Integration, Spurious Convergence, and Financial Fragility: A post-Keynesian interpretation of the Spanish crisis Esteban Perez Caldentey and Matias Vernengo

[Working Paper No. 02/2015] The authors argue that the Spanish crisis resulted from a widening deficit in the non-financial corporate sector and a declining trend in profitability under a regime of financial liberalization and loose and unregulated lending practices. WP_02_2015 (Download the full text in PDF format)

Bullying Cyprus to No End C.P. Chandrasekhar

After prolonged negotiations, the government in Cyprus and the troika running Europe from above—the European Union (led by Germany), The European Central Bank and the IMF—announced a “deal” late March to resolve the crisis in Europe. It involved a 10 billion euro bailout that is expected to prevent a collapse of the Cypriot banking system by drastically restructuring it and keep the government running. But in return for that 10 billion euro, the Cypriot government has been pressured into mobilising an additional 5.8 billion euro to finance the so-called bailout that can render the whole exercise infructuous. A chunk of…

On Global Crisis Jayati Ghosh

The epicentre of the global economic crisis is now Europe. As the world watches each move in that continent with bated breath, it is evident that whatever happens, the current economic structure and trajectory in the region are no longer viable. But any change – whether in the form of a break-up of the currency union or a revision of its structure towards greater fiscal union or just a lingering slow motion death marked by massive social and political tension - will have huge implications not only for Europe but for all of global capitalism. The combination of inflexibility, denial…

A Proposal for a Growth and Fiscal Compact Mario Tonveronachi

The author investigates the present crisis in Europe that is threatening to undo the economic integration process started under the European Union. The single market and common currency concept is today under threat because of national egoisms and undemocratic manner in which the EU operates currently. Proposal_Growth_Fiscal_Compact (Download the full text in PDF format)

A Proposal for a Growth and Fiscal Compact Mario Tonveronachi

The author investigates the present crisis in Europe that is threatening to undo the economic integration process started under the European Union. The single market and common currency concept is today under threat because of national egoisms and undemocratic manner in which the EU operates currently. fiscal_compact (Download the full text in PDF format)

Debtors’ Crisis or Creditors’ Crisis? Who Pays for the European Sovereign and Subprime Mortgage Losses? Jan Kregel

In the context of the eurozone’s sovereign debt crisis and the US subprime mortgage crisis, this article looks at the question of how the losses ought to be distributed between borrowers and lenders in cases of debt resolution. The author points out that it is unlikely that debtors can fully bear the losses in a debt resolution. It is argued that the behavior and policy of creditors is just as important a factor to consider in assessing the situation. debtors_crisis (Download the full text in PDF format)

Fundamental Flaws in the European Project George Irvin and Alex Izurieta

The euro was informed by a neo-liberal view of leaving policy entirely to market forces. In consequence, by way of its specific design, it removed three essential policy instruments from the domain of national policymaking - exchange rate management, monetary policy and fiscal policy- and it intrinsically weakened labour and welfare policy. These are the fundamental flaws in the design of the European project. Fundamental_Flaws    (Download the full text in PDF format) (This article was originally published in Economic and Political Weekly, VOL 46 No. 32 August 06 - August 12, 2011.)

Monetary Union Stability: The need for a government banker and the case for a European public finance authority Thomas I. Palley

There is accumulating evidence that the euro’s current architecture is unstable. The source of instability is high interest rates on highly indebted countries which creates unsustainable debt burdens.  Remedying this problem requires a central bank that acts as government banker and pushes down government bond interest rates to sustainable levels. That can be accomplished by creation of a European Public Finance Authority (EPFA) that issues public debt which the European Central Bank (ECB) is allowed to trade. Monetary_Union_ Stability (Download the full text in PDF format) (This article is also available at http://www.boeckler.de/show_product_imk.html?productfile=HBS-004936.xml)

Speculation against the Euro Luiz Carlos Bresser-Pereira

This speculative attack is another evidence of the need to strictly regulate the banks and hedge funds Financial markets are incorrigible. Speculation now turns against the euro or, more specifically, against Greece, and will later attack Portugal and, subsequently, Spain - the most fragile countries in the eurozone. The price of the credit default swaps (CDS) aimed at protecting creditors against a possible Greek bankruptcy went from a level of 120 in October 2009 to 419 on February 9, 2010. People who buy CDS at such a high price are betting on the country's bankruptcy, which will convert this high price into…

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