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Riccardo Bellofiore, Francesco Garibaldo and Mariana Mortagua

In the chapter, ‘A structural and monetary perspective of the euro crisis,’ the authors argue that the European crisis cannot be treated as a typical breakdown resulting from balance of payments problems and cumulative price differentials, and nor does it reflect neo-mercantilist strategies. From the authors’ perspective, the European crisis should be discussed in light of the structural problems with the productive sector, considering the structural changes generated by the eurozone, which altered the ways of mobilizing capital and promoted accumulation.

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Riccardo Bellofiore, Francesco Garibaldo and Mariana Mortagua

Is an exit from the euro possible? Is it desirable? We think that to deal with these questions, which may well not be the right ones just now, what is needed is a preliminary but thorough critique of the views on the European crisis that are most widespread. The heterodox approaches more and more underline a balance-of-payments problem, caused by cumulative differences in relative prices which have led to distinct growth strategies: export-led in the core, and debt-led in the periphery, focused on consumption and real-estate investment. This interpretation overlooks some defining features of current monetary economies, in general, and some specifics of currency areas. In a monetary union it's not possible to have a ‘normal’ balance-of-payments crisis, and a distinction must be made between financing and saving. Moreover, current accounts, based on net flows, exclude underlying changes in gross flows and their contribution to the existing stocks of debt. We also have to deal with the structural divergences in the European economy. To make sense of Europe today and its crisis, we have to take into account the geographical and technological composition of intra-European trade.