The continuing crisis of the euro — a weak link in the global financial system?

Abstract

ABSTRACT The origin and causes of European financial crisis is analyzed. Debt, budgetary imbalances, economic recession and unemployment are the figures of today’s Europe. Those problems are been cope with measures targeting creditors interests of cutting public expenditures and rising taxes. What are the prospects for the European Union to regain its momentum in terms of economic integration and image? Is there a way out of the crisis other than that of a prolonged austerity regime? The strong leftward swing in the recent elections in UK, France and Greece have been seen as a sign of a popular mood opposing a continued crackdown on social security nets and public expenditures in general as a solution to present budgetary problems, but how far can this be translated into changes of the main orientations of the EU and its central bank, the ECB?Or is the European Union helplessly driving towards a break-up not only of the Eurozone but also of its other instruments of economic integration? The rise of right-wing nationalist forces in Hungary, France and to a lesser extent also in Greece might suggest this.Before going into the subject matter it is necessary to start with some fundamental questions regarding the euro as a monetary system and its place in the world economy.At the end, some conclusions will be drawn from the present euro crisis concerning the state of general economic theory, conclusions that might have salience also for debates among economists in the southern hemisphere. Key words: finantial crisis; economic integration; economic theory Classificação JEL: F15, F36, G18. Artigo recebido em maio 2012 e aceito para publicação em jul. 2012.