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PKSG Working Paper Series

Working Paper PKWP1510

Neoliberal growth models, monetary union and the Euro crisis. A post-Keynesian perspective

December 2015

Engelbert Stockhammer

The paper offers an account of the Euro crisis based on post-Keynesian monetary theory and its typology of demand regimes. Neoliberalism has transformed social and financial relations in Europe but it has not given rise to a sustained profit-led growth process. Instead, growth has relied either on financial bubbles and rising household debt ('debt-driven growth') or on net exports ('export-driven growth'). In Europe the financial crisis has been amplified by an economic policy architecture (the Stability and Growth Pact) that aimed at restricting the role of fiscal policy and monetary policy. This neoliberal economic policy regime in conjunction with the separation of monetary and fiscal spheres has turned the financial crisis of 2007 into a sovereign debt crisis in southern Europe.

Keywords: Euro crisis, neoliberalism, European economic policy, European integration, financial crisis, sovereign debt crisis

JEL classification: E02: Institutions and the Macroeconomy E12: General Aggregative Models: Keynes; Keynesian; Post-Keynesian E50: Monetary Policy, Central Banking, and the Supply of Money and Credit: General E60: Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General F50: International Relations, National Security, and International Political Economy: General P16: Capitalist Systems: Political Economy

Download: Working Paper PKWP1510