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about the author
Heikki Patomäki is Professor of World Politics at the University
of Helsinki, Finland. Previously he has also worked as a Professor
of World Politics and Economy at Nottingham Trent University,
UK, and RMIT University, Melbourne, Australia. In 2012 he
was a Visiting Professor at the Ritsumeikan University in Kyoto,
Japan. Patomäki’s research interests include philosophy and
methodology of social sciences, peace research, futures studies,
economic theory, global political economy, and global political
theory. His most recent book is The Political Economy of Global
Security. War, Future Crises and Changes in Global Governance
(Routledge, 2008). He is currently working on two new books,
Unprincipled Economics (with Jamie Morgan) and Global Futures.
Patomäki is a founding member of Network Institute for Global
Democratization (NIGD) and has also been an activist in the
international ATTAC movement from its inception, and is cur-
rently chairing ATTAC Finland.
THE GREAT EURozoNE DISASTER
From Crisis to Global New Deal
heikki patomäki
Translated by James O’Connor
zed Books
london | new york
The Great Eurozone Disaster: From Crisis to Global New Deal
was first published in English in 2013 by zed Books Ltd,
7 Cynthia Street, London n1 9jf, uk and
Room 400, 175 Fifth Avenue, New York, ny 10010, usa
originally published in Finnish in 2012 under the title Eurokriisin
anatomia. Mitä globalisaation jälkeen? by Into kustannus
www.zedbooks.co.uk
Copyright © Heikki Patomäki, 2012
English language translation © James o’Connor, 2013
The right of Heikki Patomäki to be identified as the author
of this work has been asserted by him in accordance with
the Copyright, Designs and Patents Act, 1988
Designed and typeset in Monotype Bulmer by
illuminati, Grosmont
Index by John Barker
Cover design: www.roguefour.co.uk
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system or transmitted in any
form or by any means, electronic, mechanical, photocopying or
otherwise, without the prior permission of zed Books Ltd.
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data available
isbn 978 1 78032 480 7
Contents
preface vii
1 Introduction 1
2 The economic theory of debt crises 13
3 The predictability of global financial turmoil 28
4 Contradictions at the heart of the EMU 57
5 The trouble with the EU’s official reform proposals 82
6 European futures 104
7 How should debt crises be resolved? 133
8 Towards democratic global Keynesianism 164
glossary of key terms and acronyms 194
notes 207
bibliography 251
index 268
Preface
The European Community aimed from the start to contribute to
global economic liberalization. By the time of the arrival of the
euro, this project had achieved a single market within the EU
and continued to foster globalization outside it.
But this kind of globalization comes at a cost. As Dani Rodrik
argues in The Globalization Paradox,1 global markets, sovereign
states and democracy can’t coexist. one option is to constrain de-
mocracy to earn ‘market confidence’ and attract trade and capital
inflows. This has been the main response of the EU leaders to
the euro crisis, itself a second phase in the global financial crisis
that began in 2007–08. The second option is to limit globalization
– possibly also European economic integration – in the hope of
building democratic legitimacy at home. As I discuss in Chapter
5 of this book, the European Commission has proposed measures
that amount to tiny steps in this direction (while, of course,
leaving market freedoms intact within the Union).
The third option is to globalize democracy, or at least Euro-
peanize it, at the cost of national sovereignty. This has not been
considered by the current EU leaders, and is deemed impossible
by Rodrik: ‘Real federalism on a global scale is at best a century
viii the great eurozone disaster
away.’ The development of the EU, including persistent discontent
about its democratic deficit, highlights the inherent difficulties of
this project. But Rodrik acknowledges the attractions of demo-
cratic global governance: ‘When I ask my students to pick one of
the options, this one wins hands-down. If we can simultaneously
reap the benefits of globalization and democracy, who cares that
national politicians will be out of a job?’2
I argue in this book that there are several economic problems
(which also arise within Rodrik’s ‘smart’ or limited globalization
framework) that can only be tackled with global Keynesian
mechanisms and institutions. To be legitimate, these mechanisms
and institutions must be democratic. At the same time, it is
possible to design global governance so as to limit also economic
globalization and strengthen state autonomy in certain ways. The
EU itself may be in the process of becoming a federal state – that
is, one state among others.
My point is that mere nostalgia for the Bretton Woods–GATT
regime that lasted until the 1970s and 1980s is without merit.
The dialectics of world history continue to move on. There
were real reasons why the original Bretton Woods system broke
down. Had John Maynard Keynes’s more ambitious plans been
realized in the 1940s, the post-war system would probably have
lasted longer. And yet by the 1990s, or early 2000s at the latest,
it would have eroded.
A feasible twenty-first-century system of global governance
should be more abstract and generalizable as well as more change-
able and open to revision than Keynes’s 1940s’ vision. Through-
out the book I emphasize the need for global Keynesianism to
be not only democratic but also environmentally responsible. No
universal consensus is needed for its realization. A coalition of the
willing can establish any new system of global governance.
I am grateful to several people for their contribution to this
book. originally it was supposed to be a short report in Finnish
preface ix
for a non-specialized domestic readership, co-authored with Jussi
Ahokas, Lauri Holappa and Ville-Pekka Sorsa. For practical
reasons the text evolved into a single-authored monograph. Its
origin explains why it was written in Finnish.
The first edition was published by Into Publishers in Helsinki
in February 2012. Mika Rönkkö’s role was crucial in allowing
the speedy and professional finalization of the text. In addition,
several people read and commented on the manuscript or parts
of it, including Jussi Ahokas, Tuomas Forsberg, Lauri Holappa,
Pekka Sauramo, Katarina Sehm-Patomäki, Ville-Pekka Sorsa and
Teivo Teivainen. James O’Connor translated the text into English,
in close cooperation with me, and also proposed a number of
small improvements. I am grateful to Zed Books, and to Ken
Barlow in particular, for so swiftly processing the proposal for
this book. I also gratefully acknowledge the financial assistance
of FILI (Finnish Literature Exchange).
This book is dedicated to all those for whom ‘the Earth is
our home’.
Heikki Patomäki
Helsinki, August 2012
