Neoliberal growth models, monetary union and the Euro crisis. A post-Keynesian perspective

By Engelbert Stockhammer

PKES Working Paper 1510

December 2015

The paper offers an account of the Euro crisis based on post-Keynesian monetary theory and its typology of demand regimes. Neoliberalism has transformed social and financial relations in Europe but it has not given rise to a sustained profit-led growth process. Instead, growth has relied either on financial bubbles and rising household debt ('debt-driven growth') or on net exports ('export-driven growth'). In Europe the financial crisis has been amplified by an economic policy architecture (the Stability and Growth Pact) that aimed at restricting the role of fiscal policy and monetary policy. This neoliberal economic policy regime in conjunction with the separation of monetary and fiscal spheres has turned the financial crisis of 2007 into a sovereign debt crisis in southern Europe.

Keywords: Euro crisis, neoliberalism, European economic policy, European integration, financial crisis, sovereign debt crisis

JEL classification: E02 E12 E50 E60 F50 P16