Abstract
<p>The GIIPS crisis (Greece, Italy, Ireland, Portugal, and Spain) has been deep and resistant. To date there have not been clear signs of consistent recovery from these economies, with the only exception being Ireland, that has experimented with a longer lasting economic recovery process in recent times. The aim of this paper is to discuss the GIIPS crisis in light of the European integration project. It is argued that this crisis has resulted from two simultaneous processes: on the one hand, it has resulted from the growing internal imbalances that occurred over the economic expansion period; on the other hand, it has resulted from the rigidities imposed by the institutional arrangement of the European Monetary Union. It has been concluded that the consistent economic recovery of these economies requires an aggregate demand stimulus for them, a condition that in turn requires the implementation of countercyclical economic policies.</p>
Highlights
The European crisis began under the instability effects triggered by the global financial crisis that arose in 2008
It is affirmed that the restrictions imposed by the Eurozone institutions, in the context of the high capital mobility prevalent in the region, resulted in structural problems in these economies, those being: 1) the generation and growth of internal imbalances inside the group, during the period of economic expansion (2000-2007), between the center and the periphery of the region; 2) the deepening of the effects of the financial global crisis triggered in 2008, the epicenter of the crisis being the so-called GIIPS nations from 2010 onwards; and 3) the deepening of the crisis, due to recommendations made by the European authorities
When analysing the existence of financialised capitalism, Hein (2012) envisions three possibilities for the dynamics of the Eurozone economies over expansion periods, namely: 1) debt-led consumption boom, in which the growth of aggregate demand occurs by increasing the debt toward consumption and a relative stagnation of investment, which would be the case of Ireland, Greece, and Spain; 2) export-led mercantilism, in which the advance of exports are essential to the performance of the economy, reflecting the dynamics of the German economy; and 3) domestic demand-led, in which the dynamism of the economy is led by domestic demand, but without the strong evolution of the debt of households towards finance consumption, as in the case of Portugal and Italy
Summary
The European crisis began under the instability effects triggered by the global financial crisis that arose in 2008. From the point of view of government debt, the most vulnerable economies have been more adversely affected, namely Greece, Italy, Ireland, Portugal, and Spain, the so-called GIIPS1 countries. In this sense the paper aims to analyse the GIIPS crisis in the context of the European Monetary Union project, from a political economy approach, highlighting the economic theory that served and legitimised the constitution of the Eurozone. After the outbreak of the crisis in Europe, Ireland was incorporated into this group of countries, in order to contemplate all those with significant imbalances in public accounts
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