Europe in crisis: Bolt from the blue, by Ivan T Berend

Abstract

Reviewed by: Edelgard Mahant, Glendon College, York UniversityIn Europe in Crisis , Hungarian historian Ivan Berend explains the causes of the euro currency crisis and makes some recommendations about how to resolve it. His viewpoint is that of a convinced European federalist, and his conclusion is that the euro will survive (131).Berend begins with three case studies. He explains how the Icelandic, Irish, and Greek economies fell into serious economic crises over the four years from 2008 to 2012. The following chapter includes three further case studies--Portugal, Italy, and Spain. This time the case studies aim to show how the effects of the 2008 financial crisis in the US, together with mistakes made in Europe by both the EU and national governments, combined to cause a fiscal and financial crisis in the latter three countries. All six case studies are informative, even if one does not agree with Berend's view that the crises were to a large extent caused by the movement of the European economies away from industrial production to what he terms financialization.What Berend ignores is the fact that most of the world's successful economies have progressed from a reliance on the production of things to a reliance on the production of services, which, of course, includes financial services. The economies of all of the wealthy industrialized now derive a majority of their wealth from tertiary industries. Germany is unique in that it has preserved a significant manufacturing sector, but even Germany derives the majority of its wealth from service industries. Along with Poland, Germany is one of the more successful European economies, but it is not logical to derive prescriptions from a sample of one. That said, Berend does have a point when he ascribes some of the Western economies' financial problems to the creation of ever more refined financial instruments, derivatives of derivatives, that make it all but impossible to determine the creditworthiness of the original products.Having diagnosed the problem, Berend suggests possible solutions. These include a more federal Europe with direct European supervision of the banking sector and a European Central Bank that could raise money in the bond markets. But, he writes, if the euro survives, as he predicts, then the Union may have to allow some irresponsible or peripheral (134) or totally bankrupt countries (136) to leave.The above statements point to one unfortunate aspect of this book. The author has a tendency to be judgmental and stereotypical toward some people and countries. Writing about Greece, Spain, and other he terms peripheral, he claims that clientelism, networking, corruption, a different work ethic and lifestyle . …