El papel de los factores institucionales y polìticos en la crisis de deuda europea

This chapter deals with the causes of the recent sharp increases in the interest rates of the Government securities of some euro countries. These phenomena are disrupting the solvency of some Government sectors, intensifying the distress of financial institutions, enhancing instability, curtailing growth and employment, imposing policies that are undesired by the majority of the population, changing income distribution, triggering social conflicts, magnifying frictions among member States, and undermining the confidence in the European values and institutions. These unfortunate events are referred to as “European debt crisis” and “sovereign or Government debt crisis”. The relevance of the “moral hazard” problem cannot be denied. Yet, this problem can be solved in different ways, as shown by the debate on the process of coordination between monetary and fiscal policies in the euro area. The content of this debate can contribute to the interpretation of the causes of the debt crisis and to the identification of its solutions. This is the perspective taken in this paper, whose aim is to highlight how the flaws in the European institutional organization have favoured the crisis. We argue that before 2007 these flaws affected the cyclical and growth performance of the euro countries. After then they have contributed to an intensification of the conflicts among national political bodies and between them and the European authorities. These conflicts have favoured the speculative attacks against some Government debts and exposed the peculiar conditions under which central banking is carried out in the euro area. The conclusion is that the institutional organization of the area must be reformed in such a way as to allow it to effectively pursue the objectives for which it was created, i.e. to protect the economies and the citizens from the instability of the international financial markets.