Teria das relações internacionai

A ROUTE OUT OF THE EUROZONE CRISIS

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A RADICAL ROUTE OUT OF THE EUROZONE CRISIS
C. Lapavitsas, A. Kaltenbrunner, D. Lindo, J. Meadway, J. Michell, J.P. Painceira, E. Pires, J. Powell, A. Stenfors, N. Teles, L. Vatikiotis

BREAKING UP?

RMF OCCASIONAL REPORT 3 NOVEMBER 2011

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BREAKING UP?

A ROUTE OUT OF THE EUROZONE CRISIS

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Acknowledgements
Far too many people have commented on this report to be thanked individually. The report would have been impossible to produce without the lively spirit of inquiry within RMF.

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BREAKING UP?

A ROUTE OUT OF THE EUROZONE CRISIS

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Executive summary
1. The Eurozone crisis is part of the global turmoil that began in 2007 as a US real estate crisis, became a global banking crisis, turned into a global recession, and thus gave rise to a sovereign debt crisis. At the end of 2011 there is a risk of returning to a banking crisis in Europe and elsewhere. At the heart of bank weakness lies private and public debt accumulated during the period of intense financialisation in the 2000s. 2. The euro is a form of international reserve currency created by a group of European states to secure advantages for European banks and large enterprises in the context of financialisation. The euro has attempted to compete against the dollar but without a correspondingly powerful state to back it up. Its fundamental weakness is that it relies on an alliance of disparate states representing economies of diverging competitiveness. 3. The euro has acted as mediator in Europe of the global crisis that began in 2007. The European Monetary Union (EMU) has created a split between core and periphery, and relations between the two are hierarchical and discriminatory. The periphery has lost competitiveness in the 2000s, therefore developing current account deficits with the core and accumulating large debts to the financial institutions of the core. The result has been that Germany has emerged as the economic master of