The Euro’s “Winner-Take-All” Political Economy

Institutional Choices, Policy Drift, and Diverging Patterns of Inequality

Bibliographic Data

ID7973968
AuthorsMatthias Matthijs (0000-0001-8628-745X, Johns Hopkins University, corresponding author)
Year2016
Volume44
Issue3
Pages393-422
Publication date2016-09-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenuePolitics & Society (JOURNAL)
Journal identifiersISSN: 0032-3292 • E-ISSN: 1552-7514
PublisherSAGE Publications (PUBLISHER • US)
DOI10.1177/0032329216655317
OpenAlexW2335989889
LanguageEN
Citations received25
References cited20

This article offers an institutional explanation for the conflicting trends in income inequality both across the Eurozone and within its member states. It argues that the euro’s introduction created different economic policy incentives for peripheral and core members. First, the euro’s design was a political choice skewed toward deflationary adjustment policies in hard times, leading to falling incomes and employment in the periphery. Second, the institutional incentives of the Eurozone are the opposite for export-driven coordinated market economies and demand-led mixed market economies during booms and downturns, respectively. During the euro crisis, the Eurozone’s Northern countries gained at the expense of the Southern ones, while at the same time seeing lower domestic inequality compared to increased inequality in the periphery. This diverging pattern of European inequality was exacerbated by EU economic policy drift, the lack of any real national democratic choice in the periphery, and the growing importance of organized financial interests in Brussels

Boom · Deflation · Economic inequality · Economics · Incentive · Inequality · International economics · Market economy · Monetary economics · Monetary policy · Political science · Politics · Economic Theory and Policy · Global Financial Crisis and Policies · Social Policy and Reform Studies

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