A Europe of creditor and debtor states: explaining the north/south divide in the Eurozone

Abstract

With the recovery of growth among some Southern states, the crisis of the Eurozone may appear to be coming to an end almost a decade after the start of the great world financial crisis. There are, nonetheless, two ways in which this crisis continues to be of central importance for political economists. First, even with the recovery, the Eurozone remains divided between a small group of creditor states (principally Germany and the Benelux states), and those countries (mostly Southern states) that still have weak financial positions (either public or private) and remain vulnerable in international financial markets. The Eurozone crisis also still matters for the lessons that are drawn from it. Accounts of why large current account and debt imbalances first emerged in the Eurozone, and in some cases persist, inform how reforms-both in the Eurozone's debtor states and of the Eurozone's governance itself-are understood and evaluated. They also continue to frame how those reforms are framed for domestic audiences This article considers two competing types of explanation for the emergence of Eurozone imbalances and evaluates how persuasive they are. The first type, which has been advanced particularly forcefully by political scientist, in particular comparative political economy scholars, emphasizes differences in national institutions, in particular wage bargaining institutions. The second view, which has become dominant among economists (at least outside of Europe), emphasizes the uneven macroeconomic impact that monetary union

Macroeconomic Indicators and Foreign Direct Investment in Indonesia

“…The higher inflation rates will impact the inclining production costs and less profitable for a company. The finding of this study is in accordance with the theory of Perez (2019), which mentioned that the higher rate of inflation will affect the greater the uncertainty faced by creditors and debtors. Because most people do not like uncertainty so that high inflation can be disturbing.…”

Failing outward: power politics, regime complexity, and failing forward under deadlock

“…Following Hix (2018), strong, consistent differences between national electorates and constituents coupled with high political saliency generate Council deadlock over core principles. Within EMU, these are North-South divides over stabilizing public finances and banks through common debt and transfers, or national risk reduction efforts (Braun & Deeg, 2020;Hall, 2018;Matthijs & Merler, 2020;Pérez, 2019;Regan, 2017). The second condition is one country's possession of a critical, excludable resource which other states need to keep interdependence intact.…”

“…These reforms attributed instability to excessive government borrowing and bank lending that had to be reduced, ignoring counterclaims that Europe required a fiscal union to offset destabilizing financial flows (Jones, 2020). Nevertheless, periodic financial instability remains, and steps taken remain politically contested (Hodson, 2020), with strong distributional divides between North and South (Matthijs & Merler, 2020;Pérez, 2019). Until July 2020, Germany led efforts to stabilize EMU with national structural adjustment, budget retrenchment and financial sector risk reduction, aided by EU and ESM oversight, while resisting French-led proposals to introduce common debt and fiscal transfers between EMU Member States (Quaglia, 2019).…”

The Troika in its own words: responding to the politicisation of the southern European crises

“…According to Kriesi and Grande (2016), if we understand politicisation as a massification of growing polarisation over an increasingly salient issue, the euro crisis was not as politicized as other moments of integration crisis. However, as the authors indicate, their analysis focuses exclusively on 'creditor' countries (see Pérez 2019), leaving aside the most negatively affected political economies (Kriesi and Grande 2016, 242). The politicisation of the euro crisis was indeed rooted in a political conflict amongst creditor and debtor countries (Leupold 2016).…”