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External Imbalances and Varieties of Capitalism in the Euro Area

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Rising Powers and Economic Crisis in the Euro Area

Part of the book series: Global Reordering ((GRP))

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Abstract

This chapter discusses the main diagnoses of the euro crisis and the consequent remedies in the macroeconomics and comparative political economy literature. It is argued that both approaches view the euro crisis as the result of endogenous processes. The defects of the Economic and Monetary Union (EMU) leading to one-size-fits-none monetary policy at the supranational level and divergent domestic capabilities to keep wages in check are argued to have resulted in inflation differentials between the north and south of the euro area and consequent internal trade imbalances. The varieties of capitalism literature explains why certain member states (coordinated market economies) have been better equipped to retain and strenghten their competitiveness and trade balances than others (mixed-market economies) based mainly on the characteristics of domestic labor market and industrial relations institutions allowing them to excercise wage restraint. We argue that these valuable accounts are too much inward-looking and lack attention for extra-regional imbalances and how these can be explained by and interact with other domestic structural-institutional factors such as skill-formation and innovation regimes and the (resulting) economic structures (export basket, quality and market orientation).

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Authors and Affiliations

  1. Department of Political Science, Ghent University, Gent, Oost-Vlaanderen, Belgium

    Ferdi De Ville & Mattias Vermeiren

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  1. Ferdi De Ville
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  2. Mattias Vermeiren
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De Ville, F., Vermeiren, M. (2016). External Imbalances and Varieties of Capitalism in the Euro Area. In: Rising Powers and Economic Crisis in the Euro Area. Global Reordering. Palgrave Pivot, London. https://doi.org/10.1057/978-1-137-51440-0_2

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