Sovereign Debt Crisis in Euroland: Root Causes and Implications for European Integration

This article considers the likely impact of the global crisis on the prospects for the European project. First, it considers the nature of the current crisis. It argues that it is comparable, in terms of its deep structural character, to the one in the 1930s. The crisis manifested itself first in the financial sector, but was caused by underlying problems of overaccumulation, which explains the succession of speculative booms and busts from the 1980s onward. The article then analyses how the financial crisis transmuted into the current sovereign debt crisis in Europe. It identifies a number of interdependent factors responsible for this: the bailouts of banks following the credit crisis; the stimulus programmes necessitated by the danger of a deep economic recession; the structural problems of the European Monetary Union leading to the accumulation of debt in the peripheral members; and finally the catalytic action of speculation in the financial markets. Finally, the article discusses responses to the debt crisis, outlining the contours of two alternatives (muddling through and Europeanisation), their implications, and some of the conditions for success. The conclusion is rather pessimistic: chances that an effective, timely and sustainable solution will be realised do not seem high.