The Crisis of International Finance, the Eurozone and Economic Growth

This chapter considers the 2008 international financial crisis, the Eurozone and economic growth in a long term perspective. This systemic crisis has been the most severe among the recurring crises that have marked the "age of global finance" which had begun with the destruction of Bretton Woods. The current crisis led to a world-wide, near-meltdown of the financial and banking system, to the debt crisis and the Eurozone crisis. Contrary to the 1930s the worst has been avoided thanks to bold innovation and the successful cooperation among central banks, national governments and international organizations, and due to the break with policy orthodoxy. Yet, many of the excesses of globalization and of global finance still have to be corrected. Today, the world has to face the tasks of ending the artificially low (and even negative) interest rates and returning to a more market-conform interest rate structure without new financial turbulences as well as of overcoming the vicious circle of excessive debt and stagnation or slow growth. Both Europe and the world would be much worse off without the Euro. Strengthening the Eurozone requires cooperation, discipline and solidarity, not the creation of a European "super state". In the long term, in order to restore sustained growth, social progress and economic and monetary stability, we also need a new rule-based global international monetary order. It is the responsibility of the main pillars of the liberal and democratic world economic order, Europe, the United States and Japan, to take the initiative and lead it to success.