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

Nicholas Bayne

International Journal of Diplomacy and Economy, 2012, vol. 1, issue 1, 4-18

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.

Keywords: economic diplomacy; debt crises; United States; USA; Latin America; euro area; eurozone; European Union; EU; single currency; currencies; International Monetary Fund; IMF; European Commission; EC; European Central Bank; ECB; monetary policies; sovereign debt; debtor countries; creditor banks; isolation; contagion; economic balance; debtors; creditors; neutral intermediaries; domestic pressures; two-level game theory; political models; politics; international conflict resolution; liberal democracies; tension reconciliation; imbalances; confidence; Greece; democratic processes; democracy; economic crises; banking crises; international consequences; Spain; economy. (search for similar items in EconPapers)
Date: 2012
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