Before and Beyond the Global Economic Crisis

Before and Beyond the Global Economic Crisis

Economics, Politics and Settlement

Edited by Mats Benner

This timely and far-reaching book addresses the long-term impact of the recent global economic crisis. New light is shed on the crisis and its historical roots, and resolutions for a more robust, resilient future socio-economic model are prescribed.

Chapter 8: The ‘new new deal’ as a response to the euro-crisis

Bengt-Åke Lundvall

Subjects: economics and finance, economic psychology, political economy, politics and public policy, european politics and policy, political economy


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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