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The economic diplomacy of sovereign debt crises: Latin America and the euro-zone compared

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  • Nicholas Bayne

Abstract

This article compares today's euro-zone debt crisis, in terms of economic diplomacy, with the earlier crisis in Latin America. Four features served to reconcile the tensions and resolve the 1980s' crisis. A balance was preserved between debtor countries and creditor banks. Though initially contagious, the crisis was treated by a process of isolation. The IMF served as a neutral intermediary. Domestic pressures were defused, using 'two-level game' strategies. The same features reveal almost total failure to reconcile tensions in the euro-zone crisis. Growing imbalances between debtors and creditors led to serious loss of confidence. Early mistakes over Greece fed contagion throughout the euro-zone. No institution acted as neutral intermediary. Domestic pressures were not defused, putting the democratic process under strain. By late May 2012 the euro-zone's sovereign debt crisis had proliferated into a full-blown economic and banking crisis, with growing international consequences.

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  • Nicholas Bayne, 2012. "The economic diplomacy of sovereign debt crises: Latin America and the euro-zone compared," International Journal of Diplomacy and Economy, Inderscience Enterprises Ltd, vol. 1(1), pages 4-18.
    • Handle: RePEc:ids:ijdipe:v:1:y:2012:i:1:p:4-18
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    3. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(3), pages 427-460, July.
    4. Howard Davies & David Green, 2010. "Banking on the Future: The Fall and Rise of Central Banking," Economics Books, Princeton University Press, edition 1, number 9154.
    5. David F. Lomax, 1986. "The Developing Country Debt Crisis," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-07765-6, December.
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    Cited by:

    1. Sabina Kolesa, 2014. "Efficient Institutions and External Trade Policy Management Can Increase the Influence of a Small Country on the International Stage," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(3 (Fall)), pages 233-251.
    2. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.

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