Financial Interventionism and Liberalization in Southern Europe: State, Bankers, and the Politics of Disinflation

The article provides a structural and political account of financial intervention in Spain, Portugal and Greece and examines competing explanations for financial liberalization. It focuses on the economic and political objectives underlying financial reform, and the costs and benefits for government, central bank, and the banking sector. It argues that financial liberalization was, to a significant extent a necessary prerequisite for the central banks' programmatic effort to achieve effective disinflation. This challenges the dominant arguments viewing financial liberalization exclusively within the framework of the European financial integration program or as a result of interest group pressure. At a subsequent stage, a stabilization strategy based on monetary austerity entailed the significant political advantage of allowing governments to avoid a more radical pace of fiscal adjustment. Both financial interventionism and liberalization displayed a state-driven policy pattern.