Addressing the rationality of ‘irrational’ European responses to the crisis: a political economy of the Euro area and the need for an alternative framework for economic policy

Although the analysis of the contemporary crisis in Europe has many different aspects, this paper will limit its scope to the issue of economic policy. The euro is not just a currency − it is a mechanism. Its introduction has established a particular form of symbiosis among different capitalist economies. The project of euro must be grasped in systemic terms: this mechanism amounts to a particular organization of economic strategies and forms of political power. It is therefore meaningless to criticize the putative irrationality of the policies implemented; it is necessary, rather, to unmask their innate social logic. Mainstream economic discussions focus on the problem of moral hazard and set it as a fundamental strategic target of policy making. In the context of the contemporary version of euro area, this emphasis leads to policy making regimes in which austerity is the only way to deal with economic imbalances. In other words, austerity is offered as alternative to economic instability. What is urgently needed is a progressive prospective on policy setting that overrides this unfortunate trade-off. The paper will address this issue from the viewpoint of (international) political economy.