Munich Personal RePEc Archive

Austerity and Competitiveness in the Eurozone: a misleading linkage

Paternesi Meloni, Walter (2017): Austerity and Competitiveness in the Eurozone: a misleading linkage.

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_81172.pdf

Download (1MB) | Preview

Abstract

After focusing on fiscal indiscipline, the debate on the Eurozone crisis switched over persistent external imbalances among the European Monetary Union countries. Current account differentials were almost exclusively ascribed to the weak price competitiveness of deficit countries – neglecting demand-side factors – and consequently austerity measures have been imposed to peripheral countries in order to foster their competitiveness with the purpose of adjusting external imbalances through export growth. In this context, the contribution of this paper is twofold. Firstly, we identify this view as competitive austerity (in parallel with the expansionary austerity narrative), as the set of measures which, according to policy makers, would stimulate trade balance, output and employment. Secondly, we criticize this approach since fiscal restraints were proved to be counterproductive. We conclude by disproving the austerity-competitiveness linkage from a Keynesian perspective as well as by means of some macroeconomic evidence, and we provide an alternative recipe to the Eurozone issues.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.