The myth of Greek profligacy must be broken, according the Costas Lapavitsas, in order to confront the problems in the Eurozone. Rather, the current crisis in Europe must be traced back to a global crisis which has been "deflected through the institutions of the monetary union". It is the divergent competitiveness of the periphery states that has led to the current account imbalances, the structural surpluses and deficits. An unbalanced monetary union has led to debt accumulation, not a bloated public sector.
Lapavitsas outlines the response of the EU to the situation across the European periphery states- the PIIGS, as they are known (an acronym for Portugal, Italy, Ireland, Greece and Spain), who find themselves in different stages of crisis. The first response is to try to reverse the accumulation of public debt by stabilising the economies of those countries through a heavy-handed austerity programme, crushing unit labour costs to destroy the competitiveness gap between the periphery and the core. The second response is a classic neoliberal blood-letting technique, removing regulation and introducing further privatisation in order to promote growth.
The problem with such a policy, according to Lapavitsas, is simple: it isn't working. What emerged as a banking crisis was shifted onto the public sector, but is threatening to return to the financial sector as banks become tied to national economies.
Lapavitsas, at an event at SOAS with Paul Mason, George Irvin and Stathis Kouvelakis, chaired by Seumas Milne, then discusses possible escape routes for crisis, including the threat of national solutions to international problems, and the rise of popular social movements.
Lapavitsas' new book, forthcoming in May 2012, is the first analysis of the Eurozone crisis – with a controversial call to break up the Eurozone to stop the debt crisis. Crisis in the Eurozone offers a radical critique of the economic structures that are overseeing the destruction of national economies on the periphery of Europe, and controversially posits a possible solution: a debtor-led, democratic default on sovereign debt bolstered by the forces of civil society and organised labour.
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