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Neoliberalism, trade imbalances and economic policy in the Eurozone crisis

Author

Listed:
  • Stockhammer, Engelbert

    (Kingston University London)

  • Constantine, Collin

    (Kingston University London)

  • Reissl, Severin

    (Kingston University London)

Abstract

This paper analyses the causes of the Eurozone crisis. In doing so it carefully surveys authors from different economic schools of thought. The paper discusses competing explanations for European current account imbalances. Remarkably, opposing views on the relative importance of cost developments and of demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics and there is a remarkable variability of policy conclusions. Regarding the assessment of fiscal and monetary policy there is a clearer polarisation, with heterodox analysis regarding austerity as unhelpful and most of orthodox economics endorsing it. We advocate a post-Keynesian view which holds that current account imbalances are not a fundamental cause of the sovereign debt crisis. Rather, the economic policy architecture of the Eurozone, which aims at restricting the role of fiscal and monetary policy, is the key to understanding the crisis in Europe.

Suggested Citation

  • Stockhammer, Engelbert & Constantine, Collin & Reissl, Severin, 2016. "Neoliberalism, trade imbalances and economic policy in the Eurozone crisis," Economics Discussion Papers 2016-3, School of Economics, Kingston University London.
  • Handle: RePEc:ris:kngedp:2016_003
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    References listed on IDEAS

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    Cited by:

    1. Bajo-Rubio, Oscar & Berke, Burcu & Esteve, Vicente, 2016. "The effects of competitiveness on trade balance: The case of Southern Europe," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-27.
    2. Engelbert Stockhammer & Collin Constantine & Severin Reissl, 2020. "Explaining the Euro crisis: current account imbalances, credit booms and economic policy in different economic paradigms," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 43(2), pages 231-266, April.
    3. Sergio Cesaratto, 2017. "The Nature of the Eurocrisis. A Reply to Febrero, Uxò and Bermejo," a/ Working Papers Series 1703, Italian Association for the Study of Economic Asymmetries, Rome (Italy).

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    More about this item

    Keywords

    Euro crisis; neoliberalism; European economic policy; financial crisis; sovereign debt crisis; current account balance;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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