Europe is in crisis. Not only is unemployment rising, but several European states are on the verge of bankruptcy as financial markets refuse to roll over their outstanding debt. The policy response to the crisis has been an orthodox package of austerity and downward pressure on wages.
This article traces the origins of the crisis to the neoliberal economic policy regime in the EU. Neoliberalism has given rise to two different, complementary growth models: one of debt-led growth and one of export-led growth. Both build on wage suppression, and are ultimately unsustainable.
European integration has been dominated by neoliberalism, but a European welfare state, based on coordinated collective bargaining that aims at higher wage growth in trade surplus countries, speed bumps for financial flows and a European social security system, would be economically viable,
and would prevent many of the imbalances that have led to the present crisis.
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