Abstract
<p>The main purpose of this article is to outline the specificities of the indebtedness process of each country of the European periphery — Greece, Italy, Ireland, Portugal, and Spain — that guided the behavior of the demand and the indebtedness of the domestic economic agents from 2000 to 2017. The main results indicated that from 2000 to 2008, all of the countries had foreign sector surpluses (current account deficits), which characterized distinct indebtedness processes of the domestic economic agents. The reversal of these processes was accompanied by larger public deficits and the replacement of private debt with public debt. With the exception of Ireland, the positive impacts on the economic performance of these countries between 2009 and 2017 came from the foreign sector through the devaluation of the euro in the period.</p>
Highlights
The 2008 economic crisis made evident the deleterious effects of the processes of chronic indebtedness of private economic agents
The process of indebtedness had different causes and consequences because of the specificities created by the institutional organization of the single European currency, which can be characterized by three elements: (i) deficits in current accounts stimulated by differences in the real exchange rates between eurozone countries (Bresser-Pereira and Rossi, 2015), (ii) financing expansion provided by global financial markets (Boyer, 2013; Hein, 2013; Özgür and Memis, 2017), and (iii) difficulties in coordinating the usual countercyclical monetary and fiscal policies (Bibow, 2013; Lavoie, 2015b)
The present study main purpose is to show the specificities of the indebtedness process of each country of the European periphery (Greece, Italy, Ireland, Portugal, and Spain ƒ hereinafter referred to as GIIPS), which guided the expansion of demand and increased indebtedness of domestic economic agents in the pre-2008 crisis period and limited growth in the post-crisis period
Summary
The 2008 economic crisis made evident the deleterious effects of the processes of chronic indebtedness of private economic agents. For this study, the crisis of the European periphery countries and the change in the demandled growth components are not due to balance of payments constraints but rather to the restriction on liquidity imposed by the global financial markets from the contagion effect of the American crisis (Arestis and Karakitsos, 2012); combined with forced austerity policies at times of falling private spending (Bibow, 2013; Boyer, 2013; Lavoie, 2015b) To better understand these issues, it is necessary to explore the orthodox theoretical view that implemented those policies. In addition to this introduction and the conclusion, this article is divided into two sections: one is devoted to raising the theoretical debate about the meaning of indebtedness for the economic system, both orthodox and Keynesian; whereas the second section shows the demand-led growth characteristics, before and after 2008 economic crisis, that shaped the indebtedness process of public and private economic agents in each one of GIIPS countries
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