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A credit-money and structural perspective on the European crisis: why exiting the euro is the answer to the wrong question

Author

Listed:
  • Riccardo Bellofiore

    (University of Bergamo, Italy)

  • Francesco Garibaldo

    (Director, Claudio Sabattini Foundation, Bologna, Italy)

  • Mariana Mortagua

    (SOAS, London, UK)

Abstract

Is an exit from the euro possible? Is it desirable? We think that to deal with these questions, which may well not be the right ones just now, what is needed is a preliminary but thorough critique of the views on the European crisis that are most widespread. The heterodox approaches more and more underline a balance-of-payments problem, caused by cumulative differences in relative prices which have led to distinct growth strategies: export-led in the core, and debt-led in the periphery, focused on consumption and real-estate investment. This interpretation overlooks some defining features of current monetary economies, in general, and some specifics of currency areas. In a monetary union it's not possible to have a 'normal' balance-of-payments crisis, and a distinction must be made between financing and saving. Moreover, current accounts, based on net flows, exclude underlying changes in gross flows and their contribution to the existing stocks of debt. We also have to deal with the structural divergences in the European economy. To make sense of Europe today and its crisis, we have to take into account the geographical and technological composition of intra-European trade.

Suggested Citation

  • Riccardo Bellofiore & Francesco Garibaldo & Mariana Mortagua, 2015. "A credit-money and structural perspective on the European crisis: why exiting the euro is the answer to the wrong question," Review of Keynesian Economics, Edward Elgar Publishing, vol. 3(4), pages 471—490-4, October.
    • Handle: RePEc:elg:rokejn:v:3:y:2015:i:4:p471-490
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    Citations

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    Cited by:

    1. Riccardo Bellofiore & Francesco Garibaldo, 2020. "A Very Political Macro-financial Interpretation of the Crash of Neoliberalism: Review of Adam Tooze, 'On Crashed. How a Decade of Financial Crises Changed the World'," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 54(1), pages 245-256, June.
    2. Engelbert Stockhammer & Collin Constantine & Severin Reissl, 2020. "Explaining the Euro crisis: current account imbalances, credit booms and economic policy in different economic paradigms," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 43(2), pages 231-266, April.
    3. Ramon Boixadera Bosch & Ferran Portella Carbó, 2019. "Beyond the euro: Limits to economic policy in the EU," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 27, pages 47-58.
    4. Garbellini, Nadia, 2021. "International trade as a process of choice of technique," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 42-50.
    5. Giacomo Cucignatto & Nadia Garbellini & Facund Fora Alcalde, 2023. "Profit-led or cost-led inflation? Propagation effects through the EU inter-industry network," PSL Quarterly Review, Economia civile, vol. 76(306), pages 261-276.

    More about this item

    Keywords

    euro; structural imbalances; European finance; European industry; neoliberalism;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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