Watching the crisis of eurozone from the European ‘periphery:’ causes and developments

Milios, John and Sotiropoulos, Dimitris (2013). Watching the crisis of eurozone from the European ‘periphery:’ causes and developments. Temas de Administração Pública, 8(1)



Whatever the initial unwarranted optimism, the developments that followed the collapse of Lehman Brothers have struck at the heart of the euro, plunging into crisis the power strategies linked to it. The higher growth rates in the ‘peripheral’ European economies were accompanied by both a fast reduction in cost of domestic borrowing and a significant inflow of foreign investments (of various forms). This caused lasting surpluses in the financial accounts. The concomitant deficits in the current accounts mirror exactly this increase of the domestic demand and the inflow of foreign investments. While the imbalances in the financial accounts within the Eurozone and the expansion of the domestic banking systems offset the pressures imposed upon labor by the mechanism of the euro, they nevertheless shaped an unstable and vulnerable context of symbiosis which did not delay to come apart after the recent financial meltdown. In this context, fiscal consolidation and policies of recession are the only choice of the capitalist power if the neoliberal architecture of Eurozone is to be left intact.

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