The European Financial and Economic Crisis: Alternative Solutions from a (Post-) Keynesian Perspective
The financial and economic crisis in the Euro area has revealed a number of important flaws in the economic policy framework in Europe. On the one hand, the imbalances, which have dominated European development since the introduction of the euro, are not sustainable; and this is more serious in a period of crisis in particular. On the other hand, it has become clear that the Euro area suffers from a serious lack of institutions and policy concepts, which will not allow coping with deep financial and economic crises unless a deep restructuring takes place. The policy reactions of European governments, the European Commission and the European Central Bank in cooperation with the IMF will, therefore, hardly be able to initiate recovery. On the one hand, some important steps towards financial stabilisation have been made. On the other hand, however, these are combined with restrictive fiscal and wage policies, which will impose deflationary pressure on major parts of the Euro area and thus prevent stabilisation (or reduction) of public debt-GDP ratios. In the paper we will first analyse the imbalances, which have been built up in the Euro area, before we briefly review the policy responses towards the crisis. Since the prescribed fiscal and wage policies are still dominated by the New Consensus Macroeconomics theoretical framework, we will then develop an alternative macroeconomic policy model based on Keynesian and Post-Keynesian principles. It will be shown that stabilising wage and active fiscal policies will have major roles to play in order to cope with the imbalances and to initiate recovery for the EU as a whole. Furthermore, current account targets will have to be included into intra-Euro area policy coordination.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Hans-Böckler-Straße 39, 40476 Düsseldorf|
Phone: +49 211 7778 234
Fax: +49 211 7778 4234
Web page: http://www.imk-boeckler.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jan Kregel, 2009. "Some Simple Observations on the Reform of the International Monetary System," Economics Policy Note Archive 09-8, Levy Economics Institute.
- Eckhard Hein & Torsten Niechoj, 2005.
"Guidelines for sustained growth in the EU? The concept and consequences of the Broad Economic Policy Guidelines,"
- Eckhard Hein & Thorsten Niechoj, 2005. "Guidelines for sustained growth in the EU ? The concept and consequences of the Broad Economic Policy Guidelines," IMK Working Paper 02-2005, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- W. Edward Steinmueller, 2009. "Comments," Chapters, in: The New Economics of Technology Policy, chapter 14 Edward Elgar Publishing.
- Eckhard Hein & Achim Truger, 2009. "How to Fight (or Not to Fight) a Slowdown," Challenge, M.E. Sharpe, Inc., vol. 52(3), pages 52-75, May.
- Eckhard Hein & Achim Truger, 2006. "Fiscal Policy and Macroeconomic Performance in the Euro area - Lessons for the Future," IMK Working Paper 07-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Eckhard Hein, 2005.
"Monetary Policy and Wage Bargaining in the EMU: Restrictive ECB Policies, High Unemployment, Nominal Wage Restraint and Rising Inflation,"
- Hein, Eckhard, 2002. "Monetary policy and wage bargaining in the EMU: Restrictive ECB policies, high unemployment, nominal wage restraint and rising inflation," WSI Working Papers 103, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
- Richard Clarida & Jordi Gali & Mark Gertler, 1999.
"The Science of Monetary Policy: A New Keynesian Perspective,"
NBER Working Papers
7147, National Bureau of Economic Research, Inc.
- Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
- Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
- Eckhard Hein & Engelbert Stockhammer, 2007.
"Macroeconomic policy mix, employment and inflation in a Post-Keynesian alternative to the New Consensus Model,"
Department of Economics Working Papers
wuwp110, Vienna University of Economics and Business, Department of Economics.
- Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
- Anthony Philip Thirlwall, 1979.
"The Balance of Payments Constraint as an Explanation of International Growth Rate Differences,"
Banca Nazionale del Lavoro Quarterly Review,
Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
- Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
- Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
- Gustav A. Horn & Torsten Niechoj & Silke Tober & Till van Treeck & Achim Truger, 2010. "Reforming the European Stability and Growth Pact: Public Debt is Not the Only Factor, Private Debt Counts as Well," IMK Report 51e-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
- Thomas Palley, 2004. "Asset-based reserve requirements: reasserting domestic monetary control in an era of financial innovation and instability," Review of Political Economy, Taylor & Francis Journals, vol. 16(1), pages 43-58.
- A. P. Thirlwall, 2002. "The Nature of Economic Growth," Books, Edward Elgar Publishing, number 2579.
- El-Agraa,Ali (ed.), 2007. "The European Union," Cambridge Books, Cambridge University Press, number 9780521874434, December.
- Louis-Philippe Rochon & Mark Setterfield, 2007. "Interest rates, income distribution, and monetary policy dominance: Post Keynesians and the "fair rate" of interest," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(1), pages 13-42, October.
- Thomas I. Palley, 2010. "Asset price bubbles and counter-cyclical monetary policy: Why central banks have been wrong and what should be done," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(1), pages 91-107.
When requesting a correction, please mention this item's handle: RePEc:imk:wpaper:9-2011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Nemitz)
If references are entirely missing, you can add them using this form.