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Neoliberalism, trade imbalances and economic policy in the Eurozone crisis

Engelbert Stockhammer (), Collin Constantine () and Severin Reissl

No 2016-3, Economics Discussion Papers from School of Economics, 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.

Keywords: Euro crisis; neoliberalism; European economic policy; financial crisis; sovereign debt crisis; current account balance (search for similar items in EconPapers)
JEL-codes: B50 E60 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2016-02-17
New Economics Papers: this item is included in nep-acc, nep-eec, nep-hpe, nep-mac and nep-pke
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