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The economic diplomacy of sovereign debt crises: Latin America and the euro-zone compared

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  • Nicholas Bayne

Abstract

This article compares today's euro-zone debt crisis, in terms of economic diplomacy, with the earlier crisis in Latin America. Four features served to reconcile the tensions and resolve the 1980s' crisis. A balance was preserved between debtor countries and creditor banks. Though initially contagious, the crisis was treated by a process of isolation. The IMF served as a neutral intermediary. Domestic pressures were defused, using 'two-level game' strategies. The same features reveal almost total failure to reconcile tensions in the euro-zone crisis. Growing imbalances between debtors and creditors led to serious loss of confidence. Early mistakes over Greece fed contagion throughout the euro-zone. No institution acted as neutral intermediary. Domestic pressures were not defused, putting the democratic process under strain. By late May 2012 the euro-zone's sovereign debt crisis had proliferated into a full-blown economic and banking crisis, with growing international consequences.

Suggested Citation

  • Nicholas Bayne, 2012. "The economic diplomacy of sovereign debt crises: Latin America and the euro-zone compared," International Journal of Diplomacy and Economy, Inderscience Enterprises Ltd, vol. 1(1), pages 4-18.
  • Handle: RePEc:ids:ijdipe:v:1:y:2012:i:1:p:4-18
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    2. David F. Lomax, 1986. "The Developing Country Debt Crisis," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-07765-6, August.
    3. repec:rnp:ecopol:09111 is not listed on IDEAS
    4. Howard Davies & David Green, 2010. "Banking on the Future: The Fall and Rise of Central Banking," Economics Books, Princeton University Press, edition 1, number 9154.
    5. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(3), pages 427-460, July.
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    Cited by:

    1. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.
    2. Sabina Kolesa, 2014. "Efficient Institutions and External Trade Policy Management Can Increase the Influence of a Small Country on the International Stage," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(3 (Fall)), pages 233-251.

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