The Political and Economic Dynamics of the Eurozone Crisis

The Political and Economic Dynamics of the Eurozone Crisis

The Political and Economic Dynamics of the Eurozone Crisis

The Political and Economic Dynamics of the Eurozone Crisis

Synopsis

This is the first book to provide a full and dispassionate account of the politics and economics of the Eurozone crisis, focusing on the interlinked origins and impacts of the Euro-Zone crisis and the policy responses to it. The book is distinguished from existing research by its avoidance (and rejection) of the too-often simplistic analysis that has characterized political, media and regrettably some academic coverage, and by its attempt to escape from the tyranny of day-to-day events and short-term developments. Each of the contributors identifies an important question and undertakes a careful empirical, theoretically-informed analysis that produces novel perspectives. Together they seek to balance many of the existing accounts that have rushed to sometimes unwarranted conclusions, concerning, for example, the locus of institutional power in European crisis-management; the power and centrality of particular member states, notably Germany which has been attributed with 'hegemonic' status; the supposed entrapment of EU policy makers by an 'austerity ideology'; and the deep flaws that apparently afflict the solutions to the crisis put painstakingly in place, such as Banking Union. While it will be some time before the EU can put the crisis behind it, and the dust finally settles on the revised institutional system that emerges, The Political and Economic Dynamics of the Eurozone Crisis marks an important step towards a considered, reflective analysis of the tumultuous events and developments of the crisis period.

Excerpt

The focus of this book is on the interlinked origins and impacts of the Eurozone crisis and the policy responses to it. Each of the authors identifies an important question and undertakes careful empirical, theoretically informed analyses that produce novel perspectives on the crisis. The book is distinguished from existing research by its avoidance (and rejection) of the too-often simplistic analysis that has characterized political, media, and regrettably some academic coverage of the crisis. We engage in a number of important issues and themes in the book prompted often by disagreement with existing literature.

One disagreement concerns whether the financial crisis has its origins in a single factor, such as competitiveness, imbalances in trade or capital flows, structural flaws in the institutional design of the Economic and Monetary Union (EMU), or defects in the regulatory environment of banking and investment. It is tempting to look for a taproot for the syndrome of causes associated with the crisis, a kind of generative cause from which the others are derivative. Some have found this taproot to lie in the single interest rate and cheap money made available by the European Central Bank (ECB) to all countries in the Eurozone, including the countries on Europe’speriphery. But this capital imbalance approach can carry the story only so far, and in any case it takes uniform borrowing costs as a given rather than a contingent outcome of a market in pricing risk. It also does not explain the imbalances between center and periphery even before the euro was in place in 1999.

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