A credit-money and structural perspective on the European crisis: why exiting the euro is the answer to the wrong question

Riccardo Bellofiore, Francesco Garibaldo and Mariana Mortagua
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Riccardo Bellofiore: University of Bergamo, Italy
Francesco Garibaldo: Director, Claudio Sabattini Foundation, Bologna, Italy
Mariana Mortagua: SOAS, London, UK

Review of Keynesian Economics, 2015, vol. 3, issue 4, 471—490

Abstract: Is an exit from the euro possible? Is it desirable? We think that to deal with these questions, which may well not be the right ones just now, what is needed is a preliminary but thorough critique of the views on the European crisis that are most widespread. The heterodox approaches more and more underline a balance-of-payments problem, caused by cumulative differences in relative prices which have led to distinct growth strategies: export-led in the core, and debt-led in the periphery, focused on consumption and real-estate investment. This interpretation overlooks some defining features of current monetary economies, in general, and some specifics of currency areas. In a monetary union it's not possible to have a 'normal' balance-of-payments crisis, and a distinction must be made between financing and saving. Moreover, current accounts, based on net flows, exclude underlying changes in gross flows and their contribution to the existing stocks of debt. We also have to deal with the structural divergences in the European economy. To make sense of Europe today and its crisis, we have to take into account the geographical and technological composition of intra-European trade.

Keywords: euro; structural imbalances; European finance; European industry; neoliberalism (search for similar items in EconPapers)
JEL-codes: E12 O52 (search for similar items in EconPapers)
Date: 2015
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