Crisis in the Eurozone, by Costas Lapavitsas. Verso, London, 2012, 268 pp., ISBN: 978 1 84467 969 0, £12.99, paperback.
| Author | Olivier Butzbach |
| DOI | http://doi.org/10.1111/bjir.12049 |
| Date | 01 March 2014 |
| Published date | 01 March 2014 |
BOOK REVIEWS
Crisis in the Eurozone, by Costas Lapavitsas. Verso, London, 2012, 268 pp., ISBN:
978 1 84467 969 0, £12.99, paperback.
This book is the output of collective work produced by members of a group called
‘Research on Money and Finance’ within the School of Oriental and African
Studies — not an insignificant observation, given the school’s pedigree in heterodox
(mostly Marxist) and development economics, as proudly acknowledged by the
main author, Costas Lapavitsas, in his preface. The book is divided in three parts,
each of which is the ‘revised version’ of work published online by the research
group between March 2010 and November 2011. Again, this precision matters
because timeliness is both a blessing and a risk for this kind of book, given its direct
engagement with pressing political and economic issues. The first part deals mostly
with the origins of the ongoing crisis in the Eurozone; the second part focuses
on the policies recently followed in three countries on the ‘periphery’ of the
Eurozone, between public borrowing and bank bailouts; the last part investigates
the institutional underpinnings of the crisis and the prospect of a Greek exit from
the Eurozone.
The first point made by the authors is that the Eurozone crisis is not primarily a
public debt crisis. While this idea has gained traction among economists and informed
observers over the past two years, national and European policy making still relies on
the view of the crisis as a mostly fiscal one. Consequently, the primary concern of most
Eurozone governments and European institutions remains that of lowering public
debt and budget deficits. In the context of a severe downturn, the authors predict that
the resulting ‘austerity policies’ will worsen macroeconomic conditions and therefore
increase indebtedness.
What the book shows quite well is that the Eurozone crisis is, first and foremost,
a crisis of competitiveness in an asymmetrical monetary union. Indeed, one of
the most insightful contributions of the book is to show how the core-periphery
asymmetries found by heterodox economists in developing countries exist in the
Eurozone as well. One of the key factors behind the crisis has been the growing
balance of payments disequilibrium between ‘core countries’ such as Germany and
‘peripheral countries’ such as Greece, Ireland, Portugal and Spain. While the
former have registered large current account surpluses and financial account deficits
since the advent of the euro, the latter have sustained high current account deficits
thanks to growing levels of indebtedness. This asymmetry is the structural outcome
of the functioning of the European Monetary Union (EMU), or, as the authors
put it, a ‘beggar thyself and thy neighbour’ strategy pursued by the core countries
on the back of their workers and of the economies of the periphery. These asym-
metries have translated into high levels of external debt, fuelled by core banks’
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British Journal of Industrial Relations doi: 10.1111/bjir.12049
52:1 March 2014 0007–1080 pp. 185–190
© John Wiley & Sons Ltd/London School of Economics 2014. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
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