Alternative explanations for the euro crisis and their implication

Abstract

The paper discusses alternative explanations for the crisis that hit the euro area in 2010-2012. The crisis is inseparable from the accumulation of external imbalances between member countries since the mid-1990s. Therefore, the explanation for its origins has to be found in the identification of the mechanisms that contributed to the accumulation of those imbalances. The different explanations discussed here – convergence between economies, fiscal practices, labour relations,
capital flows and specialization profiles – are not mutually exclusive. However, the available evidence suggests that some processes are more relevant than others – and they are not the most obvious.