This chapter begins by defining financial integration and identifying its drivers. Financial integration is a situation without frictions that discriminate between economic agents in their access to – and investment of – capital, particularly on the basis of their location. Market forces as well as collective action and public action drive financial integration. The second part of the chapter describes different methods of measuring the degree of financial integration, and distinguishes between price-based and quantity-based measures. The third part of the chapter gives an overview of the extent to which various financial markets in the EU are integrated. The financial crisis and the euro crisis represent serious setbacks for European financial integration. An important reason why the EU placed the creation of a single financial market and the Capital Markets Union high on the policy agenda is that it widely believed that financial integration would stimulate economic growth. The chapter concludes by discussing this growth effect and other consequences of financial integration.

This chapter discusses the EU’s payment and post-trading (i.e. securities clearing and settlement) systems. Over the past decade, the volume and value of transactions that are processed via these systems have grown tremendously. Stable and efficient payment and post-trading systems have become very important for the operation of financial markets and the economy in general. For a long time, these infrastructures were fragmented along national lines and were exposed to limited competition. But integration is continuing in the context of the single currency, the Single Euro Payments Area and technological innovations. The chapter starts by examining the different elements of (retail and wholesale) payment and post-trading systems. The second part of the chapter gives an overview of the economic features of the payment and securities market infrastructures. The third part of the chapter describes the current situation in the payment and post-trading industry and recent initiatives to promote further integration, and addresses weaknesses exposed by the financial crisis.

This chapter discusses the impact of institutional investors on the functioning of the financial system. Institutional investors are pooling funds and transferring economic resources to different asset classes and countries. They also transfer resources over time, and contribute to price discovery and thereby increase the efficiency of the financial system. In recent decades, the intermediation of financial assets has gradually shifted from banks to institutional investors such as pension funds, insurance companies, and mutual funds. During this process of re-intermediation, the assets of institutional investors of the EU-15 countries quadrupled from 49 per cent of GDP in 1990 to 223 per cent in 2017. This chapter provides an overview of the growth of institutional investors over the last three decades and documents the development of the main types of institutional investors.

This chapter provides a concise overview of European competition policy, with a focus on financial services. The chapter first defines competition and describes the objectives of EU competition policy, i.e. maintaining competitive markets and a single market in the EU. The ultimate goal of competition is to offer consumers a greater choice of products and services at lower prices (i.e. to enhance consumer welfare). The second part of the chapter analyses the economic rationale for competition policy by examining the difference between a perfectly competitive market and a monopoly. The third part of the chapter elaborates on the four tools of EU competition policy. The fourth part of the chapter discusses a framework for investigating the abuse of dominance

This chapter outlines the strengths and background of the major powers before the war, as well as competing political and ideological factors, and the general development of military forces. The largest of the eventual belligerents: Britain, China and Russia, and their different structures. Similar contrasts between medium-sized powers, the United States and Japan. Smaller powers in continental Europe: France, with its empire, Germany, and Italy. Population advantage of Germany within Europe, despite territorial losses after World War I. ‘Satisfied’ and ‘unsatisfied’ powers. Political and ideological factors leading to war. Liberal democracy challenged. Communism as a dynamic force both in Europe and Asia. The radical right, a response partly to Communism and partly to the perceived failings of liberal democracy. Leaders of the radical right, Mussolini in Italy and Hitler in Germany. Nationalist China, Jiang Jieshi, and anti-colonialism. Expectations about the nature of future war. Failure of arms limitation. ‘Total War’ theory and totalitarianism. Developments in armies, including armoured vehicles and mobility. Developments in navies. Independent/strategic and combined-arms use of air-power.

This chapter covers the final stages of Japan’s offensive in the Pacific in the spring of 1942 and the successful Allied counter-attack there, and in Burma, through to the end of 1944. Allied grand strategy: Germany or Japan first? Aircraft carriers replace battleships. The Battle of the Coral Sea as the culminating point of the Japanese Pacific offensive. The Battle of Midway: the decisive defensive naval battle. The US Navy regains the strategic initiative. The counter-offensive towards Rabaul, with Guadalcanal as the first objective. Japanese failure to gain a political or military victory in China. British and American aims and disappointments regarding Jiang Jieshi. The successful Japanese Army ICHI-GŌ offensive in China in April 1944. Overview of China’s role in the war. The important political and military role of British India, including the defeat of the Japanese army at Imphal-Kohima in 1944. American amphibious offensives in the South Pacific and, from early 1944, in the Central Pacific. The decisive offensive Battle of the Philippine Sea and the capture of the Marianas. The successful invasion of the Philippines, following the Battle of Leyte Gulf in October 1944.

This chapter covers the Soviet-German war after the December 1941 Battle of Moscow and the failure of the initial Blitzkrieg; the Red Army takes the initiative after the Battle of Stalingrad and drives the Wehrmacht back to the western borderlands of the USSR by the spring of 1944. The Soviet winter offensive in 1941-2. Stalin’s over-optimism leads to setbacks at Kharkov and in Crimea. Hitler’s spring 1942 ‘second offensive’, Operation BLUE, concentrated in southern Russia. The Battle of Stalingrad; reasons for the success of Russian counter-attack. The responsibility of Hitler and his generals. Improvements in the Red Army are critically important. Spring 1943 and Hitler’s delayed attempt at a limited offensive in Operation CITADEL. The Battle of Kursk is followed by a successful Red Army counter-offensive across Ukraine in 1943-4. Developing diplomatic relations between Russia, Britain, and America. The Communist International disbanded. The first meeting of the ‘Big Three’ leaders at Tehran in late 1943: agreements about Polish borders and the timing of the British and American cross-Channel landing.

The introduction lays out the basic arguments, and also explains the emphasis on grand strategy and operations. The Axis powers declared their aim as a ‘new order of things’, notably in their 1940 Tripartite Pact. This contrasted with the ‘old’ order created by the Allies after World War I, exemplified by the Paris peace treaties of 1919 and Washington Treaty of 1922. These treaties dealt with Europe and Asia respectively, and they demonstrate that the causes and course of the next struggle would be global. World War II began in China in July 1937, rather than in Europe in 1939; the Asia-Pacific war was as important as the war in Europe. The book’s focus on grand strategy and military operation is warranted, partly for reasons of space and partly because this is the history of a war, and the outcome was victory or defeat.

Having a well-functioning financial system in place that directs funds to their most productive uses is a crucial prerequisite for economic development. The financial system consists of the financial infrastructure and all financial intermediaries and financial markets, and their relationships with respect to the flow of funds to and from households, governments, business firms, and foreigners. The main task of the financial system is to channel funds from those with a surplus to sectors that have a shortage of funds. In doing so, the financial sector performs two main functions: (1) reducing information and transaction costs and (2) facilitating the trading, diversification, and management of risk. This chapter discusses both of these functions at length. The importance of financial markets and financial intermediaries differs across Member States of the European Union. An important question is how these differences affect macroeconomic outcomes.