. Schieder, Siegfried / Spindler (Hrsg.), Manuela: Theorien der internationalen Beziehungen, 2. Aufl., Opladen 2006.

^[39] Gu, Xuewu: Theorien der internationalen Beziehungen, p. 43.

^[40] ibid., p. 47.

^[41] Waltz, Kenneth N.: Theory of International Politics, First Edition, Boston 1979.

^[42] The four theory strands are: rise and fall realism, neoclassical realism, defensive structural realism, and offensive structural realism. See Elman, Colin: Realism, in: Griffiths, Martin: International Relations Theory for the Twenty-First Century. An introduction, New York 2007, p. 15.

^[43] Keohane, Robert O. / Nye Jr., Joseph S.: Power and Interdependence. World Politics in Transition, Boston 1977.

^[44] Gu, Xuewu: Theorien der internationalen Beziehungen, p. 152/153.

^[45] Krasner, Stephen D.: Sovereignty, Regimes, and Human Rights, in Rittberger, Volker: Regime Theory and International Relations, Oxford 1993, p. 139.

^[46] Gu, Xuewu: Theorien der internationalen Beziehungen, p. 151/152.

^[47] Grieco, Joseph M.: Anarchy and the Limits of Cooperation: A Realist Critique of the Newest Liberal Institutionalism, International Organization, Volume 42, No. 3 1988, p. 485-507.

^[48] Ikenberry, John G.: America and the Reform of Global Institutions, in: Alexandroff, Alan S.: Can the World Be Governed? Possibilities for Effective Multilateralism, Ontario 2008, p. 114.

^[49] For the purpose of this publication the global financial and economic crisis and the EU sovereign debt crisis will be subsumed and presented as being two stages of one crisis. This makes sense, because they are inevitably linked with each other.

^[50] Present time. At this day US President Obama signed the law to avert the technical insolvency of the US.

^[51] Federal Reserve Bank of St. Louis: Timeline, http://timeline.stlouisfed.org/index.cfm?p=timeline, 16.09.2011.

^[52] European Commission: Economic crisis in Europe: Causes, Consequences and Responses, p. 12.

^[53] Federal Reserve Bank of St. Louis: Timeline.

^[54] Frasch, Jutta: Die Finanzkrise: Ein Weckruf für die EU, in: Hilpert, Hanns Günther / Mildner (Hrsg.), Stormy: Globale Ordnungspolitik am Scheideweg. Eine Analyse der aktuellen Finanzmarktkrise, SWP-Studie, Berlin Februar 2009, http://www.swp-berlin.org/fileadmin/contents/products/studien/2009_S04_hlp_mdn_hg_ks.pdf, p. 21, 16.09.2011.

^[55] Wearden, Graeme / Teather, David / Treanor, Jill: Banking crisis: Lehman Brothers files for bankruptcy protection, the guardian, September 15, 2008, http://www.guardian.co.uk/business/2008/sep/15/lehmanbrothers.creditcrunch, 16.09.2011.

^[56] U.S. Department of the Treasury: About Financial Stability. What is TARP and Why Did We Need It?, http://www.treasury.gov/initiatives/financial-stability/about/Pages/What-Is-Tarp.aspx, 16.09.2011.

^[57] Wiwo.de: Neues Rettungspaket für Hypo Real Estate über 50 Milliarden Euro, 05.10.2008, http://www.wiwo.de/finanzen/neues-rettungspaket-fuer-hypo-real-estate-ueber-50-milliarden-euro-373535/, 16.09.2011.

^[58] Centre for European Reform: Beyond Banking: What the financial crisis means for the EU, London 2008, http://www.cer.org.uk/pdf/pb_fin_crisis_23oct08.pdf, p. 4, 16.09.2011.

^[59] Abadi, Cameron: Europe’s Economic Meltdown: How Did We Get Here?, Foreign Policy, July 20, 2011, http://www.foreignpolicy.com/articles/2011/07/20/europe_s_economic_meltdown_how_did_we_get_here?page=full, 16.09.2011.

^[60] Council of the European Union: Presidency Conclusions, Brussels 11 and 12 December 2008. Presidency Conclusions, http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/104692.pdf, p. 1, 16.09.2011.

^[61] Council of the European Union: Council approves loan to Latvia to support its medium-term balance of payments, http://europa.eu/rapid/pressReleasesAction.do?reference=PRES/09/16&format=HTML&aged=0&language=EN&guiLanguage=en, 16.09.2011.

^[62] Recovery.Gov: The Recovery Act, http://www.recovery.gov/About/Pages/The_Act.aspx, 16.09.2011.

^[63] The High-Level Group on Financial Supervision in the EU: Report, Brussels, 25 February 2009, http://ec.europa.eu/internal_market/finances/docs/de_larosiere_report_en.pdf, 16.09.2011.

^[64] Bundesanstalt für Finanzdienstleistungsaufsicht: The new system of financial supervision in Europe, http://www.bafin.de/cln_171/nn_721306/EN/BaFin/International/europeansupervision/europaeischeaufsicht__en__node.html?__nnn=true, 16.09.2011.

^[65] OECD: Weak recovery in sight but damage from crisis likely to be long-lasting, says OECD, http://www.oecd.org/document/41/0,3746,en_2649_34109_43123241_1_1_1_1,00.html, 16.09.2011.

^[66] Nelson, Rebecca M. / Belkin, Paul / Mix, Derek E.: Greece’s Debt Crisis: Overview, Policy Responses and Implications, Congressional Research Service, May 2010, http://www.fas.org/sgp/crs/row/R41167.pdf, p. 2, 16.09.2011.

^[67] See e.g. Report by Eurostat on the revision of the Greek government deficit and debt figures, November 22, 2004, http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/GREECE/EN/GREECE-EN.PDF, 16.09.2011.

^[68] Nelson, Rebecca M. / Belkin, Paul / Mix, Derek E.: Greece’s Debt Crisis: Overview, Policy Responses and Implications, p. 3.

^[69] Statement by the Eurogroup, 2 May 2010 Brussels, http://www.consilium.europa.eu/uedocs/cmsUpload/100502-%20Eurogroup_statement.pdf, 16.09.2011.