E-encyclopedia of banking, stock exchange and finance

Selected letter: G

  • G-7

    Since 1975, the heads of state or government of the major industrial democracies have been meeting annually to deal with the major economic and political issues facing their domestic societies and the international community as a whole. The six countries at the first summit, held at Rambouillet, France, in November 1975, were France, the United States, Britain, Germany, Japan and Italy (sometimes referred to as the G-6). They were joined by Canada at the San Juan Summit of 1976 in Puerto Rico, and by the European Community at the London Summit of 1977. From then on, membership in the Group of Seven, or G-7, was fixed, although 15 developing countries' leaders met with the G-7 leaders on the eve of the 1989 Paris Summit, and the USSR and then Russia participated in a post-summit dialogue with the G-7 since 1991. Starting with the 1994 Naples Summit, the G-7 met with Russia at each summit (referred to as the P8 or Political Eight). The Denver Summit of the Eight was a milestone, marking full Russian participation in all but financial and certain economic discussions; and the 1998 Birmingham Summit saw full Russian participation, giving birth to the Group of Eight, or G-8 (although the G-7 continued to function along side the formal summits). At the Kananaskis Summit in Canada in 2002, it was announced that Russia would host the G-8 Summit in 2006, thus completing its process of becoming a full member. After the invasion of Crimea in 2014, Russia has no longer joined the Summits. In 2017 the summit took place in Italy (Taormina), in 2018 will be in Canada (Charlevoix).

    Further information on summits, documents and analyses are available here

  • G-8

    (Text by G-8 Research Group - University of Toronto, http://www.g8.utoronto.ca/what_is_g8.html)

    Since 1975, the heads of state or government of the major industrial democracies have been meeting annually to deal with the major economic and political issues facing their domestic societies and the international community as a whole. The six countries at the first summit, held at Rambouillet, France, in November 1975, were France, the United States, Britain, Germany, Japan and Italy (sometimes referred to as the G6). They were joined by Canada at the San Juan Summit of 1976 in Puerto Rico, and by the European Community at the London Summit of 1977. From then on, membership in the Group of Seven, or G7, was fixed, although 15 developing countries' leaders met with the G7 leaders on the eve of the 1989 Paris Summit, and the USSR and then Russia participated in a post-summit dialogue with the G7 since 1991. Starting with the 1994 Naples Summit, the G7 met with Russia at each summit (referred to as the P8 or Political Eight). The Denver Summit of the Eight was a milestone, marking full Russian participation in all but financial and certain economic discussions; and the 1998 Birmingham Summit saw full Russian participation, giving birth to the Group of Eight, or G8 (although the G7 continued to function along side the formal summits). At the Kananaskis Summit in Canada in 2002, it was announced that Russia would host the G8 Summit in 2006, thus completing its process of becoming a full member. (See Delegations & Documents for a list of all summits since 1975.) The G7/8 Summit has consistently dealt with macroeconomic management, international trade, and relations with developing countries. Questions of East-West economic relations, energy, and terrorism have also been of recurrent concern. From this initial foundation, the summit agenda has broadened considerably to include microeconomic issues such as employment and the information highway, transnational issues such as the environment, crime and drugs, and a host of political-security issues ranging from human rights through regional security to arms control. The responsibility of host rotates throughout the summit cycle at the end of the calendar year, as follows: France, United States, United Kingdom, Russia (as of 2006), Germany, Japan, Italy and Canada. Throughout the year, the leaders' personal representatives … known as sherpas … meet regularly to discuss the agenda and monitor progress. In addition, the G7/8 has developed a network of supporting ministerial meetings, which allow ministers to meet regularly throughout the year in order to continue the work set out at each summit; these include the meetings of the finance ministers, foreign ministers and environment ministers, among others. G7/8 ministers and officials also meet on an ad hoc basis to deal with pressing issues, such a terrorism, energy, and development; from time to time the leaders also create task forces or working groups to focus intensively on certain issues of concern, such as a drug-related money laundering, nuclear safety, and transnational organized crime. The G7/8 provides an important occasion for busy leaders to discuss major, often complex international issues, and to develop the personal relations that help them respond in an effective and collective fashion to sudden crises or shocks. The summit also gives direction to the international community by setting priorities, defining new issues and providing guidance to established international organizations. At times, it arrives at decisions that address pressing problems or shape international order more generally. The summit members comply modestly with the decisions and consensus generated by and codified at their annual meeting. Compliance is particularly high in regard to agreements on international trade and energy, and on the part of Britain, Canada, and Germany (for analysis of compliance, see Analytical Studies). Summit decisions often create and build international regimes to deal with new international challenges, and catalyze, revitalize and reform existing international institutions. In recognition of its centrality in the process of global governance, the summit has always attracted the attention of thousands of journalists at each leaders' meeting, and of a number of countries seeking admittance to this exclusive and powerful club. It has also become a prime occasion for non-governmental and civil society organizations to advocate on behalf of their concerns. The annual meeting has been an opportunity for anti-globalization demonstrations since the Birmingham Summit in 1998; the protests turned violent in 2001 at the Genoa Summit, resulting in the death of a protestor.

    For more information on the history and processes of the G7/8, please see G8 Online.

  • G20

    (Text by G-8 Research Group - University of Toronto, http://www.g20.utoronto.ca/g20whatisit.html)
    The G20 is an informal group of 19 countries and the European Union, with representatives of the International Monetary Fund and the World Bank. The finance ministers and central bank governors began meeting in 1999, at the suggestion of the G7 finance ministers in response to the global financial crisis of 1997-99. Since then, there has been a finance ministerial meeting every fall. On November 14-15, 2008, U.S. President George W. Bush invited the leaders of the G20 countries - creating the first ever G20 summit - to Washington DC to coordinate the global response to the aftermath of the financial crisis that had started in the United States. At that meeting, the leaders agreed to meet again. Thus, British prime minister Gordon Brown hosted the second G20 summit in London on April 1-2, 2009. This was followed by the third G20 summit hosted by U.S. president Barack Obama in Pittsburgh on September 24-25, 2009, with a fourth summit to be co-chaired by Canadian prime minister Stephen Harper and Korean president Lee Myung-bak in Toronto on June 26-27, 2010. In January 2010, at a meeting of the G20 leaders' personal representatives (sherpas) in Mexico, it was decided that after the sixth summit - scheduled for November 11-12, 2010, and hosted by Korea - the G20 leaders would begin meeting once annually, in the fall, beginning in France in 2011. Mexico will chair the G20 in 2012. To help prepare these summits, the G20 finance ministers and central bank governors continue to meet on their own, on the occasion of the spring and sometimes also the fall meetings of the International Monetary Fund and the World Bank, and again in the final weeks before the summit.

    News, commentaries and documents can be found at this page.

  • G20 DERIVATIVES REGULATION

    Abstract

    OTC derivatives had a clear role in spreading out volatility and risks in the 2007-2009 financial crisis. While the broad approach to reform taken by G-20 countries to achieve financial stability is sound, what has been neglected so far, however, is the role played by non-financial operators and the low degree in international coordination on new financial regulation. Non-financial operators trading of OTC derivatives does not often take place under the new regulatory umbrella, either because of the relative size (i.e. below the minimum threshold) or because of the lack of capital requirements. This lowers the incentives to clear centrally, increases counter-party risks and reduces financial stability. The low degree in international coordination on new financial regulation further decreases the ability to deal with unexpected events.

    Financial Derivatives

    The global regulatory framework has not yet intervened on the trading of OTC derivatives by non-financial operators that constitutes a source of systemic risks. Global leaders of the G20 met in Pittsburgh (2009) and decided to revise the global financial architecture to better cope with evolving risks and to effectively promote growth. As most economists agree on, the financial crisis has been not only the product of excessive credit and assets’ bubble, but also of “poorly designed liberalization, ineffective regulation and supervision, and poor interventions” (IMF, 2014, p.3). Financial derivatives had a clear role in spreading out volatility and risks, but their economic role separates from the shortcomings in their trading infrastructures.

    Under the auspices of the Financial Stability Board (FSB), the G-20 nations have moved to regulate the use of OTC derivatives by financial operators (i.e. banks and financial intermediaries), since they trade around 90% of the global derivatives markets. At the heart of the international regulatory effort is an attempt to build resilient, continuous, and transparent OTC derivatives markets.

    Regardless of the reduced global economic performance, the derivatives’ market continued to grow and reached $710 trillion at end 2013 (BIS, 2014A), as measured with the notional amount outstanding; the corresponding gross market value declined to $19 trillion, below its 2012 level ($24 trillion), mostly because of interest rates contractions due to the lowering global path (Tabs. 1, 2, 3). The notional dimension of derivatives largely exceeds that of most financial products; as of December 2013, the global capitalization of the equity markets reached $64 trillion, and the bond market reached $22.4 trillion (WFE, 2014).

    The BIS (2013) established a group to study the macroeconomic impact of the new regulatory framework for OTC derivatives; economic benefits and costs of planned reforms have been compared, and the long-run benefit is the reduced probability of economic and financial crisis which positively affects growth. The (short and long term) costs of planned reforms are relevant for the global financial system, but the lack of data on detailed bilateral trading exposure, together with the uncertainty over the final regulatory scenario limited the extent of the analysis. The probability of gaining higher benefits under the new regulatory system strongly depends on the level of coordination among financial systems and the ability to recognise and close those gaps left open in the past.

    Generally speaking, the EU and the U.S. are well advanced in adopting the new rules, with respect to other G-20 countries, but that comes at the detriment of consistency and coherence between the European and the American systems; in particular, divergent rules on capital, liquidity, derivatives and banking structure create regulatory misalignments that incentives the beggar-thy-neighbour, and the race to the bottom in terms of competition and price at the detriment of markets’ stability (Deutsch, 2014). This has non-trivial effects on growth and development for all G-20 countries because of deep financial linkages.

    Non-financial operators

    The trading of OTC derivatives products by Governments, local administrations, and non-financial firms’ accounts for 10% of the total global OTC market in 2013 and together with the model risk, i.e. the uncertainty over the pricing of derivatives, limit the possibility to effectively achieve financial stability under the new regulatory system. The relatively small dimension should not limit considering the potential risk involved, since domino effects might spread thanks the deep interconnections in the financial system. Before 2007 nobody would have ever imagined that a tiny market like that of subprime mortgagesi would have created such a global disaster, not even the US Federal Reserve (Gramlich, 2004).

    Governments and local administrations

    After 1990 many sovereign states employed OTC financial derivatives to hedge their debt, and to smooth its costs (e.g. foreign-currency denominated bonds). The successful experience of U.S. states (e.g. California, Texas), Denmark, and Brazil confirm that OTC derivatives contracts are powerful risk management tools although the small disclosure of data on such contracts fuelled criticism (Oldani, 2008).

    Local administration’s experience with OTC derivatives strongly depends on their financial independence from the central state. Since the State is finally responsible for all obligations underwritten by local administrations, the UK prohibited the use of derivatives by local administrations back in 1988; on the other side, Italian Regions have outstanding OTC derivatives worth €10,784 million in 2013 under no clear domestic regulatory frameworkii. In the recent past some public administrations bankrupted because of financial mismanagement involving derivatives contracts; the $2 billion Orange County (California) default in 1994 and the $4 billion default of the Jefferson County (Alabama) in 2011 in fact were caused by excessive financial risks (Howell-Moroney and Hall, 2011) and not by reduced resources available, like taxes or Government fundingiii.

    The Governmental Accounting Standard Board (GASB) issued the Statement No. 53 in 2008 that “addresses the recognition, measurement and disclose of information regarding derivatives entered into by state and local governments”. The aim of the statement is to “improve financial reporting by requiring public administrations to measure derivatives at fair value in their economics resources measurement”.

    The standard establishes disclosure requirements such as a derivative summary, information about hedge effectiveness, fair value, management’s objectives, significant terms, and risks. The standard is effective since fiscal year 2010, but not all countries decided to update the domestic accounting systems in order to provide meaningful and homogenous information on financial transactions (again Italy lies far behind). At present, small information is provided by administrations on their derivatives contracts, limiting the empirical analysis of risks and costs.

    Non-financial firms

    Non-financial firms trade OTC products to hedge and to speculate; the economic literature has highlighted that the lack of accounting data on OTC contracts separate from other hedging contracts (e.g. insurance) represents a barrier toward a comprehensive assessment of risks involved. While financial firms should comply also with capital and margin requirements, non-financial ones are free to engage in potentially risky contracts without any requirement and under small supervision. In July 2014 the International Financial Reporting Standards (IFRS) issued the standard n.9 that will replace the International Accounting Standard (IAS) statement n. 39 on the use of OTC derivatives by financial and non-financial firms after 2018; the fair value measures derivatives’ exposure, and firms should provide information on the type of derivatives, scope and relations with the core business. The evolving financial system structure and increased complexity lead to this new comprehensive standard.

    Model risk: the known unknown

    Uncertainty over the pricing model of derivatives leads to the model risk. In 1997 the A. Nobel Prize in Economics has been assigned to Myron S. Scholes and Robert C. Merton for their contribution to the pricing of financial derivatives; in 1997-1998 the hedge fund they managed, the Long Term Capital Management (LTCM) was hit by the Asian and the Russian bonds crises, and finally crashed. The collapse of LTCM was due to the complex risk models employed and to the overreliance to such models. Many economists and markets players believe that derivatives’ pricing models have been used wrongly prior to the subprime crisis and that they are still used wrongly today (Jarrow, 2010). Derman, back in 1996, introduced six simple rules of thumb to mitigate the model risk, but they can be further summarised in one: prefer simple models to complex ones since Devil is in the detail. This principle should be taken into consideration by board’s members of non-financial firms and managers of local public administrations.

    Enron would be an easy example for the reader to figure out the potential risks involved in derivatives’ trading, but instead we follow Warren Buffett’s approach: he stated in his 2002 shareholder’s letter that derivatives are financial weapons of mass destructions, but, by looking at Berkshire Hathaway balance sheet, it is clear that Mr. Buffett actively uses them, taken with a grain of salt. Nevertheless, which is exactly the size of the grain is not easy to say.

    Conclusion

    The trading of OTC products by non-financial operators (Governments, local administration and non-financial firms) often occurs in the absence of capitalization, proper financial accounting criteria and adequate monitoring or supervision. G-20 Governments trading should be under scrutiny by other member countries, and by credit rating agencies; however, the recent financial crisis already showed the limits of credit rating agencies, and the small degree of coordination among countries in case of unexpected financial shocks. Local administrations might have a certain degree of freedom to engage in sophisticated financial products, like OTC derivatives, and should be monitored by the central state. Non-financial firms either listed or not on a stock exchange, are monitored by domestic market authorities. However, their financial trading is not under intense monitoring and scrutiny.

    The BIS (2014C) analyses the incentives to centrally clear OTC derivatives contracts under the new regulatory system, and, with respect to non-financial operators, states that:

    if an end user of OTC derivatives is not subject to capital requirements for counterparty credit risk, its incentive for central clearing is reduced; if the end user is not subject to the margin requirement on non-centrally cleared derivatives, or that fall below the margin required thresholds, the impact on incentives to clear centrally is not straightforward (p.19)

    The regulatory frameworks in the EU and in the U.S. are not fully consistent with each other, and the lack of transatlantic consistency can be reduced by means of greater regulatory coordination by the G-20 over principles, rather than rules.

    The G-20 should strengthen the international financial system structure and explicitly consider the role of non-financial operators trading of OTC products, since some of them fall entirely out of the new regulatory umbrella. Non-financial operators should be compelled to adhere to the centralised counterparty system, and the collateralised systems of trading, and to enhance their accounting and risk management procedures in order to properly deal with financial risks. The focus has to be out on the derivative, and not on the type of counter-part that enter the trading.

    References

    Bank for International Settlements BIS (2013) Macroeconomic impact assessment of OTC derivatives regulatory reforms, Macroeconomic Assessment Group on Derivatives MAGD, Basel, August.

    Bank for International Settlements BIS (2014A) OTC derivatives market activity in the second half of 2013, Basel May.

    Bank for International Settlements BIS (2014B) Regulatory reform of over-the-counter derivatives: an assessment of incentives to clear centrally, Basel, October.

    Derman Edward (1996) Model Risk, RISK.

    Deutsch Klaus (2014) Transatlantic consistency, EU Monitor: Global financial markets, Deutsche Bank Research, July 9.

    Gramlich Ed M. (2004) Subprime Mortgage Lending: Benefits, Costs, and Challenges, Remarks At the Financial Services Roundtable Annual Housing Policy Meeting, Chicago, Illinois, May 21.

    Howell-Moroney Micheal E. , Jeremy L. Hall (2011) Waste in the Sewer: the collapse of accountability and transparency in public finance in Jefferson county, Alabama, Public Administration Review, March-April, 232-242.

    International Accounting Standard (IAS) n.39 Financial Instruments: Recognition and Measurement.

    International Financial Reporting Standards (IFRS) n.9 Financial Instruments.

    International Monetary Fund (IMF) (2014). Understanding Financial Crises: Causes, Consequences, and Policy Responses. Stijn Claessens, M. Ayhan Kose, Luc Laeven, and Fabián Valencia (eds), Washington.

    Jarrow Robert (2010) Risk management models, Johnson School Research paper Series n.38-2010.

    Oldani Chiara (2008) Governing Global Derivatives: Challenges and Risks, Ashgate Publishers, London, ISBN 9780754674641.

    i In 2007 the subprime mortgage market accounted for around 12% of the entire mortgage market.

    ii The outstanding debt of Italian local administrations is €115 trillion (7% of GDP, 2013); the Italian Republic has underwritten swaps to hedge the foreign denominate debt that is less than 3% of total debt in June 2014. The Italian public debt reached 132% of GDP in 2013.

    iii The city of Detroit is an example of default due to over-financing with reduced resources, decreasing population and production. Unbalanced interest rate swaps produced further damage and the city paid large fees to banks to foreclose some of them

    EDITOR: CHIARA OLDANI, published also in the World Commerce Review, Dec. 2014

  • G20 LOS CABOS JUNE 2012 Final statement

    On June 20th, 2012 the leaders of G20 countries released their final statement on growth, stability, social protection, trade, financial architecture, commodity prices and volatility, green economy and development, and the fight against corruption.

    Increasing importance is played by emerging economies, especially larger ones. Imbalances and disequilibria are addressed by means of common regulation to achieve common growth. Strengthening the financial architecture is of central importance to restore growth, and the centralised system of clearing for derivatives is wished as a solution to smooth excessive risks and reduce disequilibria. However, the deadline of 2012 seems to be not feasible.

    See also:

    OIL PRICE VOLATILITY AND SPECULATION (Encyclopedia)

  • Gaussian process

    It's a stochastic process (Xt) with t ? R+, where random variables constituting the random vector n-dimensional (Xt1, Xt2, Xt3, …, Xtn) for ?n ? N, versus time (t1, t2, t3, …, tn) per ?n ? R+, are distributed as a multivariate Gaussian distribution, according to the following equation for the probability density:

    Where b represents the expected value of the random variable function versus time and K the covariance between the random variables.

    Note that this process is uniquely determined by assigning the functions:

    where K is a symmetric function and semi positive definite.

    Editor: Giuliano DI TOMMASO

  • GENERAL MOTORS

    General Motors has been one of the world's largest automakers and it traces its roots back to 1908. The New GM Company started operating on 10 July 2009, after the bankruptcy of the old company. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in more than 120 countries. GM and its strategic partners produce cars and trucks in 31 countries, and sell and service these vehicles through the following brands: Baojun, Buick, Cadillac, Chevrolet, FAW, GMC, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall, and Wuling. GM's largest national market is China, followed by the United States, Brazil, the United Kingdom, Germany, Canada, and Russia. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services.
    General Motors acquired operations from General Motors Corporation on 10 July 2009, and references to previous periods in this and other press materials make reference to operations of the old General Motors Corporation. More information on the new General Motors can be found at www.gm.com.
    GM is the majority shareholder in GM Daewoo Auto & Technology Co. (South Korea), and it has product, powertrain and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd. (Japan). Moreover, GM has advanced technology collaborations with Chrysler LLC, Daimler AG, BMW AG and Toyota Motor Corp. as well as vehicle manufacturing ventures with several automakers around the world, including Toyota, Suzuki, Shanghai Automotive Industry Corp. (China), AVTOVAZ (Russia) and Renault SA (France). Genuine GM parts and accessories are sold under the GM, GM Performance Parts, and ACDelco brands through GM Customer Care & Aftersales, which supplies GM dealerships and distributors worldwide. GM engines and transmissions are marketed through GM Powertrain.
    Link:
    www.gm.com
    © 2011 ASSONEBB

  • GLOBAL PUBLIC GOOD (ENCYCLOPEDIA)

    Abstract

    Peace, climate change and ecosystem management, exploitation of renewable energy, international economic and financial stability are all "goods" whose production has a global public importance. The concept of Global Public Good has been developing since the sixties and even more in the last two decades, and it is now considered the new reference frame for global political and economic development as well as for international relations. In 1999 The United Nations Development Program defined these assets as public goods (therefore non-rival and non-excludable) whose usefulness crosses over national and regional boundaries and encompasses more groups of people not only with reference to geographical condition, but also under the socio - economic and generational perspective.

    Historical context
    The 15th and 16th centuries ushered in a new epoch in international relations, marked by the appearance of sovereign States in Europe as well as by the expansion of their colonial powers and trade links. However, in recent centuries, especially in the last decades, the amount of goods (or"bads") intentionally considered on a global range, has surged, often growing exponentially. The reasons are due to several factors:
    - new technologies have increasingly enhanced human mobility as well as the movement of goods, services, and information around the world.

    - Economic and political openness and the rise of diplomatic relations have provided a further impetus to cross-border transnational activity.
    - Systemic risks have increased. The accumulating environmental degradation caused by human activities, involves many risks, including global climate change. Integrated financial markets pose the risk of boom - bust cycles. Growing socioeconomic inequities bring into question the legitimacy of the global governance system.
    - International regimes, often run by small groups of powerful Nations claiming on universal applicability, are becoming more influential. Nations and groups have seen their public domains becoming intertwined and their living conditions interdependent. For example, an economic downturn in a major economy usually affects many others Countries through trade and investment links. Financial crises can spread from one continent to another one within few hours, often not sparing economies with solid fundamental variables either. New global public platforms, such as Internet, weaken the influence of many conventional public policy tools, including those for controlling problems, that is “public damages” such as tax evasion, money laundering, drug trafficking, commercial fraud and child abuse. The public and policy makers all over the world, increasingly find out that public goods, which they would prefer to have at a local level, cannot be produced solely through domestic action. A growing number of national public goods have gone global.

    Definition

    In order to fully understand the meaning of Global Public Good is necessary to analyse the concept of "public good" first. In fact, Global Public Goods may be considered as a particular type of public goods presenting the two public goods’ fundamental characteristics:
    - Non - excludability: the impossibility or the extreme difficulty to exclude someone from the consumption of the good;
    - The non - rivalry: the possibility that good has to be consumed simultaneously by many people. The consumption of a single individual has not to affect the possibility of consuming, at the same time, the same good by others.

    However, a public good can take on a global character if it complies with the three important criteria, universally recognized and established by the United Nations Development Program in the late nineties :

    - Geographical criterion;
    - Socio … economic criterion;
    - Generational criterion.

    Therefore, the notion of global is not merely geographic, that is global as opposed to local, national or regional. On the other hand, it is multidimensional, including, besides the geographic dimension, also the sociological and temporal one.

    Geographical criterion

    Nation States represent important core elements of the international community and play crucial role in international relationships. Since the Peace of Westphalia in 1648, Nation States have enjoyed formal policy sovereignty and played a key role in shaping human activity - under the economic, social, cultural and political viewpoint- within their borders.1 For a variety of reasons and purposes, States form groups such as regional forums (for example, in Asia, Latin America, Sub-Saharan Africa or Europe), trade blocs (such as the North America Free Trade Agreement or South American Common Market, or Mercosur) defense alliances (such as NATO, the Nord Atlantic Treaty Organization), and clubs (such as the OECD, Organization for Economic Cooperation and Development). The first requirement for a Global Public Good is that it covers more than one group of Countries. In fact, if a public good were only to apply to just one geographic region, Europe for instance, it would be a regional public good, and substantially a club good.

    Socio- economic criterion

    As the trend analyses of human development over the past 50 years have shown, socio-economic disparities are growing both between and within Countries. The rich are getting richer and the poor are getting poorer not only in terms of income, but also in many other respects, including access to knowledge, information and technology.

    Being rich or poor is not a matter of being a citizen of a rich or a poor Country. On the contrary, wealth and deprivation coexist side by side, both in the poorest and in the richest Countries. Therefore, even though a public good has world-wide benefits because it is able to reach all Countries (or at least, a large number of Nations belonging to different country groups), its benefits may be accessible only to better-off population segments, marginalizing the poor further.

    For instance, Internet, runs such a risk because it has a high access price (the costs of a computer, a telephone line, and sometimes the subscriber fee for the Internet service provider). Similarly, Global Public "Bads", such as malaria or tuberculosis, if left unaddressed, often hurt the poor more than the rich ones. This is because the poor ones may be unable to afford medical treatments and protection or because the only asset they can count on is often just their health and physical strength.

    Generational criterion

    The preceding two points suggest that ideally, humanity as a whole should be the beneficiary of Global Public Goods; but an individual’s life is limited. Therefore, it is fundamental to specify which generation we are referring to when we say “humanity”. For instance, the environmental movement reminds us of the importance of a long-term perspective. As argued in the Brundtland Commission’s report, “Our Common Future”, sustainable development is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.2 Not only does this definition of sustainability apply to environmental debt (that is, the irreversible damages to natural resources), but also to finances and other forms of debt. Any type of collective borrowing from the future raises questions about intergenerational equity. Some authors, including Sandler, distinguish between intra - generational and intergenerational Global Public Goods, emphasizing how we have to deal with trade-offs between these two types of goods.3

    Nuclear energy is a case in point: it can increase the availability of energy for present generations, but in the long run it will create nuclear waste. Hence the third qualifying mark of a Global Public Good is that it meets the needs of present generations without jeopardizing those of the future ones.

    Typologies

    The table 1 classifies Global Public Goods primarily according to their human-made properties (society).4 Global Public Goods are considered public in two senses: public rather than private, and global rather than national.



    Quadrants 1 - 2A - 4A are referring to the “national domain”, while quadrants 2B … 3 - 4B to the “global public domain”.

    Many decisions, on which it may prove it hard to reach consensus at the national level, such as on whether and to what extent to make certain goods public or private, must be made by Nations all together.

    The goods in quadrants 2 and 4 require a kind of harmonization of national policies. Policy harmonization is often intended to encourage Countries to internalize cross-border externalities by generating the positive ones while taking back the negative ones. Several goods in quadrant 2B involve efforts which aim at increasing the inclusiveness of such goods as international communication and transport systems in order to improve the worldwide availability of network externalities. The same intention usually drives initiatives to increase adherence to norms and standards, including human rights, and to foster respect for national sovereignty. Most of the goods in quadrant 2B are perceived by different national and transnational actors as global benefits. On the contrary, many of the goods in quadrant 4 involve the internalization of negative cross-border externalities. These types of externalities can be diffused in almost every Country, like the carbon dioxide emissions, which … if combined … increase the risk of global warming. These externalities can originate just in some Countries, but potentially, they could spread worldwide, as with the outbreak of a new contagious disease. The political response to the negative externalities could be to establish an international regime that all Countries would be expected to comply with. The promotion of basic human rights, shown in quadrant 2B, is a good example. However, depending on the public good under consideration, alternative policy options might be preferable, as shown in quadrants 4A and 4B. Quadrant 4A lists goods with political responses that involve defining and assigning new (national) property rights, such as national pollution allowances.

    Quadrant 4B includes goods involving measures similar to those of the national context and they aim at making certain crucial goods, such as basic education and health care, universally available. Moral and ethical concerns often motivate the international community to undertake such measures. Sometimes externalities have an important role too. For example, there might be concern that the potential global repercussions of failing States, because of conflicts and wars, could impose much higher costs in the future than facing today the root causes of political tension, such as the extreme poverty and inequity.

    A further message, related to the pure public goods, is listed in quadrant 3.

    As national borders become more flexible and cross-border economic activity increases, these goods turn into indivisible across borders or at transnational level. All Nations face the same international economic conditions in the international financial markets and they also cope with the same risk of global climate change. Because of this indivisibility, environmental sustainability is included in figure 5 as a global concern, so that Countries are encouraged to internalize the environmental externalities they do generate.

    For this reasons, it is possible to develop a typology of Global Public Goods (table 2)5 which differentiates between goods based on the nature of their benefits and not on their aims (since they are all global), therefore, on their public dimension. Differentiating between the types of publicness associated to particular classes of Global Public Goods, sheds new light on some of the political tensions typical of globalization. It shows that in order to fully understand these types of tensions, it is necessary to analyze globalization not just within cross-border private economic activities, but also within what it is currently happening to goods in the public domain. International cooperation seems essential for global policy outcomes or conditions. For global man-made goods, the international community can count on a wider leeway in the pursuit of international cooperation. In addition, international cooperation can often take the form of more concerted national policy action. However, in order to achieve global policy outcomes or conditions and to outline the shaping of their indivisible benefits, it is often needed a truly widespread action raising all actors to the same level.6




    Global Public Goods and Provision Problems


    Considering now the problems related to these goods, one of the most critical aspects is related to their supply. The main anomaly concerns the problem of underproduction due to the phenomenon of free - riding. In fact, we have observed how the Global Public Goods, being a special category of public goods, are subject to non - excludability. It is not possible to exclude any individual from the consumption of these goods, so everyone has to generate positive externalities (that is, those effects that also people who have not contributed to the production of goods, can benefit from). People who benefit from a good without afford the costs involved, are consequentially called free - riders. Therefore, being the production costs allocated out of proportion among the recipients of goods, the production turns out to be too expensive and consequently it will be reached a production of a lower level than a socially optimal one. At the national level, this problem might be easily solved by moving the production of public goods from the private sector to the State which can get the necessary financing through public taxation. On the other hand, at the international level the situation is certainly more complicated7 because the State owns the authority to impose on citizens its fiscal decisions. But currently, with regard to Global Public Goods, there are no institutions, international speaking, able to exercise the necessary authority to efficiently regulate the system of production costs for these goods. For this reason, in the management of Global Public Goods’ production costs, there are two different prospects: either the States give up part of their sovereignty in favor of international institutions with coercive powers, or they decide to align their economic policy guidelines and follow the way of international cooperation.

    Global Public Goods and Globalization

    Globalization is often associated with increased privateness thanks to the liberalization of the economy, which allows to move more goods and services into markets, fostering integration of international markets and encouraging private cross-border economic activity as trade, investments, transport, travels, migration, and communication. These are certainly important characteristics of globalization.

    Globalization also concerns with the increase in the public aspects about people’s lives, which are becoming more interdependent. Events in one area of the globe often provoke repercussions all around the world. A growing collection of international policy principles, norms, treaties, laws and standards, is defining common rules for an ever-wider range of activities. We may think about the many international agreements on some global concerns such as the maintenance of peace and security, the control over terrorism and drug trafficking, the prevention of the risk of global climate change, the fight against the spread of communicable diseases or the construction of global communication and transportation networks. These concerns all deal with the provision of public goods whose benefits or, the costs in the case of public “bads,” cut across the national borders proving that many national public goods have turned global. Globalization and Global Public Goods are different, but still inextricably linked concepts. In fact, the way in which Global Public Goods are provided determines whether globalization is to be considered as an opportunity or as a threat.

    Since that Global Public Goods are public goods with benefits (or costs, in the case of such "bads" as crime and violence) that reach out Countries and regions, involving both rich and poor populations and different generations too, it can be stated that to some extent, Global Public Goods and "Bads" can be considered as a result of globalization. For example, as financial markets become integrated, a financial crisis that would have once hit just a Nation, could now turn out to be an international one if not carefully managed from the very beginning. We can provide a lot of examples such as Mexico’s “tequila” crisis in 1994…95, East Asia’s financial crisis in 1997…98, the Russian Federation’s debt default in 1998, and more recently, the Greece financial crisis. Nevertheless, Global Public Goods are also important driving forces of globalization.

    The international civil aviation system is a case in point. Airplanes could not travel around the world as swiftly and safely as they do without carefully harmonized national civil administration services and infrastructures. Managing globalization depends largely on providing Global Public Goods.8 While the link between globalization and public goods has rarely been explored, globalization is being contested above all when people feel overwhelmed and even attacked by goods or, more often, by "bads" of public domain, including contagious diseases, financial meltdowns, ecological calamities, and computer hacking. These "bads" tend to affect people indiscriminately. Because of these conditions, individual and national political responses are often ineffective. As a result many people around the world share a sense of widespread uncertainty and sometimes even a loss of the personal security.9

    Perceptions of globalization vary across population groups, but they also vary according to the Global Public Good and it can be said that discontent about globalization often arises from the ways in which Global Public Goods are, or are not, provided.
    There are growing expectations among Countries for a fair and participatory supply of public goods, because they should affect the population as a whole. .

    In fact, the protests against globalization could be interpreted as a demand for a better provision of Global Public Goods, so that globalization may also be one day, an opportunity for bettering and enriching the lives of everyone.

    ____________________________________

    1The Peace of Westphalia was a series of peace treaties signed between May and October 1648 in Osnabruck and Munster. These treaties ended with the Thirty Years’ War (1618 … 1648) in the Holy Roman Empire, and with the Eighty Years’ War (1568 … 1648) between Spain and the Dutch Republic when Spain formally recognized the Dutch independence.
    2http: //www.un-documents.net/wced-ocf.htm.
    3Corner T. and T. Sandler, (1993), Private Provision of Public Goods under price uncertainty, in Social Choice and Welfare, Vol. 10, No. 4, p. 375.
    4Kaul I, P. Conceiçao and R. U. Mendoza (2003), Providing Global Public Goods: Managing Globalization, New York, Oxford University Press.
    5Ibidem.
    6Sandler T. (1998), “Global and Regional Public Goods: a Prognosis for Collective Actions”, Fiscal Studies, Vol. 19, No. 3, pp. 221-247.
    7Musgrave R. A. and P. B. Musgrave (2003), Prologue in Providing Global Public Goods: Managing Organization, Oxford University Press, p. 12.
    8Kaul I, P. Conceiçao and R. U. Mendoza (2003), op. cit.
    9Held D. and A. McGrew (2007), Globalization/Anti Globalization, Polity Press, p. 90.


    Bibliography
    Corner T. and T. Sandler, (1993), “Private Provision of Public Goods under Price Uncertainty”, in Social Choice and Welfare, Vol. 10, n. 4, p. 375.
    Held D. and A. McGrew (2007), Globalization/Anti Globalization, Polity Press, p. 90
    Kaul I, P. Conceiçao and R. U. Mendoza (2003), Providing Global Public Goods: Managing Globalization, New York, Oxford University Press.
    Musgrave R. A. and P. B. Musgrave (2003), Prologue in Providing Global Public Goods: Managing Organization, Oxford University Press, p. 12
    Sandler T. (1998), “Global and Regional Public Goods: a Prognosis for Collective Actions”, Fiscal Studies, Vol. 19, No. 3, pp. 221-247

    Ediotr: Francesca BERTI



  • GLOBALIZATION: ECONOMY, FINANCE AND REGULATION (ENCYCLOPEDIA)

    Abstract

    Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure. Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization refers to the integration of economics and societies all over the world. It promotes the reduction of all forms of trade restrictions that prevent the economic and monetary integration. Along with an economic globalization, there is a globalization of law resulting from redefinition regulatory framework of main international organizations. International financial market, its impact on the real economy and its regulatory activities, are combined within the processes of international trade liberalization, financialization and progressive sovereignty transfer to international economic organizations (such as International Monetary Fund - IMF, World Bank and World Trade Organization - WTO).

    Globalization and World Economy

    From the point of view of the economist, globalization is the penchant of the economy to become global. The economy becomes transnational thanks to activity between geographically distant subjects. International trade, therefore, together with the Foreign Direct Investment (FDI), is one of the fundamental parameters to understand economic globalization. After World War II it has grown at a faster rate, increasing the international degree of openness of national economies. This trade openness is calculated as the ratio of the sum of exports (X) and imports (T) on Gross Domestic Product (GDP):

    Open= X+T/GDP (1)

    A high openness of the domestic market to international trade provides the country with a higher availability of inputs, but exposes the country to the same economic crises hitting the other States. Convergence towards a more global economy is also evident thanks to the policies, in the eighties, for the reduction of restrictions on foreign direct investments (FDI) in the countries of Organization for Economic Cooperation and Development (OECD), as shown in Table 1:

    Source: UNCTAD.

    The increase in the flow of goods, capital and services is also due to technological innovation (see new economy), the reduction of transport costs and to the collapse of planned economies after the late eighties. This contributed to easing the physical distances, making it easier to contact the economies with considerable diversity in the delivery of inputs. In particular, the reduction of transport and communication costs can facilitate the productive specialization, the international movement of production factors, and makes it easier to offshoring. International economic openness exposes countries to external shocks. National economies become more interdependent, and any reduction in economic activity in one of them is easily transmitted to other economies, through their international links (see the subprime crisis). In addition, the international trade between developed and developing countries implies an increase of wage differentials between skilled and unskilled workers (as stated in the Stolper-Samuelson theorem). Globalization is not a uniform process. Significant segments of the world population are not affected by globalization (i.e. those not subject to competition). This also has obvious effects on income in terms of distribution.

    For some academics, this phenomenon is not new but is in fact a return to the period before the First World War, characterized by a progressive globalization of markets, production and finance (see Gilpin 2009).

    Financialization

    Economic globalization can be divided into two distinct areas. The first is real globalization (relationship between real goods, services and factors), the second concerning the financial globalization (relationship between financial assets). Other than the increase in trade of goods and fFDI, international movements of financial capital, bank capital and international transactions in bonds and shares have soared. Financial globalization allows a faster ad cheaper possibility to transfer assets in other markets. While real globalization protagonists are essentially companies (mainly multinational companies) and consumers, in financial globalization the protagonists are identified in banks, investment funds, financial advisors and financial institutions. The literature argues that financial globalization promotes behaviour of public authorities based on efficiency. According to this view, the market rewards the virtuous countries and rejects economic and institutional systems not operating perfectly (see the Greek public debt crisis of 2010).

    At the international level, the government willingness to promote financial stability in a global perspective, involves the gradual transfer of governance to transnational bodies such as the Financial Stability Board. Since 1992 the financial integration of the European Union began at the regional level, with a progressive loss of decision-making autonomy of national governments in monetary policy (see Fiscal Compact and Italian Stability law).

    Globalization of law and regulations

    Globalization is changing the contours of law and creating new global legal institutions and norms. The increased interdependence in the economic and financial relations between national economies around the world has also effects on the redefinition of its regulation and the concept of global public good (such as common standards, common currency). The need for States to govern the economic changes and the simultaneous demand for deregulation of markets, in a normative system consisting of international actors from different regulatory frameworks, involves the development of atypical patterns of negotiation. The different political systems shall conform with a gradual transfer of powers to transnational institutions. The harmonization of legislation promoted by acts to reduce international trade barriers, in the late nineteenth century, represented a further incentive to creation of global market. Regional initiatives, such as European monetary integration (see Community directives relating to banking, the EU directives on financial intermediation), the conclusion of bilateral agreements, the liberalization in regional bodies (EU, North American Free Trade Agreement-NAFTA), the results of some multilateral negotiations (OECD and Uruguay Round), represented a further drive to globalization.

    For these reasons, globalization makes it unsuitable the traditional idea of ??society as a social unit, territorially defined and institutionally organized. It question traditional apparatus of State power and national sovereignty.

    Different interpretations of globalization

    According to liberal analysis, the globalization develops a qualitative and at the same time positive change in current international system. It is transported to a new socio-economic system marked by the fall of national divisions. The transnational character of globalization, according to the liberals, allows the maintenance of peace in the world, as each nation derives economic benefits from the strong performance of other nations. For these reasons, a nation is not willing to wage war against other economies. According to this interpretation, economic globalization is a positive process for the sharing of liberal values ??such as individualism and freedom, maximization of global wealth that brings economic benefits to all and enables all individuals to increase their choices.

    According to mercantilism schooli, globalization is only a quantitative change in trade flows and, therefore, is not a new event. The reasons of these theories focuses on data on trade flows and openness of national economies before the First World War. Finally, globalization is a kind of economic interdependence intensified.

    According to the Marxist analysis, globalization is both intensified interdependence and, at the same time, the last stage of capitalism. As liberals, Marxists argue that globalization presents new elements but contrary to the liberals, the Marxists ruling is negative. Globalization is a new form of State exploitation as a result of unequal process where economic power is concentrated in the main industrialized countries. This is attributed to the increasing of multinationals importance in world economy. They promote the shift of production from industrialized countries to developing countries, allowing free zones in which human rights are not guaranteed.



    i Mercantilism is an economic doctrine based on the theory that a nation benefits by accumulating monetary reserves through a positive balance of trade, especially of finished goods.

    References

    AA.VV. (2013) Costituzione, economia, globalizzazione, Roma, Edizioni Scientifiche Italiane http:/tinyurl.com/qy8cj9p

    ACOCELLA N. (2008) La politica economica nell’era della globalizzazione, Carocci (http://www.carocci.it/index.php?option=com_carocci&task=schedalibro&Itemid=72&isbn=9788843034529)

    ANDO’ B. … VECCHIO F. (2012) Costituzione, globalizzazione e tradizione giuridica europea, Assago, CEDAM

    BATEMAN, V. N. (2012) Markets and Growth in Early Modern Europe, London, Pickering & Chatto (http://www.pickeringchatto.com/titles/1449-9781848932586-markets-and-growth-in-early-modern-europe)

    GILPIN R. (2009) Economia Politica Globale. Le Relazioni economiche internazionali nel XXI secolo, Milano, Università Bocconi

    HELPMAN E. (2011) Understanding Global Trade, London, Harvard University Press (http://dems.unimib.it/corsi/678/altro/understanding_global_trade.pdf)

    MARCHETTI R. … MAZZEI F. … PETITO F. (2010) Manuale di politica internazionale, Milano, Egea Editore (www.egeaonline.it/editore/catalogo/MANUALE_DI_POLITICA_INTERNAZIONALE.aspx)

    RUSSO A. (2012) Politiche pubbliche tra globalizzazione e spazio locale, Roma, Carocci (http://www.carocci.it/index.php?option=com_carocci&Itemid=72&task=schedalibro&isbn=9788843066797)

    STIGLITZ J.E. (2002) Globalization and Its Discontents, New York, W.W. Norton & Company

    Editor: Giovanni AVERSA

  • GME

    The Electricity Market Authority (Gestore dei Mercati Energetici S.p.A) is the company which was set up by Gestore della Rete di Trasmissione Nazionale S.p.A. (now Gestore dei Servizi Energetici … GSE S.p.A.) with the mission of organising and economically managing the Electricity Market, under principles of neutrality, transparency, objectivity and competition between producers, as well as of economically managing an adequate availability of reserve capacity.
    The take-off of the Electricity Market on 31 March 2004 marked the advent of the first regulated electricity market in Italy, as in other international experiences.
    The creation of an electricity market responds to two specific requirements:
    • encouraging competition in the potentially competitive activities of electricity generation and sale, through the creation of a “marketplace”;
    • favouring maximum efficiency in the management of electricity dispatching, through the creation of a market for the purchase of resources for the dispatching service.
    The Electricity Market, commonly called Italian Power Exchange (IPEX), enables producers, consumers and wholesale customers to enter into hourly electricity purchase and sale contracts. Market Participants connect to an electronic platform through the Internet and enter into on-line contracts under secure-access procedures based on digital certificates.

    The Electricity Market consists of:
    1. the Spot Electricity Market (Italian ecronym MPE), including:
    a. the Day-Ahead Market (DAM, Italian acronym MGP), where producers, wholesalers and eligible final customers may sell/purchase electricity for the next day; GME is the central counterparty in the transactions concluded in the DAM;
    b. the Intra-Day Market (IM, Italian acronym MI), where producers, wholesalers and final customers may modify the injection/withdrawal schedules that they have defined in the DAM; GME is the central counterparty in the transactions concluded in the IM; and
    c. the Ancillary Services Market (ASM, Italian acronym MSD), where Terna S.p.A. provides the dispatching services needed to manage, operate, monitor and control the power system. The ASM consists of the scheduling stage (ex-ante ASM) and of the Balancing Market (BM). Terna is the central counterparty in the transactions concluded in the ASM.
    2. the Forward Electricity Market with delivery taking/making obligation (FEM, Italian acronym MTE), where Participants may sell/purchase future electricity supplies. GME is the central counterparty in the transactions concluded in the FEM.
    3. the Platform for physical delivery of financial contracts concluded on the IDEX (CDE), where financial electricity derivatives contracts concluded on the IDEX are executed. IDEX is the segment of the financial derivatives market of Borsa Italiana S.p.A. where financial electricity derivatives are traded. The contracts executed on the CDE are those for which the Participant has requested to exercise the option of physical delivery in the Electricity Market. GME is the central counterparty of the delivered contracts.
    As part of the organisation and economic management of the Electricity Market, GME is also vested with the organisation of trading venues for Green Certificates (giving evidence of electricity generation from renewables), Energy Efficiency Certificates (the so-called "White Certificates", giving evidence of the implementation of energy-saving policies) and Emissions Allowances or Units.
    Moreover, as per Annex A to the AEEG’s Decision 111/06 (as subsequently amended and supplemented), GME also manages the Forward Electricity Account Trading Platform (Italian acronym PCE) for the registration of forward electricity purchase/sale contracts that have been concluded off the market.
    On 15 August 2009, Law no. 99 of 23 July 2009, concerning provisions on the development and internationalisation of companies, as well as on energy matters, came into force. Article 30 of the Law vests GME with exclusive responsibility to economically manage the natural gas market under principles of neutrality, transparency, objectivity and competition.
    © 2009 ASSONEBB

  • GOLDMAN SACHS GROUP INC.


    The Goldman Sachs Group, Inc. is a global investment banking and securities firm which engages in investment banking, securities, investment management, and other financial services, primarily with institutional clients. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street in the Lower Manhattan area of New York City.
    The firm has offices in major international financial centres and provides mergers and acquisitions advice, underwriting services, asset management, and prime brokerage to its clients, which include corporations, governments and individuals. The firm also engages in proprietary trading and private equity deals and is a primary dealer in the United States Treasury security market.
    Goldman Sachs “is a financial advisor, lender, investor and asset manager. Its role is not always visible to consumers, and they do not engage in many traditional commercial banking activities. They connect buyers and sellers, linking investors and capital with the businesses and governments in need of it. This fuels job creation and innovation, while increasing tax revenue and facilitating economic development”.
    (http://www2.goldmansachs.com/)
    Editor: Chiara OLDANI
    © 2010 ASSONEBB

  • Google (History)

    Google is a web search engine founded by Larry Page and Sergei Brin; they met in 1995 at Stanford University, aged 22 and 21 respectively, and started their firm in 1996. They worked on the search engine of the university and decided to call their engine Google, a play on the word “googol,” a mathematical term for the number represented by the numeral 1 followed by 100 zeros. The use of the term reflects their mission to organize a seemingly infinite amount of information on the web.The complete history of Google is available here.

    Google is listed on the NASDAQ stock exchange (GOOG) since August 2004; the initial public offering price was 38$, in May 2012 the stock price was 604$. "Google is a global technology leader focused on improving the ways people connect with information. We aspire to build products that improve the lives of billions of people globally. Our mission is to organize the world’s information and make it universally accessible and useful."

  • GRASSI, PAOLO (Encyclopedia)

    Grassi, Paolo (1879-1974), Director General of the Italian Treasury.

    1. Grassi was born in Treia (Macerata), the third of five children from a family of landowners. To escape his parents’ will, who had planned an ecclesiastical career for him, he moved to Rome where, in 1904, he won a place at the Ministry of Treasury as a voluntary clerk. The President of the Examining Board, Luigi Venosta, Director General of the Cassa Depositi e Prestiti (Deposits and Loans Department), noticed his abilities and so Grassi carried out his first assignments in this office. In 1906, he graduated in Law at the University of Rome "La Sapienza" and in 1908 he passed an exam for distinguished merit at the Ministry. The President of the Examining Board was Carlo Conti Rossini, an expert of African history and Director General of the Treasury from 1917 to 1925, who became Grassi’s mentor. In 1911, Grassi married Pierina Gigli, who gave him two daughters: Gigliola and Mirella. The aforementioned "exam for distinguished merit" enabled him to get ahead rapidly in his career: he became First Secretary and, in 1912, he was Department Head. Henceforth he performed delicate assignments as an inspector of issuing banks, free banks and exchange banks. In 1913 he was appointed Cavaliere ufficiale of the kingdom. In 1918, after passing an examination by the review board, he was appointed Deputy Inspector for the Supervision of Issuing Banks and Treasury operations and the following year he was made Senior Inspector. At the Turin Printing Works, he bore the main brunt of the office and factory workers’ agitation during the unrest and strikes of 1919 and 1920, by displaying great energy and tact. In the summer of 1921, he carried out a delicate mission in Zara, Dalmatia, where he was responsible for converting currency in the Dalmatian territory annexed by Italy.

    2. When the difficult post war period was over, Grassi specialised in bank supervision. He carried out important inspections in the Bank of Italy’s subsidiary branches and in the other two issuing banks, Banco di Sicilia and Banco di Napoli. After being accredited by the latter two banks in September 1922, he wrote detailed reports on the accounts and on the "profits and losses" of the two above-mentioned southern Italian banks. In 1923, he was one of the Supervisors for the report on the Bank of Italy’s accounts. He worked with Finance ministers, first with Alberto De’ Stefani, then with Giuseppe Volpi. He developed a wealth of experience in sectors that were highly technical. From January 1926 to August 1927, he was accredited as Supervisor for Banco di Napoli in the delicate phase when the latter became a commercial bank and lost its right to issue, becoming a monopoly of the Bank of Italy following the Bank Law of 1926. He developed sincere ties of friendship with Giuseppe Frignani, Under-Secretary at the Ministry of Finance in the Volpi’s years and Director General of Banco di Napoli. Grassi performed inspections in the major branches of the Banco di Napoli: Milan, Bari, Ancona, Sassari and Naples. He acted not only as a Supervisor, but took part in the administration. He suspended several decisions and drew attention to the risks in policies regarding the Bank’s portfolio, rates and management of staff.

    3. The Volpi Ministry (1925-1928) brought new men to the limelight. Conti Rossini was succeeded as Director General of the Treasury by Luigi Pace, Federico Brofferio and in 1928 by Vincenzo Azzolini. In the same year, Vincenzo Azzolini was appointed Director General of the Bank of Italy. The problem of his successor at the Treasury arose. The position went to Alessandro Ceresa, who did not stay there for long. Conti Rossini supported Grassi’s candidature. In 1928, Minister Antonio Mosconi appointed him Director General. This appointment opened the door to a great number of prestigious Directors’ Boards, including Banca Nazionale del Lavoro then guided by Arturo Osio. The connection with the BNL led to Grassi’s special relations with the Bank in the 1930s. Following his appointment, towards the end of 1928, Grassi published an article entitled Le innovazioni al conto del Tesoro in the journal "Economia". The subject was Minister Mosconi’s reform which Grassi saw as part of the third phase in the Fascist economic policy, after De’ Stefani’s support of production and Volpi’s program for financial stabilization. The reform was described as progress on the path towards transparency and simplification in the process of making public documents concerning the country’s financial situation.

    4. After Bonaldo Stringher’s death in 1930, Grassi was one of the most authoritative candidates for the position of Governor of the Bank of Italy, which went to Vincenzo Azzolini. This was no surprise to an anonymous political commentator of the period, who described Grassi as a man capable of "holding at bay" Azzolini in the event of disputes arising between them since, they asserted, it was from the Treasury that the Bank of Italy could be controlled, and not vice versa. This was one chapter in the drawn-out conflict between the Treasury and the Bank of Italy. Grassi’s early days as a figure capable of taking major decisions coincided with the onset of the great crisis in 1929 which overrun the Italian universal banks. He was involved in the founding of the Istituto mobiliare italiano in 1931 and, together with Guido Jung, in the founding of the Istituto italiano per la ricostruzione industriale (IRI), on whose board he sat and to whose business he lent his talent. However, he was cautious upon the growth of the Beneduce administrative bodies, such as IMI and IRI, outside the sphere of ministerial bureaucracy. From 1935, he tended to take on increasing responsibility and actually took decisions on behalf of the new Finance Minister, Paolo Thaon di Revel. Grassi reached the height of his influence with the IRI-Treasury agreement in December 1936, which, other than his own, carried the signatures of Vincenzo Azzolini, Alberto Beneduce, and Giuseppe Ventura, Treasury Inspector. The agreement was prepared after thorough enquiries had been carried out by Grassi together with Mario Romanelli, Senior Inspector at the Ministry, and the young Pasquale Saraceno of IRI. In particular, it provided for the settlement of the credit and debit relations between IRI, the Treasury and the Bank of Italy. This was a delicate operation carried out to safeguard a significant portion of the country’s industrial wealth with an eye to monetary and financial equilibrium. In other words, it completed the process begun in 1933 with the nationalization of credit through IRI.

    5. Unlike his younger brother, Luigi, a First World War veteran who worked at the head office of the Guardia di Finanza, Grassi did not have Fascist sympathies (he claimed a party membership card of 1921, which was probably backdated). It was his recognised technical ability and his role in balancing the various groups of the Italian managerial class that assured him undisputed high ranking in the administration. In this period, the BNL connection was fundamental for Grassi. Faced with the funding requirements for the war, firstly in Ethiopia and then in Spain, for autarchy, and for public works in Italy and in the colonies, the Roman bank managed to rake up thousands of subscriptions for Treasury Bonds, even among very small investors. Grassi was also involved in foreign economic policy. From 16 June to 9 July 1932, he was a delegate at the reparations conference in Lausanne (June-July 1932). In 1936, Azzolini asked Grassi to solve the problem of the Maria Theresa thaler, because the circulation of this coin in Ethiopia fuelled speculation on the lira. After the conquest of Ethiopia in May 1936, the question … which would then have to be faced in all the other occupied territories during the Second World War … arose as to whether to extend the circulation of the lira or whether to keep the Maria Theresa thaler, an eighteenth-century Austrian currency which, for various reasons, had become the main currency in East Africa from the nineteenth century. In short, after the Italian occupation, the thaler was pegged to a fixed rate of exchange with Italy and the Austrian monopoly ceased legally. Then other countries began to mint thalers with lower production costs than the Italian Mint: they sold thalers at a huge profit, they bought surplus lire and resold them on foreign markets, depressing the rate of exchange. It was decided to put an end to the circulation of two currencies. Grassi was always interested in minting and its history, both in his public and his private life. During his administration, the money minted at the Italian Mint was of a very high technical and artistic quality. Projects and issuing for the territories of the Italian Empire were developed, and "third party" production began, thereby starting an industrial activity that was the pride of the Istituto Poligrafico. The most valuable coins were presented to the King, Victor Emmanuel III, who was perhaps the greatest and most famous numismatist of the time. Under Grassi’s direction, the monumental Relazione della R. Zecca (Rome, 1941) was produced, a volume of more than four hundred pages of great value.

    6. After 1940, when Italy went to war, Grassi was responsible for the monetary relationships with the occupied states. This is evident in the notes sent to Grassi by Massimiliano Majnoni d’Intignano (1894-1957), the director of Banca Commerciale’s office in Rome, concerning the banking situation in Greece following the Italo-German occupation, the closure of the English banks and the subsequent space left for the Italian banks, and the deposit of funds for the armed forces with Comit Ellas. The correspondence with Raffaele Mattioli’s Comit, especially with the head office in Rome, was important. The Greek case was not unique, because the aforementioned experience in Zara gave Grassi particular authority in the post-war changeover procedures. There was also Egypt, as it is seen in the diaries of Serafino Mazzolini (1890-1945), an experienced diplomat. Grassi was on the board of directors of the Istituto nazionale cambi con l’estero (National Institute for Overseas Exchange) … created by Francesco Saverio Nitti in 1917 …, together with Vincenzo Azzolini, Alberto Beneduce, Manlio Masi and Alberto D’Agostino who also worked at Comit. The Exchange Institute, which from 1935 was at the service of Felice Guarneri’s Ministry of Commerce and Foreign Currencies, attracted the best economists of the time. Besides, the control of foreign trade and currency was one of the key issues of the 1930s, and one to which the best economists applied themselves. As Grassi’s commitments increased, his prestige grew too. In 1938, he was appointed Cavaliere di Gran Croce (he had been appointed Grande Ufficiale in 1930), one of the many honours he received from the governments of Italy, Spain, Germany, Hungary, Albania, the Vatican and San Marino. Grassi would have liked to become Accountant and Comptroller General, but he never achieved this ambition.

    7. Grassi followed the mechanism known as the "circulation of capital", invented by the German economist Ernst Wagemann. It was a strategy proposed by Thaon di Revel at the time of the war in Ethiopia, according to which, in view of the fact that the government had to finance the war by issuing currency, which involved shifting resources from one sector to another, the inflationary effect is brought down by administrative means such as a price and wage freeze, and surplus liquid assets are reabsorbed by the tax burden and by the placing of government securities. The Treasury had to chase events, and Grassi’s work was under pressure. Until 1942 the circuit allowed the monetary and financial situation to be kept under control, but Grassi’s 1943 report to the Minister of Finance, Giacomo Acerbo, on the situation of the Treasury and the state of currency underlined the enormous effort made to cope with the various demands of recent years. Collapse was imminent.

    8. After armistice ofSeptember 8th, 1943, Grassi did not go to the Republic of Salò, in northern Italy. He continued to work at the Ministry until the 4th of October, but on the 1st of November he was pensioned off. Rome was then under the Nazi control. With the liberation of Rome, in June 1944, he returned to the Ministry, but he was pensioned off again on 29 January 1945. As Director General, Grassi was accused of collaborationism with the Germans and charged with some of the responsibility for the Nazis’ theft of the Bank of Italy’s gold: however, there are various different interpretations of the episode. Grassi’s retirement provision was cancelled in 1948. Reinstated, he left the Ministry of the Treasury once and for all on 1 August 1949 because he had reached the upper age limit of seventy. His successor as Director General was his brother-in-law, Giuseppe Ventura, Treasury Inspector. After the second world war, Grassi held numerous appointments which enabled him to have a role in the years of the reconstruction and the economic boom, albeit on a smaller scale: he sat on the Advisory Board and was vice-president of the Istituto nazionale di credito edilizio, Banca Romana and the Hotel and Tourism Department of Banca Nazionale del Lavoro. Grassi was also a member of the Advisory Board of the Italian State Railways, the National Insurance Service, Milani Paper Mills, the Monte Amiata Company and the Consortium for Credit for Agricultural Improvement (Meliorconsorzio). He died in Rome, aged 95.
    Bibliography
    For further details and sources, see G. Farese, La continuità nell’amministrazione finanziaria. Paolo Grassi al Tesoro 1904-1944, forthcoming on "Storia economica", 2009.
    Editor: Giovanni FARESE
    © 2009 ASSONEBB

  • GREEK PUBLIC DEBT CRISIS OF 2010 (Encyclopedia)

    The Greek crisis is the result of the negative business cycle over the last years, of the sluggish economic environment and poor productivity, but most of all it is the product of mismanagement of public funding and unsatisfactory reporting practices. The subprime crisis pushed for credit rationing, due to small market confidence. The interbank market dried up because of difficulties in evaluating assets and liabilities.The panic that followed after Lehman Brothers’ bankruptcy in the USA and the Northern Rock rescue in the UK in late 2008 pushed for public intervention by Governments. G20 countries (April 2009) decided to put in place massive public spending programs to save the productive system, and smooth the inevitable hard landing of economies. Their programs were uncoordinated, and each country decided its own goals and plans. The USA saved the financial system, regulated and not, but decided to save only some players in the automotive industry. As a result, General Motors - GM filed for Chapter 11 creditor protection in March 2009, leaving millions unemployed and bond holders with empty hands. European countries intervened domestically by increasing social expenditure (towards the unemployed and families), through firm rescue plans and restructuring programs. In 2010, the excessive public spending produced the first public debt crisis after the subprime credit crisis: Greece. Greece is characterized by a weak economic environment (i.e. sluggish productivity) and excessive public debt and deficit. In 2009, Greece reported an unprecedented 15.4% deficit/GDP ratio, and public debt skyrocketed to 126.8%. The European Commission had revised the official Greek data on debt, expenditure and deficit many times since 2000. The most severe revisions took place in 2004 and 2009. In the years 2000-02, Greece subscribed currency and interest rate swap contracts with Goldman Sachs in order to hedge risks and to reduce the cost of debt. At the time, these operations were consistent with European accounting rules (which were substantially absent, we must say). In February 2010, Goldman Sachs reported that these operations produced a debt reduction of €2,367 billion, but after the year 2004 the bank has not sell any other contract to the Hellenic state, in accordance with Eurostat rules. The cost reduction was produced by the effective currency hedge (of the drachma with the US$ and the Japanese Yen), and by interest rate hedging. After 2002, Greece closed its swaps, but misreported the remaining streams of interests; in 2005 and 2008, revisions were introduced and data revised backward. According to the EU, this was a case of deliberate misreporting. According to the EU report and the press1, Greece had been underwriting swaps contracts after 2005, yet not directly, but by exploiting incomplete accounting reporting practices, as described in details in the EU report. The Greek government financed the deficit by means of the National Bank of Greece (which is not the central bank), thus violating the Maastricht Treaty rules. This trick became evident when the National Bank of Greece accessed the European Central Bank re-financing scheme in 2008, giving as collateral the notes issued by Titlos Plc. Titlos Plc is a SPV created by the National Bank of Greece itself and Goldman Sachs, that sold €5.1 billion notes expiring in February 2039 to the National Bank of Greece. The Greek Treasury controlled 100% of this bank, and this was a way of externally financing outstanding debt, circumventing controls and bans. The result of this operation is that the deficit of the Greek Treasury was securitized through the National Bank of Greece , which obtained liquidity from the ECB basing on the notes issued by Titlos. The final cost of the Greek debt was that of the Refi rate. These operations were a fraud against European accounting rules. The EU report (2010) used very hard words to describe the behaviour of the Greek authorities: voluntary misreporting, methodological weaknesses and unsatisfactory technical procedures in the Greek statistical institute, inappropriate governance, poor cooperation and lack of clear responsibilities. The EU, moreover, stated that "revisions are an illustration of the lack of quality of Greece fiscal statistics, and show that the progress in the compilation of fiscal statistics in the country, and the intense scrutiny by Eurostat since 2004, have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU Member States (…)” and "Eurostat is at present not in a position to validate figures which are of acceptable statistical quality". The walking out of a country from the EMU would produce certain negative effects on the credibility of the monetary union itself, but on the other side it would strengthen the constraints for those who remain. The balance between pros and cons is not merely economic, and the final decision was taken by ECONFIN, which is in charge of saving Greece. In March 2010, Greece asked the help of the EU and IMF, and, after prolonged discussion, obtained a 3-year rescue plan worth of €110 billion. German and French presidents will politically pay for their benevolence towards this country. The Greek government voted an austerity plan to reduce corruption, tax evasion and the waist of public resources. The Greek population is paying the highest price of the crisis; salaries and wages of public employees have been reduced, unemployment has overcome 20% and public spending is frozen. The pension reform will reduce the wealth of the population; other domestic manoeuvres will act on productivity, but that will take a long time to show up in statistics. In 2011, the IMF will visit Greece to verify the soundness of reforms in order to confirm the loan.

    _________________________
    1Wall Street Journal of February 23rd, 2010.


    Bibliography
    European Central Bank Withdrawal and expulsion from the EU and EMU, Legal Working paper n.10, December 2009 (http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf )
    EU report on Greek government debt and deficit statistics, 8 January 2010 (http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/COM_2010_REPORT_GREEK/EN/COM_2010_REPORT_GREEK-EN.PDF )
    International Monetary Fund (2010) Statement by the EC, ECB, and IMF on the Interim Review Mission to Greece, Press Release No. 10/246, June 17.
    Oldani C., Savona P. (2010) The souvlaki connection: some reflection on Greek public debt crisis, Review of Economic Conditions in Italy, n2.

    Editors: Chiara OLDANI & Paolo SAVONA
    © 2011 ASSONEBB

  • GREEN CERTIFICATES (GC, it.CV)

    Green Certificates (GC, Italian acronym CV) represent a form of support to electricity generation from renewable energy sources (RES). Under Law 244/07, the electricity generated by RES plants commissioned or repowered from 1 April 1999 to 31 December 2007 is certified as renewable electricity (RES-E) and eligible for Green Certificates for the first 12 years of operation of the same plants. The electricity generated by RES plants commissioned or repowered after 1 January 2008 is certified as RES-E for the first 15 years of operation of the same plants.
    Green Certificates are issued by Gestore dei Servizi Energetici S.p.A - GSE on the basis of producers’ reports of RES-E generation in the previous year, or of the expected RES-E generating capability in the current or following year. One Green Certificate is worth 1 MWh of electricity.
    For plants commissioned after 31 December 2007 and having a yearly average nominal capacity of more than 1 MW (0.2 MW for wind power plants), GSE issues Green Certificates for 15 years, by multiplying the net electricity (EI) determined for the project by the constants (differentiated by source) shown in Table 2 of the 2008 Budget Law.
    Table 2 of the Budget Law was updated by Law no. 99 of 23 July 2009, as shown below:

    As a result of the enactment of the Decree of 18 December 2008, GSE makes adjustments for eligible RES (“IAFR”) plants, i.e. it issues additional Green Certificates by applying the multiplicative factors reported in the above table.
    Moreover, art. 11 of Legislative Decree 79/99 stipulates that, beginning in 2002, producers and importers of electricity from non-renewable sources are required to yearly inject into the power system a given quota of RES-E. This quota is equal to 2% of the electricity from non-renewable sources generated or imported in the previous year and exceeding 100 GWh/year.
    Producers and importers may also fulfil their renewable quota obligation by purchasing Green Certificates that have been issued in respect of RES-E generated by other parties.
    From 2004 to 2006, the minimum quota of RES-E to be injected into the power grid in the following year was increased by 0.35% per year. In the 2007-2012 period, this quota is increased by 0.75% per year.
    Gestore dei Mercati Energetici S.p.A (GME) organises and manages the Green Certificates Market. The following entities may participate in the Green Certificates Market as buyers or sellers: GSE, domestic and foreign producers, electricity importers, wholesale customers, as well as associations (consumers’ and users’ groups, environmental associations, trade unions). To participate in the market, applicants must submit an appropriate application to GME and obtain the status of Market Participants.
    The Green Certificates Market organised by GME provides:
    - liquidity: as per art. 9 of the Ministerial Decree of 24 Oct. 2005, GSE will offer its own Green Certificates in the market regulated by GME itself;
    - transparency: the prices that are set in the market are of public domain;
    - security: GME operates in the market as a CENTRAL COUNTERPARTY and guarantees the payment of transactions.
    Usually, market sessions are held weekly on a continuous trading basis. The dates of the sessions are posted in the “How to operate” section.
    © 2009 ASSONEBB

  • GREEN ECONOMY

    UNITED NATIONS (UN) Environment Programme (UNEP) defines green economy an economy that enhances human well-being and social equity by significantly reducing environmental risks and the use of natural resources. In substance, green economy is an economy low in carbon, efficient in the use of resources and inclusive from a social point of view.

    This definition is not opposed to the concept of sustainable development, on the contrary is one of the ways to build the foundations for the progress of society by pursuing a sustainable development.

    In fact, its implementation will also benefit the developing countries, improving their approach to the exploitation of natural resources, the quality of sanitation, access to water, and more generally the use of services related to biodiversity. Embracing a new “greener” economic paradigm can indeed help reduce poverty and generate benefits in a number of important productive sectors, while reducing the environmental and economic risks and increasing income and employment.

    UNEP has published numerous reports and has strongly advocated the implementation of a new Global Green New Deal (GGND), simultaneously launching a global initiative on this issue (Green Economy Initiative). Launched in 2008, this initiative aims to consider the investments put in place for the transition to a green economy, assessing the benefits on the fight against climate change, new technologies, and energy. In addition, the initiative is aimed at providing analysis and policy support for investing in green sectors and greening those areas that are currently environmental causing damages.

    Three levels of activity have been established within GEI:

    Drawing up a report on green economy in order to analyze macro-economy, sustainability and the implications on poverty reduction of green investments in sectors ranging from renewable energy to sustainable agriculture, providing guidance on the policies that can attract investments in these areas;Providing consulting services on how to start a green economy in specific countries; Involving a wide range of partners from the sectors related to research, non-governmental organizations, business and United Nations in implementing GEI. Green Economy Report (Towards a Green Economy … Pathways to Sustainable Development and Poverty Eradication) has been prepared by UNEP in November 2011 in collaboration with economists and experts from around the world. The report aims to demonstrate that environmentally-friendly economy is not an obstacle to growth, but on the contrary can be considered to be both a new engine of development capable of creating new jobs and an effective strategy for the elimination of poverty. In fact, according to the Report by UNEP, focusing on a green economy can promote development even in the most underdeveloped economies, where 90% of the GDP of the poorest of the population is tied to natural resources, forests and water resources.

    One of the conclusions of the Report is that investing 2% of world GDP (about 1,300 billion USD) in the ten key areas identified by UNEP (agriculture, water, forestry, fisheries, energy, industry, waste, construction, transports and tourism) would lead to a transition from the current economic model towards a green economy.

    All of this would reorient the world economy on a more sustainable growth trajectory, producing more long-term benefits of the maintenance of economic growth of a “business as usual” scenario.

    Bibliography

    UNDESA, UNEP, UNCTAD (2011), The Transition to a Green Economy: Benefits, Challenges and Risks from a Sustainable Development Perspective.
    UNEP (2011), Towards a green economy: Pathways to Sustainable Development and Poverty Eradication, UNEP.
    UNEP (2012). Green Economy Policy Briefs … key issues for the transformation towards the Green Economy, UNEP.

    Editor: Barbara PANCINO; Emunuele BLASI

  • Green Growth, OECD Strategy (Encyclopedia)

    Abstract
    Initiative launched by OECD in 2009 to respond to the economic and financial crisis and to restore growth on a more sustainable path, by ensuring new development opportunities to limit the impact on environmental resources and on ecological services from which derives much of human well-being.



    Green Growth Strategy is an initiative launched by OECD in 2009 to respond to the economic and financial crisis, and to restore growth on a more sustainable path, both under the social and environmental point of view.

    Drawn up on behalf of the Council of Ministers of the 40 member States, the Strategy was published in May 2011 under the title of “Towards Green Growth”, with the aim of providing member Countries with some useful guidelines in order to develop their strategies and national policies in the green growth field. As it is clear enough from the headline, the OECD considers sustainable development and Green Economy primarily as engines of growth and sources of new development opportunities, able at the same time, to limit the impact on environmental resources and on ecological services from which derives much of human well-being.

    The sustainable development, the efficient use of resources, the fight against climate change and environmental degradation are pursued by spreading an improved production model, new work opportunities and innovative technologies.

    Creating favorable conditions for investment and competitiveness, promoting innovation, encouraging new markets for “green” products and services, introducing environmental tax measures, removing subsidies prejudicial to the environment, establishing a climate of stability and trust: these are the keys on which it is necessary to leverage in order to overcome the current crisis in a perspective of sustainability.

    A green growth strategy requires in particular, a mix of tools derived from wide intervention packages. The first one includes the framework conditions that can strengthen the economic growth while ensuring the preservation of the natural capital. These involve basic tax and regulatory devices and traditional tools of economic policy and competition. The second package includes ad hoc tools, based on prices and on other strategic mechanisms, capable of promoting the efficient use of resources and the internalization of environmental pressures: taxes, tradable permits, voluntary approaches and public-private partnerships. Explicit reference is made in this context, to taxations of CO2 as alternative to taxes on corporate income, on work or cuts down public expenditure.
    OECD believes that the key area on which to focus is innovation that, understood in its broadest sense (technological, organizational, behavioral), is the main motor of green economy and plays an essential role in promoting a structural change in the economy and in the society with a positive impact on employment too. Green technology is already facing an expansion phase, as evidenced by the increase in the number of patents in the field of renewable energy, electric and hybrid vehicles as well as the energy efficiency in the construction and lighting industry. Technological innovation must be supported by targeted trade policies, such as the reduction in trade and investments barriers and an adequate protection of intellectual property rights. Furthermore, innovation alone is not enough: it requires the development of appropriate infrastructures for next generation technologies, especially in areas like energy, water supply, telecommunications and transport networks.

    OECD pays particular attention also to employment, not only because does green growth create new job opportunities, but also because in transition, some jobs, tied to the old unsustainable production model, are at risk: political efforts should therefore be addressed to ensure that companies and workers quickly adapt to changes and seize new opportunities, easily moving from sectors in contraction towards those in expansion.

    The Strategy also deals with some aspects of international cooperation, that should be strengthened in order to ensure an appropriate management of “global common goods”, such as climate and biodiversity and to address financial flows, global trade and investments. In this context, reference is also made to the need to prevent, through adequate control measures, the development prospects of poorer economies which could be compromised by blatantly protectionist measures established in many developed countries with the excuse of green growth.

    All in all, the strategy stresses the importance of ensuring appropriate monitoring of the transition of the economy and society towards a green model. For several years, OECD has started reviewing the traditional methods by which we measure the growth and well-being, pointing out the inadequacy and the incompleteness of GDP as indicator or reference, while giving importance also to values non closely-linked to economic production, such as quality of life, environmental health and access to education. As regards to Green Growth, specifically, some peculiar indicators, which should be alongside the traditional macro-economic ones, have been identified and divided into four interlinked micro-areas with the aim of:

    - Monitoring the productivity of natural capital and resources, and therefore verifying the difference between the rate of economic growth and the rate of growth of the environmental pressures caused by the adoption of production and consumption systems. Indicators in this case are, for example, CO2 emissions, water consumption, generated waste, and natural resources used for production.

    - Describing the basic environmental heritage. Such indicators are the renewable resources available and their extraction, the condition of endangered species and the number of the existing forests.

    - Monitoring the environmental dimension of the quality of life. Indicators of this type are, for instance, the health problems pollution-related and the access to sewage and purification systems.


    - Identifying political responses and economic opportunities. This category includes indicators such as the percentage of green investments, the rate of employment in the environmental sector and the patents of green technologies.

    As indicated in the guidebook of the Strategy (Towards Green Growth: Monitoring progress … OECD Indicators), for each of these groups, a list of possible indicators is presented. This list is reviewed as soon as new data become available and these concepts are developed further. At the moment, 25 indicators have been identified, however, not all are currently quantifiable.

    Bibliography
    OECD (2011), Towards Green Growth, Paris.
    OECD (2011), Towards Green Growth: Monitoring Progress … OECD Indicators, Paris.
    OECD (2011), Tools for Delivering Green Growth, Paris.
    OECD (2011), Towards Green Growth: A summary for policy makers, Paris.

    Editor: Barbara PANCINO; Emanuele BLASI

  • GREENHOUSE GAS (GHG) (Encyclopedia)

    Greenhouse gases are components of the atmosphere. They can be both anthropogenic and natural gases. The principal greenhouse gases (GHGs) are carbon dioxide (CO2), water vapour (H2O), nitrous oxide (N2O), methane (CH4) and ozone (O3). The Kyoto Protocol also includes sulphur hexafluoride (SF6), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs).
    GHGs have the peculiarity to absorb and release the infrared radiation emitted by clouds, the atmosphere, and the Earth surface. This process impacts on the radiative balance and results in the greenhouse gas effect, which warms the Earth’s surface. A great concentration of these gases in the atmosphere impedes the natural process of absorption and release of infrared radiation.
    While is it clear that emissions of greenhouse gases have a warming effect on climate, the final net warming effect is not likewise clear as it also depends on the cooling impact of sulphate aerosol emissions which have moderated the increase in temperatures we are currently experiencing. Indeed, a prediction of the overall global warming effect is not as simple as it can be imagined, as other factors interfere and interact.
    After water vapour, which contributes 36%-72% to the GHG effect, CO2 is the main anthropogenic greenhouse gas (it contributes 9-26%). Water vapour concentrations are not significantly affected by human activity (with the exception of local scales), while CO2 concentrations are. Moreover, by causing the main GHG effect, water power and CO2 generate primary positive feedbacks inducing further warming of the earth’s surface.
    The climate-forcing strength of different greenhouse gases is based on the gas Global Warming Potential (GWP), which is described relatively to that of carbon dioxide (used as numerator: it is defined to have a GWP of 1 over all periods). This measure, the carbon dioxide equivalent, allows us to compare emissions from various greenhouse gases and it can be derived by multiplying the quantity of tons of a GHG and its associated GWP. For instance, Table 2.14 in the Fourth IPCC Assessment Report states that Methane has a GWP of 72 over 20 years, 25 over 100 years and 7.6 over 500 years. This shows a higher warming potential of methane as compared to carbon dioxide.
    Both natural and anthropogenic activities may change the GHG concentrations in the atmosphere. Natural sources of carbon dioxide are far greater than sources coming from human activity but, in the long run, the former are almost balanced by the carbon uptake of natural sinks such as vegetation growth and photosynthesis process, oceans, etc. (IPCC AR4 WGI, 2007).
    During the pre-industrial era, the concentrations of existing gases were approximately constant. Human activities have subsequently contributed to the "changes in atmospheric concentrations of greenhouse gases and aerosols, land cover and solar radiation" which "alter the energy balance of the climate system", (IPCC AR4, 2007).
    Furthermore, the concentration recently increases at a higher rate as compared with the past: in the 1960s, the average annual increase was only 37% of what it was in 2000 (IPCC, 2001).
    Human activity has a relevant impact on the levels of nitrous oxide, methane and carbon released. Nitrous oxide emissions are mainly associated with agriculture, the rice cultivation being the primary source; while methane emissions refer to the human activity associated with ruminant livestock (Raupach et al., 2007). Man-made CO2 emissions mostly derive from the burning of fossil fuels, such as gasoline, fuel oil, natural gas, coal, etc. (IPCC AR4 WGII, 2007), the cement and lime production, and the land use management (e.g. deforestation, forest degradation, etc.)
    The major greenhouse gas contributing sectors are industry and transportation, followed by construction, commerce and agriculture; while the main sources of individual greenhouse gas emission are energy waste, electricity consumption, heating and cooling, and transportation.
    Raises in anthropogenic gas concentrations seem "to have caused most of the increases in global average temperatures since the mid-20th century" (IPCC AR4, 2007) and warming is in turn expected to affect freshwater resources, food availability and health, and the economic situation among other phenomena (Steinfeld et al., 2006).
    Given that concentrations of these gases are strongly correlated with temperature, the United Nations Framework Convention on Climate Change (UNFCCC), opened for signature in the Rio de Janeiro Summit in 1992 and entered into force in 1994, assumed the objective of stabilizing the GHG concentrations in the atmosphere at a level that "would prevent and reduce dangerous human-induced interference with the climate system".
    Today, the most
    significant international policy step to control emissions of GHGs is represented by the Kyoto Protocol, entered into force in 2005. It fixes both a general reduction target compared to 1990 values (1990 is the baseline for all emissions reduction targets in the Protocol, with few exceptions), and country-specific emission reduction targets, to be reached in the commitment period 2008-2012. According to the Kyoto Protocol, "Annex B Parties" can reduce emissions either by (i) limiting fossil fuel consumption or (ii) increasing the net carbon sequestration in terrestrial carbon sinks (IGBP, 1998). With the aim of monitoring and estimating the current and future levels of greenhouse gas (GHG) emissions and removals, articles 4 and 12 of the UNFCC Convention, in accordance with the Conferences of the Parties (COPs), states that Annex B countries must present the national inventories of anthropogenic greenhouse gases distinguishing between emissions by sources and removals by sinks. The inventories are technically reviewed annually.
    Bibliography
    H. Steinfeld, P. Gerber, T. Wassenaar, V. Castel, M. Rosales and C. de Haan (2006). Livestock’s Long Shadow: Environmental Issues and Options. LEAD/FAO.
    IGBP Terrestrial Carbon Working Group (1998). The Terrestrial Carbon Cycle: Implications for the Kyoto Protocol. Science, pp. 1393 … 1394
    IPCC, 2001: Climate Change 2001: The Scientific Basis. Contribution of Working Group I to the Third Assessment Report of the Intergovernmental Panel on Climate Change. Edited by J. T. Houghton et al. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA
    IPCC, 2007: Climate Change 2007: Synthesis Report. Contribution of Working Group I, II, III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. [Core Writing Team, Pachauri, R.K and Reisinger, A. (eds.)]. IPCC, Geneva, Switzerland, 104 pp.
    Raupach MR, Marland G., Ciais P., Le Quéré C. , Canadell J. G., Klepper G., and Field C. B. (2007). Global and regional drivers of accelerating CO2 emissions. Proceedings of the National Academy of Sciences of the United States of America 104 (24): 10288-10293.
    The Kyoto Protocol. Downloadable at:http://unfccc.int/kyoto_protocol/items/2830.php
    United Nations Framework Convention on Climate Change (UNFCCC)
    http://unfccc.int/national_reports/annex_i_ghg_inventories/items/2715.php

    Editor: Melania MICHETTI
    © 2009 ASSONEBB

  • GROSS DOMESTIC PRODUCT (GDP)

    The GDP is the total market value of all final goods and services produced in a country in a given perod (e.g. year), and equals to total consumption (C), investment (I), government spending (G), plus the value of exports (X), minus the value of imports (M):

    GDP = C + G + I + (X-M)

    GDP is not to be confused with gross national product (GNP) which allocates production based on ownership. Presented only quarterly, GDP is most often presented on an annualized percent basis. GDP per capita is often considered an indicator of a country's standard of living.

    GDP is related to national accounts (see Financial Accounts in the System of National Accounts), a subject in macroeconomics.

    Editor: Giovanni AVERSA

  • GROSS NATIONAL PRODUCT (GNP)

    An estimate of the total money value of all the final goods and services produced in a given one-year period by the factors of production owned by a particular country's residents. An economic statistic that includes Gross Domestic Product (GDP), plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents. Gross National Product (GNP) is a measure of a country's economic performance, or what its citizens produced (i.e. goods and services) and whether they produced these items within its borders.

    Gross National Product (GNP) is often contrasted with Gross Domestic Product (GDP). While GNP measures the output generated by a country's enterprises (whether physically located domestically or abroad) GDP measures the total output produced within a country's borders - whether produced by that country's own local firms or by foreign firms.

    Editor: Giovanni AVERSA

  • GSE

    Gestore dei Servizi Energetici - GSE S.p.A. (GSE) plays a central role in the promotion, support and development of renewable energy sources in Italy.
    GSE’s sole shareholder is the Italian Ministry of Economy and Finance which, in consultation with the Ministry of Economic Development, provides guidance on GSE’s activities.
    GSE is the parent company of “Gestore dei Mercati Energetici S.p.A.” (GME) and of “Acquirente Unico S.p.A.” (AU).
    GSE promotes sustainable development by granting economic support for electricity generation from renewable energy sources and by organising communication campaigns to raise awareness of environmentally-sustainable energy use.
    GSE’s main activities are as follows:
    • qualifying RES-E (“IAFR”) plants;
    • qualifying CHP plants;
    • issuing Green Certificates (“GC, Italian acronym CV”) and monitoring producers’ and importers’ compliance with the related obligations;
    • issuing the Guarantee of Origin (GO) of electricity generated by RES or high-efficiency (CHP) plants;
    • issuing RECS (Renewable Energy Certificate System) certificates;
    • as implementing body, running the support schemes for electricity generation by photovoltaic and thermodynamic solar plants;
    • market trading of electricity generated by plants using RES or other eligible sources (“CIP-6”);
    • market trading of electricity generated by producers who have opted for indirect sale through GSE (“ritiro dedicato”), instead of direct sale in the market;
    • market trading of electricity generated by new RES plants of up to 1,000 kW (200 kW for wind plants) whose owners have opted for the all-inclusive feed-in tariff;
    • running the net metering service (“scambio sul posto”) for electricity generated by RES plants of up to 200 kW or high-efficiency CHP plants;
    • granting support to the Public Administration in the energetic field and to the AEEG for inspection and check activities;
    • participating in the international associations IEA (International Energy Agency), OME (Observatoire Méditerranéen de l’Energie) and AIB (Association of Issuing Bodies).
    © 2009 ASSONEBB

  • GUARANTEED INVESTMENT CONTRACT - GIC

    A guaranteed investment contract (GIC) is a type of investment-oriented product offered by insurance companies. In guaranteed investment contracts, insurance companies are responsible for the payment of a predetermined annual crediting rate over the life of the investment plus the principal amount. In return for the repayment corresponded at maturity, the firm receives a single premium. Therefore, the term ‘guaranteed’ does not refer to guarantees provided by third parties, and the investors are exposed to the same credit risks associated to any corporate obligation (insolvency and default of the insurance company). For this reason the interest rate is in any case higher than those earned by U.S. Treasury securities of the same maturity and it depends on the market conditions and the rating of the issuer. Guaranteed investment contracts are typically sold by pension plan sponsors as pension investments with maturity ranging from one up to 20 years.

    Bibliography
    Fabozzi F., Modigliani F., Jones F. (2010), Foundation of Financial Markets and Institutions, Pearson International Edition.

    Editor: Bianca GIANNINI
    © 2010 ASSONEBB

Selected letter: G English version

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