POLITICAL ECONOMY OF THE EUROZONE DEBT CRISIS: AN EVALUATION IN THE CONTEXT OF SOUTH AND NORTH EUROPEAN CAPITALISMS

Abstract

One of the most popular discussion topics in the Eurozone Debt Crisis  relates to whether the policies which were implemented by the European Union (EU) to overcome the crisis  could be sufficient or not. This is because countries, which are included in the EU, have different historical processes, social structures and growth strategies. Despite the existence of differences among countries, one-size-fits-all monetary policy was implemented to members of the European Monetary Union (EMU).  Fiscal rules which were imposed by the EU as a supra-national institution could also be evaluated from this perspective. Hence, Southern European countries have been negatively affected by these policies because these policies did not support their demand-led growth strategies. On the other hand, Northern European countries have benefited from it by increasing their exports to Southern European countries. However, it is observed that the idea of the one-size-fits-all policy did not work for some countries with the crisis period. At this point, Varieties of Capitalism (VoC) literature provides a theoretical background to explain this process. The VoC approach emphasizes the requirement of different policies for different economies instead of one-size-fits-all policy instruments. The aim of this paper is to show that Southern European countries have been negatively affected by one-size-fits-all policies during the crisis; therefore, the implementation of varying policies by member countries of the EMU is necessary to overcome the crisis.