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Neoliberalism has not given rise to a sustained profit-led growth process, but to a finance-dominated accumulation regime in which growth relies either on financial bubbles and rising household debt (‘debt-driven growth’) or on net exports (‘export-driven growth’). The financial crisis that began in the market for derivatives on the US subprime mortgage market has translated into the worst recession since the 1930s. In Europe the crisis has been amplified by an economic policy architecture (the Stability and Growth Pact) that aimed at restricting the role of fiscal policy and insulating monetary policy and central banks from national governments. The crisis has thus led to a sharp economic divergence between core and peripheral countries. Contrary to the situation in the (export-driven) Germanic core of Europe, the crisis is escalating in the (debt-driven) southern countries of Europe. The paper interprets the policy regime as the outcome of national elites’ attempt to use European integration as a means to constrain nation states. The result is a policy regime that has fatally weakened nation states as regards their fiscal and monetary capacities without creating a European state.
Keywords: Euro crisis, neoliberalism, European economic policy, European integration, financial crisis, sovereign debt crisis
JEL classification: E02 E12 E50 E60 F50 P16