Volume 44, Number 173,
April-June 2013
Adjustment: Origin of the European Crisis
Andrés Musacchio

This is the Gordian knot of the long-term problem facing the European economy. Income redistribution in favor of capital is consistent with recessive trends. In this way, financial funds not oriented towards production accumulate, feeding a speculative current. This attracts growing resources and further weakens productive investment. At the same time, financial agents must invest these resources, which may be temporarily destined to finance consumption, construction or the acquisition of assets and maintenance of population living standards at the expense of future risks. This process can be illustrated in the following way:

Diagram 1. The Vicious Cycle of Post-Fordism Stagnation
Source: Huffschmid (2008: 60).

Some specific national differences linked to two variants of the neoliberal model10 have become clear since the beginning of the Monetary Union. In summary, the first can be characterized as financialized neoliberalism, associated with countries that have higher than average inflation rates and suffer from a phenomenon similar to that of monetary revaluation. This group, encompassing various Eastern European countries, Greece, Spain, Portugal, Ireland and Italy, was exposed to a real interest rate temporarily lower than average, which encouraged private credit and stimulated, through the profitability of services and financial and real-estate speculation, a temporary boom. Except in Spain, the new conditions also brought about an increase in nominal salaries, having an even greater effect on the competitiveness of the goods-producing sectors. The counterpart to this was an increase in current account deficits of the balance of payments, in some cases above 20% of gdp in times before the crisis.

10 We analyzed the question that we will discuss here in Musacchio (2008), where we emphasized (the first version of the article presented in a lecture in Brussels in 2007) the explosive nature of the situation underway.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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