The European Response to the Global Financial Crisis: Reinforcing the Status Quo?

This chapter sheds light on the European response to the global financial crisis in 2008. It explores the role of the German and French governments in crisis management and the nature of the power dynamics between the northern and southern Europeans that shaped the economic policy recipe that favoured austerity and internal devaluation. The ‘politics’ of the management of the crisis had a dynamic impact and to a large extent shaped the economic outcomes in the ‘intermediate’ economies and more broadly in Southern Europe. The northern governments—under the German and French political initiatives—aimed to protect their economies from the spread of the crisis and to save the Euro. On the other side, the political forces that resisted austerity in Southern Europe abandoned their anti-austerity promises once in government. The status quo in Europe prevailed. However, the crisis management and austerity in Southern Europe triggered diverse political phenomena in the aftermath of the crisis such as the rise of anti-austerity movements in the South, and a backlash against the bailout programmes in the North. The crisis in Southern Europe turned into a political crisis in the Eurozone as a whole.