ABSTRACT
The euro-area crisis is not a ‘sovereign debt’ crisis, as the conventional view depicts it. As a number of non-mainstream economists have been explaining since the euro-area crisis broke out (at the end of 2009), this crisis is the result of unsustainable macro-economic imbalances across the private sector of the euro-area, which have built up and remained largely unaddressed in the first ten years of the European Monetary Union (EMU). Some of these economists—for instance Cesaratto and Stirati (2011)—argue that the EMU has been experiencing a balance-of-payments crisis, to wit, a crisis that results from huge current account imbalances across the euro-area, but particularly between ‘core’ countries like Germany (recording current account surpluses above 6% of GDP) and the ‘PIIGS’ (named apparently with a view to indicate that this crisis originates in excessive public debt across the member countries of the euro-area, particularly in its ‘periphery’—the PIIGS are: Portugal, Ireland, Italy, Greece, and Spain). This elicited an external-debt-sustainability crisis (Bagnai, 2013). Other economists within the heterodox camp explain by contrast that the euro-area crisis originates, in fact, in a monetary-structural flaw encapsulated in the euro-area-wide payment system, namely TARGET2 (see Rossi, 2013). Be that as it may, all these unconventional views are far away from the orthodox account of the origins of the euro-area crisis. As a result, it does not come as a surprise that heterodox economists are, in general, against the policy stance taken by euro-area governments to address this major crisis along the conventional view based on fiscal consolidation (that is to say, a series of austerity measures intended to rebalance the public sector’s budget by different spending cuts aimed at kick-starting economic growth).
