Causes and Consequences of the Recent European Crisis: Can Polanyi help us understand problems of the Eurozone?

Causes and Consequences of the Recent European Crisis: Can Polanyi help us understand problems of the Eurozone?

By evoking economic turmoil in Europe, the global crisis of 2007-2008 had important impacts on the economic and political integration of the European Union (EU), leading to a reassessment of the relationship between the core– periphery countries and the model of the ‘democratic European welfare state.’ Most studies that address this problem in the EU focus on the fiscal mismanagement and welfare policies of the non-core or periphery countries (i.e. Greece) as the main culprit. Unlike the mainstream ideas, this paper explains the recent European crisis as a result of the liberalization and deregulation process that started with the second globalization wave in the 1970s. This paper also questions whether the recent radical nationalist trend in the EU countries can be explained as a byproduct of the crisis, using Polanyi’s notion of “double movement”.

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  • Table 1- Current Account Balance in Selected Eurozone Countries France ,8 ,2 ,7 ,5 0,5 0,6 1 1,7 1,5 1,7 Germany ,9 ,7 ,1 ,3 ,5 ,3 ,6 ,7 Netherlands ,6 ,6 ,5 ,6 ,4 ,3 ,7 ,3 ,2 ,6 Finland ,4 ,5 ,8 ,2 ,4 ,2 ,3 ,6 ,8 ,4 Greece 7,2 6,5 6,5 5,8 7,6 11,4 14,6 14,9 11,1 10,1 Italy ,3 0,4 0,8 0,3 0,9 1,5 1,3 2,9 2 3,5 Portugal 10,3 8,2 6,4 8,3 10,3 10,7 10,1 12,6 10,9 10 Spain 3,9 3,3 3,5 5,2 7,4 9 10 9,6 5,2 4,6 Source: Eurostat yearbook 2012
  • Table 2- Interest Rate Convergence and Decrease before and during the Crisis for Selected Countries Germany 78 07 04 35 76 22 22 61 France 86 13 10 41 80 30 23 65 12 32 Netherlands 89 12 10 37 78 29 23 69 99 99 Finland 98 13 11 35 78 29 29 74 01 01 Ireland 01 13 08 33 76 31 53 23 74 60 Greece 12 27 26 59 07 50 80 17 09 75 Italy 03 25 26 56 05 49 68 31 04 42 Spain 96 12 10 39 78 31 37 98 25 44 Portugal 01 18 14 44 91 42 52 21 40 24 UK 91 58 93 46 37 06 50 36 36 87 Source: Eurostat yearbook 2012
  • Table 3- Eurozone Annual Unemployment Rates (in percentages) 2007 2009 Germany 6 6 7 1 1 9 France 3 7 8 6 3 Netherlands 5 3 4 5 4 8 Austria 6 6 3 4 2 3 Ireland 9 5 1 7 5 3 Greece 7 6 6 6 7 9 Spain 3 8 7 1 1 Portugal 6 7 6 7 5 Italy 1 6 3 4 1 2 Core Countries 7 1 3 8 3 3 Non-core 7 Countries 9 8 4 4 6
  • Source: Caldentey and Vernengo, “The Euro Imbalances.”