A separation or divergence exists in the Eurozone between those member states—generally ‘creditor’ or ‘surplus’ states—that have weathered the financial and economic crisis since the late 2000s relatively well, and those states—generally ‘debtor’ or ‘deficit’ states—that have experienced the most upheaval economically, socially and politically in the context of that crisis. The imbalances between debtor and creditor states predate the crisis, as we will show in this chapter. However, the crisis has cast the relationship between the two categories of state in a new light that renders the ‘core–periphery’ concept increasingly pertinent.
First deployed by various post-Marxist development theorists, the concept denotes not only an imbalance but also a power relationship within global capitalism between an economically and politically dominant wealthy core—often led by a large hegemonic power—and a largely poor, dependent periphery (Wallerstein 1974, 1979). The use of the concept in relation to the European Union (EU) or Eurozone in the aftermath of the crisis can be understood as denoting a similar kind of dynamic, as we will discuss in what follows. A wealthy core led primarily by Germany has, according to such a narrative, guided the response to the crisis in ways that preserve or even exacerbate economic imbalances between a core and periphery, making the latter supplicant to the former. Such a narrative may be partially true, particularly in relation to certain periphery states that have found themselves forced into a harsh austerity politics in the course of the crisis. But it is probably to overstate the power of core states and understate the economic, political and social divisions within states on both sides of this divide. As we will suggest later—and as the authors elucidate in greater detail in the following chapters—important elite actors cutting across both the public–private and the core-periphery divide were collectively culpable in precipitating the crisis. And while those in the periphery countries certainly suffered the most, lower social classes in the core also encountered, and continue to encounter, significant hardship.
As the title of this book indicates, we focus here on the impact of the crisis in the ‘Eurozone periphery’ and, in particular, on those Eurozone states that have been most severely afflicted and received so-called bailouts of one form or another. In the chronological order in which they were first granted loans, the countries that we consider are Greece (2010), Ireland (2010), Portugal (2011) and Spain (2012). Proving that they were capable of producing even more pejorative terms than ‘periphery’ to denote this group of countries in economic distress, many working in the financial markets came to refer to them collectively by the moniker ‘the PIGS’ in the early 2010s. Slight modifications of the acronym were used, with Italy sometimes included in this group of ‘problem states’; hence, PIIGS. We will, in contrast, purposefully use the abbreviation GIPS in what follows, to denote our four country cases.
The most obvious omission from the book, according to the logic by which these four countries were selected, is not Italy but Cyprus, as it was the fifth country to receive a bailout in 2012. A much smaller member state than those considered (with a population of little over one million), it nevertheless shared certain vulnerabilities with the other four (Trimikliniotis 2013; Michaelides and Orphanides 2016). Italy , as mentioned above, is the other notable omission. Also widely regarded as part of the so-called periphery given its status as a debtor state, it has struggled significantly throughout the crisis, particularly—like GIPS—in terms of refinancing its debt in the years after 2010. Moreover, ongoing weaknesses in its political and banking systems were a pressing concern at the time of writing in 2017. That said, unlike GIPS, Italy had not received a bailout as of that date.
Finally, we should acknowledge that there is another periphery beyond the Eurozone itself (Bohle and Greskovits 2012; Ryner and Cafruny 2017: 137–166). Although not all members of the common currency, a number of Central and Eastern European EU member states were hard-hit by the broader global financial crisis (GFC) and associated ‘credit crunch’. In particular, Hungary and the Baltic states had particularly high and rapidly increasing levels of mortgage debt that led to significant economic crises and recessions in the late 2000s and, in the cases of Hungary (2008) and Latvia (2009), to International Monetary Fund (IMF)–EU bailouts.
In offering a close analysis in this book of four important countries at the heart of the so-called periphery, we are particularly keen to explore the domestic dynamics of crisis. The chapters highlight the interconnected economic, political and social dynamics within these states that made them particularly vulnerable to crisis and that guided responses to that crisis. The chapters also document the very real social and political effects of crisis. We should certainly not understate the agency of state-level private and public actors in fostering conditions that made these states particularly vulnerable to the crisis, even if that agency would later become constrained in important ways as a consequence of collective responses to that crisis. At the same time, in considering GIPS together as part of a ‘Eurozone periphery’ that stands in contradistinction to a ‘core’, we are also suggesting that there are important structural factors that underpinned similar developmental trajectories. In particular, these states’ collective imbrication in the EU and its common currency zone on similar terms were crucial. While the chapters will focus on the domestic particularities of the individual cases in some detail, this introductory chapter will focus largely on the similarities and the broader structural context of European and, in particular, economic and monetary integration.
The chapter proceeds in five steps. In a first, we consider the underlying causes of the crisis in the periphery, highlighting the central importance of growing levels of debt within the Eurozone and the growth in imbalances between (debtor) periphery and (creditor) core. We concur with an emerging political economy literature that the emergence of a ‘sovereign debt crisis’ from 2010 needs to be understood against a much broader historical backdrop (see, among many others, Matthijs and Blyth 2015; Ryner and Cafruny 2017). In a second step, we consider the particular structural importance of the single currency and the design flaws in the euro that precipitated the asymmetries at the heart of the crisis. We argue that a euro modelled on neoliberal ‘efficient market’ principles in a broader context of so-called financialization was always destined to be vulnerable. Third, we outline the responses of the EU to the crisis, which consisted largely of the imposition of austerity on increasingly dependent periphery states. We argue that such responses failed to deal with the underlying issues enunciated in the previous sections and, indeed, exacerbated the crisis, particularly for the periphery (such consequences are considered in g...