Chapter 8: The ‘new new deal’ as a response to the euro-crisis
While the eurozone was originally designed to protect member countries from economic instability, it has now turned into a major source of instability for the world as a whole. Currently European leaders bring Europe ahead in the direction of a European Federation not because it is part of their vision, but because it seems to be the only way to avoid triggering a global depression. When the EMU was established there were warning voices that a monetary union without a common fiscal policy would be vulnerable to external shocks. The total budget of the EU is only a few per cent of GNP and cannot play the same role as the federal budget in the US as automatic stabilizer. This is especially problematic for a currency union bringing together countries at very different levels of economic development. There were elements in the Lisbon Strategy that could have reduced the gaps between the North and South of Europe. But the turn toward more neo-liberal solutions that took place around 2005 undermined its capacity to function as a scaffolding for the eurozone (Lundvall and Lorenz 2011).
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