Controversial and novel features of the Eurozone crisis as a balance of payment crisis

The European crisis appears as the n-th “this time is different” episode of the financial liberalisation sequence cum fixed exchange rates, capital flows from the centre to the periphery, housing bubble, current account (CA) deficit and indebtedness, default. In the author’s view, although Reinhart and Rogoff (2009) is not a satisfactory account of the history and nature of defaults, their title conveys the sense of a recurring pattern of unfortunate events. In this contribution the author examines some conventional and heterodox explanations that have been given for the nature of the balance of payments (BoP) disequilibrium of the Eurozone (EZ) members in relation also to the presumed German mercantilism. The paper discusses next two different interpretations of the causes of the rise in the sovereign spread of periphery countries: both do not clearly identify the nature of the EZ crisis as a BoP crisis. Finally, it focuses on the novel and controversial features of the EZ BoP crisis compared to previous experiences. These original tracts regard the role of the European Central Bank in refinancing banks in peripheral countries.