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Understanding the political economy of the eurozone crisis


Frieden, Jeffry; Walter, Stefanie (2017). Understanding the political economy of the eurozone crisis. Annual Review of Political Science, 20(1):371-390.

Abstract

The Eurozone crisis constitutes a grave challenge to European integration. This article presents an overview of the causes of the crisis and analyzes why it has been so difficult to resolve. We focus on how responses to the crisis were shaped by distributive conflicts both among and within countries. On the international level, debtor and creditor countries have fought over the distribution of responsibility for the accumulated debt; countries with current account surpluses and deficits have fought over who should implement the policies necessary to reduce the current account imbalances. Within countries, interest groups have fought to shift the costs of crisis resolution away from themselves. The article emphasizes that the Eurozone crisis shares many features of previous debt and balance-of-payments crises. However, the Eurozone's predicament is unique because it is set within a monetary union that strongly constrains the policy options available to policy makers and vastly increases the interdependence of the euro crisis countries. The outcome of the crisis has also been highly unusual because the costs of crisis resolution have been borne almost exclusively by the debtor countries and taxpayers in the Eurozone.

Abstract

The Eurozone crisis constitutes a grave challenge to European integration. This article presents an overview of the causes of the crisis and analyzes why it has been so difficult to resolve. We focus on how responses to the crisis were shaped by distributive conflicts both among and within countries. On the international level, debtor and creditor countries have fought over the distribution of responsibility for the accumulated debt; countries with current account surpluses and deficits have fought over who should implement the policies necessary to reduce the current account imbalances. Within countries, interest groups have fought to shift the costs of crisis resolution away from themselves. The article emphasizes that the Eurozone crisis shares many features of previous debt and balance-of-payments crises. However, the Eurozone's predicament is unique because it is set within a monetary union that strongly constrains the policy options available to policy makers and vastly increases the interdependence of the euro crisis countries. The outcome of the crisis has also been highly unusual because the costs of crisis resolution have been borne almost exclusively by the debtor countries and taxpayers in the Eurozone.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Uncontrolled Keywords:euro, debt crisis, balance-of-payments crisis, distributive conflict, European Monetary Union, austerity
Language:English
Date:2017
Deposited On:06 Dec 2017 17:53
Last Modified:06 Dec 2017 17:53
Publisher:Annual Reviews
ISSN:1094-2939
Publisher DOI:https://doi.org/10.1146/annurev-polisci-051215-023101
Official URL:http://www.annualreviews.org/doi/pdf/10.1146/annurev-polisci-051215-023101

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