The European economic crisis need not be considered as a problem that is sui generis. Drawing on literature from the political economy of development that centers on finance and monetary policy, we show that the economic vulnerabilities and policy predicaments facing the European periphery share many similarities with problems encountered by middle-income developing countries. Three main concerns guide our discussion: the politics of credible commitment, the significance of state capacity for stabilizing credibility, and the challenges of maintaining democratic legitimacy during times of financial volatility. Our analysis of the dynamics of hard currency pegs and monetary unions draws on lessons from the classic Gold Standard and on more recent experiences of financial crises in emerging markets. We consider how these may apply to the Eurozone periphery, before drawing out some implications for the problems of core–periphery relationships in European Monetary Union.
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“Emerging markets,” like “periphery,” sometimes lacks clarity. But the concept may usefully let us draw upon an established literature on financial vulnerabilities and monetary dilemmas.
This development is an important part of the story in its own right, as these policy options are no longer possible within EMU.
Similar problems arise in relation to other exit strategies such as emigration.
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Dellepiane-Avellaneda, S., Hardiman, N., Pagoulatos, G. et al. Pathways from the European Periphery: Lessons from the Political Economy of Development. St Comp Int Dev 53, 239–260 (2018). https://doi.org/10.1007/s12116-018-9261-6
- European periphery
- Financial crises
- Emerging markets
- Credibility of monetary commitments
- State capacity