Against the Troika: Crisis and Austerity in the Eurozone
A roundtable on Against the Troika: Crisis and Austerity in the Eurozone.
The Eurozone crisis has recently become overshadowed by the Brexit referendum, the Syrian war and its related migration crisis, as well as the election of Donald Trump as American President. The instability of the euro area has arguably shifted from an acute “fast burning crisis” to more of a “slow burning crisis.”[i] In spite of a modicum of financial stability and official pronouncements that the crisis is over,[ii] the 19-member state monetary union remains marred in a litany of problems, including stubbornly high unemployment rates,[iii] lackluster aggregate economic growth,[iv] persistent regional payment imbalances,[v] divergences in government borrowing costs,[vi] highly contentious “bailout” politics in “peripheral” nations like Greece and Portugal,[vii] and future electoral uncertainties in “core” nations like France and Germany where euroscepticism appears to only be growing.[viii]
As key symptoms of crisis persist, so too do interdisciplinary debates over the future prospects of the regional currency, and even the European Union as a whole.[ix] Optimism amongst leading political scientists[x] and economists[xi] in the outlook of the common currency is, to put it mildly, rare, even amongst ardent supporters of European integration.[xii] The inability of intricate supranational efforts to restore stability over the past half decade has unsurprisingly fueled growing demand for alternative analyses and more unconventional responses. Proposals once deemed wildly outlandish are challenging “there is no alternative” (TINA) arguments that Europe is forever destined by become an “ever closer union.” Most radical of all, suggestions to jettison the euro itself and return to national currencies of yonder are increasingly gaining the support of prominent commentators.[xiii] Case in point is Against the Troika, a short book in which two well-known economists, German Heiner Flassbeck and Greek Costas Lapavitsas, team up to both critique and detail measures to move beyond the policies of the ‘Troika”, consisting of the European Commission (EC), European Central Bank (ECB) and the International Monetary Fund (IMF).
This symposium evaluates the analysis and prescriptions offered in Flassbeck and Lapavitsas’ provocative manifesto. Three scholars of European politics find Against the Troika to provide a refreshing, if not entirely original, analysis of what has gone wrong in the euro area. Shawn Donnelley writes approvingly of Flassbeck and Lapavitsas’ critique of orthodox economic thinking that derides the high aggregate national debt levels of ‘peripheral’ Eurozone members while understating the repression of labour costs in “core” states. Angelos Chryssogelos is equally supportive of Flassbeck and Lapavitsas’ emphasis on the neomercantilist unwillingness of countries like Germany to raise wages, as well as how such suppression of aggregate demand contributed to and perpetuates instability. Criticizing the book’s limited grounding in existing theoretical debates, Michele Chang nevertheless praises Against the Troika for clearly elucidating the structural constraints limiting the policy space of Eurozone member states. Flassbeck and Lapavitsas’ concept of an “impossibility triad” for ending fiscal austerity and restructuring public debt whilst remaining in the Eurozone is shown to be insightful for understanding the ill-fated challenge to the Troika undertaken by the Greek government headed by the Syriza party in the summer of 2015.
While broadly agreeing that Flassbeck and Lapavitsas present a strong case for challenging the policies of the Troika, symposium contributors find their specification of alternatives to be wanting. Chang questions how problems that long afflicted countries such as Italy before their adoption the common currency, like inflation, may be avoided with the return to national currencies. Donnelley criticises the limited focus of Against the Troika on Greece as a lost opportunity for detailing how the eighteen other Eurozone members might go about undertaking alternative courses of action. Chryssogelos laments the lack of specifics in Flassbeck and Lapavitsas’ proposal that Eurozone members undertake coordinated exits from the common currency zone. All three contributors point to how such absence of detail undermined Syriza government efforts to challenge the Troika in 2015, and weakened the wider case for opposing the Troika beyond Greece.
In sum, while helpfully advancing the case for why the policies pursued by technocrats at the EC, ECB, and IMF should be opposed, Against the Troika fails to set out a sufficiently detailed programme for how such challenge might concretely be undertaken. Though providing a thorough justification for calls to exit the Eurozone, Flassbeck and Lapvitsas fall well short of elaborating useful mechanics for proceeding with what remains a radical course of action with significant implications not only for Europeans but citizens worldwide. In highlighting the limits of challenges to the Troika, this symposium therefore pushes for opponents of the status quo to provide more thorough consideration of measures to extinguish the slow-burning eurozone crisis once and for all.
Malcolm Campbell-Verduyn is a political scientist broadly interested in global political economy, whose regional focus is Europe. He completed a doctoral degree in International Relations at McMaster University in 2015 and is currently a SSHRC Postdoctoral Fellow at the Balsillie School of International Affairs.
Against the Troika: Crisis and Austerity in the Eurozone
by Heiner Flassbeck and Costas Lapavitsas
Paperback / 144 pages / 2015
Below are links to the rest of this special round table.
“Calling to Arms But Leaving Ammunition Behind”
Criticizing the book’s limited grounding in existing theoretical debates, Michele Chang nevertheless praises Against the Troika for clearly elucidating the structural constraints limiting the policy space of Eurozone member states.
“Yet Another Greco-German Imbalance”
Angelos Chryssogelos is equally supportive of Flassbeck and Lapavitsas’ emphasis on the neomercantilist unwillingness of countries like Germany to raise wages, as well as how such suppression of aggregate demand contributed to and perpetuates instability.
“Missing Chances for Change”
Shawn Donnelley writes approvingly of Flassbeck and Lapavitsas’ critique of orthodox economic thinking that derides the high aggregate national debt levels of “peripheral” Eurozone members while understating the repression of labour costs in “core” states
[i] t Hart, Paul, and Arjen Boin. 2001. “Between crisis and normalcy: the long shadow of post-crisis politics.” In Uriel Rosenthal, Arjen Boin, and Louise K. Comfort, eds., Managing crises: Threats, dilemmas, opportunities. Springfield, Illinois: Charles C Thomas Publisher. pp. 28-46.
[ii] Financial Post. 2013. “Eurozone crisis declared ‘over’ by French president as unemployment across the region soars”. 10 June.
[iii] Eurostat. 2016. “Euro area unemployment rate at 10.3%”. Available at: http://ec.europa.eu/eurostat/documents/2995521/7225076/3-04042016-BP-EN.pdf/e04dadf1-8c8b-4d9b-af51-bfc2d5ab8c4a
[iv] Eurostat. 2016. “Real GDP Growth Rate- Volume”. http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec00115&plugin=1
[v] Davies, Gavyn. 2016. “The German balance of payments quandary”. Financial Times, 10 July.
[vi][vi] Koranyi, Balazs. 2015. “Disappointed ECB says euro zone economies further apart than at the start”. Reuters, 29 July.
[vii] Smith, Helena. 2016. “A year after the crisis was declared over, Greece is still spiralling down”. The Guardian, 13 August.
[viii] Vincenti, Daniela. 2014. “EU grandees fret at 2017 triple poll in France, Germany, UK”. EurActiv, 10 October; BBC. 2016. “Euroscepticism on rise in Europe, poll suggests”. 8 June.
[ix] For a sampling see Daianu, Daniel, Carlo D’Adda, Giorgio Basevi, and Rajeesh Kumar. 2014. The Eurozone Crisis and the Future of Europe The Political Economy of Further Integration and Governance. Palgrave MacMillan; Giddens, Anthony. 2013. Turbulent and mighty continent: what future for Europe? John Wiley & Sons; Micossi, Stefano. 2015. “What future for the Eurozone?”. VoxEU, 7 September; Streeck, Wolfgang. 2015. “Brutish, nasty – and not even short: the ominous future of the eurozone”. Guardian, 17 August; Webber, Douglas. 2014. “How likely is it that the European Union will disintegrate? A critical analysis of competing theoretical perspectives”. European Journal of International Relations, 20 (2), 341-365.
[x] Germain, Randall. 2016. “Review: The Future of the Euro”. CritCom, 1 September.
[xi] Stiglitz, Joseph. 2016. The Euro: How a Common Currency Threatens Europe. New York: Norton.
[xii] Genito, Lorenzo. 2016. “Review: In Defence of Europe: Can the European Project be Saved”. EuropeNow, issue 1 (November).
[xiii] Khan, Mehreen. 2016. “Euro depression is ‘deliberate’ EU choice, says former Bank of England chief”. Telegraph, 1 March.
Published on January 5, 2017.