Document Type

Working Paper

Publication Date



Center for Law and Economic Studies


This paper argues that while financial markets have become transnational, their governance structures have remained national at the core: Fiscal responsibility for crises is ultimately born by the nation state where the crisis occurred – whether or not it bears any responsibility for regulatory or policy failures. The tension between the transnational nature of markets and national responsibility for these markets has been revealed once more by the global financial and the European sovereign debt crises. Against this background, the Vienna Initiative (VI) offers the prospect of an alternative governance regime. The VI was formed to manage the fallout from the global crisis in the former socialist countries of Central and Eastern Europe (CEE). It brought together in an open and deliberative process the key stakeholders in the pan-European financial market, including transnational bank groups, fiscal authorities, regulators and central banks from home and host countries, the European Central Bank (as observer), the European Commission (EC), and several international financial institutions (IFIs). While each of these stakeholders had a manifest interest in a coordinated response, effective coordination required engineering to overcome the collective action problems they faced. The commitments stakeholders ultimately made to fend off a financial collapse went well beyond what they were legally obliged to do. The paper explores the institutional and organizational foundations of the VI and suggests lessons it may hold for other transnational governance challenges.