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Western banks in Eastern Europe: New geographies of financialisation

Periodic Reporting for period 4 - GEOFIN (Western banks in Eastern Europe: New geographies of financialisation)

Periodo di rendicontazione: 2021-06-01 al 2022-11-30

Financialisation, or the growing power of finance over societies and economies, is increasingly recognised as the key feature of contemporary capitalism. However, significant gaps in our understanding of this process remain. Indeed, despite growing recognition that financialisation is an inherently spatial process, a geographically-informed view of financialisation remains underdeveloped. In addition, and related to this, the extent and the ways in which post-socialist ‘transition’ societies in East-Central Europe have been financialised remain under-researched and under-theorised. Yet, the examination of former state-socialist societies (built on the very opposite economic logic to that of financialisation) provides an unmatched opportunity to learn about financialisation itself, how it ‘penetrates’ societies and with what social and spatial implications. East-Central Europe in this sense constitutes a unique terrain for frontier research. GEOFIN has addressed the above shortcomings by producing empirical and theoretical insights to develop a geographically-informed view of financialisation. The objective was to examine how states, banks and households in post-socialist contexts have been financialised and to consider what implications this has for the societies in question and for Europe as a whole. The project piloted a novel approach based on the concept of ‘financial chains’ which are understood both as channels of value transfer and as social relations that shape socio-economic processes and attendant economic geographies. A set of case studies have been mobilised to reveal the different ways in which banks, states and households across post-socialist East-Central Europe are interconnected by financial chains with each other and with a wider political economy. Empirically, GEOFIN focused on ‘new’ EU member states, i.e. post-socialist countries that fully liberalised their financial systems (as part of the EU accession requirements) and are thus fully exposed to the forces of Western finance. GEOFIN fundamentally advanced our understanding of new geographies of financialisation, opening up new horizons in studies of finance and its future role in the society. This includes the examination of the role of central banks in the financial system and the implications of monetary policy for social, economic and territorial cohesion and for positive climate action.
Work performed in the GEOFIN project advanced along the following main objectives:

Objective A: To examine the ways in which post-socialist states in East-Central Europe have been inserted into the circuits of Western finance, what role state-socialist legacies played in the process and what implications this has for financialisation.
Objective B: To examine the ways in which Western banking groups managed to ‘penetrate’ post-socialist East-Central Europe, how this financial expansion differed from other contexts and how this is linked to wider processes of financialisation in Europe.
Objective C: To examine the ways in which households in post-socialist East-Central Europe have engaged with the new financial system, to what extent they experience financial exploitation and how this varies across different geographical settings.
Objective D: To advance theoretical understanding of financialisation based on a geographically-informed view, focusing on states, banks and households in the post-socialist context and the way in which these actors are interconnected with each other and with a wider political economy via ‘financial chains’ across different spatial scales (from local/regional and national to European and global) and through time.
Objective E: To assess the implications of the East-Central European financialisation experience for wider Europe and to develop alternative narratives of sustainable financial futures in Europe that would be compatible with the EU’s commitment to economic, social and territorial cohesion.

To date, the results have been disseminated via more than 10 journal articles, 13 Working Papers, 15 blogs and some 30 conference presentations, with more coming.
Among the key research outputs so far are the following articles in international peer-review journals:

Sokol, M (2022) Financialisation, central banks and ‘new’ state capitalism: The case of the US Federal Reserve, the European Central Bank and the Bank of England. Environment and Planning A: Economy and Space. DOI 10.1177/0308518X221133114

Sokol, M. and Pataccini, L. (2021) Financialisation, regional economic development and the coronavirus crisis: a time for spatial monetary policy?, Cambridge Journal of Regions, Economy and Society. DOI: 10.1093/cjres/rsab033

Pataccini, L. (2021) Europeanisation as a driver of dependent financialisation in East-Central Europe: insights from the Baltic states. New Political Economy, DOI: 10.1080/13563467.2021.1994542

Sokol, M. and Pataccini, L. (2020) Winners and losers in coronavirus times: Financialisation, financial chains and emerging economic geographies of the Covid-19 pandemic. Tijdschrift voor Economische en Sociale Geografie 111(3): 401-415. DOI: 10.1111/tesg.12433

Sokol, M. (2017) Financialisation, financial chains and uneven geographical development in Europe: Towards a research agenda. Research in International Business and Finance (RIBAF), Vol. 39, Part B, pp. 678-685. Invited contribution. DOI: http://dx.doi.org/10.1016/j.ribaf.2015.11.007
The project achieved the following progress beyond the state-of-the-art:

1. Further elaboration of the concept of ‘financial chains’ as a device to study financialisation in its various forms and settings (Task 1).
2. Advancement of our understanding of financialisation of state in the post-socialist context (Task 2 / Objective A).
3. Advancement of our understanding of financialisation of Western banking groups in the post-socialist context (Task 3 / Objective B).
4. Advancement of our understanding of financialisation of households in the post-socialist context (Task 4 / Objective C) and beyond.
5. Advancement of our theoretical understanding of financialisation based on a geographically-informed view, focusing on states, banks and households in the post-socialist context (Task 5 / Objective D) and beyond.
6. Development of alternative narratives of sustainable financial futures in Europe that would be compatible with the EU’s commitment to economic, social and territorial cohesion (Task 6 / Objective E) and leading to positive climate action.
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