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FASS thinking: Professorial lecture with Engelbert Stockhammer

Date:29 November 2012, 5:00pm
Location:JG5014, Penrhyn Road, Kingston University
 KT1 2EE

‘The Euro Crisis: European Neoliberalism, German Wage Suppression and Greek Debt’

Neoliberalism has not given rise to sustained profit-led growth process, but to a finance-dominated accumulation regime where growth relies either on financial bubbles and rising household debt (debt-led growth) or on net exports (export-led growth). The financial crisis that began in the market for derivates on the US subprime mortgage market has translated into the worst economic crisis since the 1930s. In Europe the crisis has been amplified by an economic policy architecture (the Stability and Growth Pact) that aimed at restricting the role of fiscal policy and insulating the monetary policy from national governments. European neoliberalism had fostered financial deregulation and, as a consequence, the financial flows that founded the housing bubbles in Spain and Ireland; and it has created a setting, where the only policy tool available to countries in the case of adverse developments is wage policy. Downward flexible wage (or ‘internal devaluation’) is not only the preferred adjustment instrument, it is nearly the only policy that member states have. The crisis has thus led to a sharp economic divergence between core and peripheral countries. Contrary to the situation in the (export-led) Germanic core of Europe, the crisis is escalating in the (debt-led) Southern countries of Europe. And the crisis is becoming a political crisis as the nation states are deprived of the basic economic policy instruments and working class resistance is growing.

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