Wednesday, June 26, 2013
C3.17 (Oudemanhuispoort)
The presentation proposes a common interpretation of the initial success of the launching of the euro and of the painful
muddling through since the bursting out of the Greek sovereign debt crisis .At odds with mono causal analysis, it is
argued that three interrelated processes interact and deliver a quite complex idiosyncratic systemic crisis. First of all,
the victory of new classical macroeconomics has diffused the belief that market economies are structurally stable,
money is neutral, financial markets are efficient. Thus private and public actors would cope with the Euro,
provided it generates more symmetric shocks than asymmetric ones. The experts involved in the assessment of the
Euro superbly ignored an elementary teaching from Tinbergen about the viability of any policy mix regime, the
analyses from economic geography, the core truth of Keynesian economics and the consequences the heterogeneity of
European capitalisms and their regulation modes.
The second perverse process takes place in the political arena. National politicians and elites were happy to invoke
the functional necessity to defend the Single market by a definite step towards monetary integration: they could
present as an external constraint coming from Brussels the liberalisation reforms that were opposed by various
social groups within the domestic democratic arena. Furthermore the same European Treaty could be interpreted
quite differently across the members of the Euro-zone according to their legal tradition, degree of acceptance of world
competition, economic specialisation and political references and ideologies. Most governments were only defending
their national interests and shrinking sovereignty, whereas a weaker European Commission and a rather modest
European Parliament had lost most of their expertise and legitimacy in defending a community and supranational
aggiornamento of European institutions in line with the ambition of the Euro.
Nevertheless, a third stream of causality has to be brought into the picture. The first years of the Euro would not
have been so happy and then its crisis so severe, had not financial innovation and globalisation provided the
anaesthesia of experts, politicians and public opinion. An easy access to credit for homeowners, households,
governments generated a boom for any member States, even for those economies less and less competitive. With the
collapse of Lehman Brothers, the musical chair game stops and after a lag the Euro-zone becomes the weakest link
of the international economy and focuses the impatience and anxiety of finance .All the previously neglected
unbalances and political oppositions about the best way out of the crisis pop out, not to forget that the time of
supranational political deliberation cannot cope with the quasi instantaneity of finance.
The article builds upon this analysis in order to explain why the numerous European Councils, from march 2010
to June 2012, have been unable to simultaneously stop the contagion of the crisis on one side, restore the credibility
of the Euro by announcing more and more ambitious plans to launch the federal institutions required for sustaining
private and public financial stability on the other side.
muddling through since the bursting out of the Greek sovereign debt crisis .At odds with mono causal analysis, it is
argued that three interrelated processes interact and deliver a quite complex idiosyncratic systemic crisis. First of all,
the victory of new classical macroeconomics has diffused the belief that market economies are structurally stable,
money is neutral, financial markets are efficient. Thus private and public actors would cope with the Euro,
provided it generates more symmetric shocks than asymmetric ones. The experts involved in the assessment of the
Euro superbly ignored an elementary teaching from Tinbergen about the viability of any policy mix regime, the
analyses from economic geography, the core truth of Keynesian economics and the consequences the heterogeneity of
European capitalisms and their regulation modes.
The second perverse process takes place in the political arena. National politicians and elites were happy to invoke
the functional necessity to defend the Single market by a definite step towards monetary integration: they could
present as an external constraint coming from Brussels the liberalisation reforms that were opposed by various
social groups within the domestic democratic arena. Furthermore the same European Treaty could be interpreted
quite differently across the members of the Euro-zone according to their legal tradition, degree of acceptance of world
competition, economic specialisation and political references and ideologies. Most governments were only defending
their national interests and shrinking sovereignty, whereas a weaker European Commission and a rather modest
European Parliament had lost most of their expertise and legitimacy in defending a community and supranational
aggiornamento of European institutions in line with the ambition of the Euro.
Nevertheless, a third stream of causality has to be brought into the picture. The first years of the Euro would not
have been so happy and then its crisis so severe, had not financial innovation and globalisation provided the
anaesthesia of experts, politicians and public opinion. An easy access to credit for homeowners, households,
governments generated a boom for any member States, even for those economies less and less competitive. With the
collapse of Lehman Brothers, the musical chair game stops and after a lag the Euro-zone becomes the weakest link
of the international economy and focuses the impatience and anxiety of finance .All the previously neglected
unbalances and political oppositions about the best way out of the crisis pop out, not to forget that the time of
supranational political deliberation cannot cope with the quasi instantaneity of finance.
The article builds upon this analysis in order to explain why the numerous European Councils, from march 2010
to June 2012, have been unable to simultaneously stop the contagion of the crisis on one side, restore the credibility
of the Euro by announcing more and more ambitious plans to launch the federal institutions required for sustaining
private and public financial stability on the other side.
