New Varieties of Capitalism
Chapter 6: The new crisis paradigm: the GIIPS countries
The sovereign debt crisis in the eurozone makes it necessary to add a new category to the Varieties of Capitalism (VoC) in the European Union (EU). This paradigm consists of a group of countries who have shown severe crisis symptoms since the onset of the global financial crisis. Greece, Italy, Ireland, Portugal and Spain, the so-called GIIPS group, shared common structural weaknesses in their economies which existed prior to the crisis. Under adverse external circumstances these weaknesses have reached a tipping point. All of the countries involved display profound gaps in the capitalisation of their financial industries. Substantial government support hence became necessary to avoid the collapse of major banks which would have had unforeseen consequences for individual economies. None of them were able to shoulder this financial burden without external support from the International Monetary Fund (IMF) and EU. This dependency on external financial help in the form of loans inevitably has resulted in a loss of political autonomy for the governments of the countries in question. As long as they are recipients of loans from the IMF and the European Financial Stability Facility (EFSF)/European Stability Mechanism (ESM) they are in a situation where they have to accept the imposition of strict austerity measures. Drastic public spending cuts are hence inevitable with the effect of substantial job losses in the public sector, reduced welfare spending and an increase in the retirement age.
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