The causal relationship between politics and economics can be satisfactorily understood by looking at a financial crisis. European financial crisis started in Eurozone in 2009 and recurring crisis that hit some EU members notably Greece interestingly show this link. The crisis which was initially predicted to bring the Europe Union (EU) into collapse is primarily caused by economic and political policies of EU which consequently damage some EU members economy more than the others. Sovereign debts, high unemployment, saving problems demonstrate how serious the crisis is.
Although numerous attempts such as budgetary austerity, pension cut, raising tax and bailouts have been proposed and imposed to certain member countries to accelerate the recovery from the crisis, it is proven insufficient and the sustainability of eurozone remains unclear. The proposals are supposed to be the solution, but it turns out that responses are mixed. Members such as Germany and France fully support the initiatives, but others including Greece express their anger. That is to say, the measures and economic recovery plans proposed by EU leaders have not convinced member states and their citizens and are considered unpopular.
In recent referendum held in Greece on Sunday July 5, Greek voters overwhelmingly rejected bailouts terms such as austerity measures offered by European Union. Since the crisis, European citizens have raised their doubt about the future of EU unity. Several polls conducted following the crisis showing that majority of European citizens affected most by the crisis no longer believe in the EU as a strategic institution to boost their economy. Some even prefer their countries to stay away from the EU. Survey by Pew Research Center, for example, shows a decline of support for the EU integration among EU member countries (Pew Re-search Center, 2013). Similar finding also reveals that since the beginning of the euro crisis, trust in the European Union has fallen and created conflict be-tween northern and southern-centre and periphery (Torreblanca and Leonard, 2013). This attitude is radically different from the past’s which consistently showed high preferences of joining the EU.
Some scholars specifically address the crisis as a failure of capitalism. They claim that capitalism fails to provide a better economy solution. Rather, capitalism causes destruction of state’s economy. Castells et al (2012), for example, perceive this crisis as global capitalism crisis not only an economic crisis but also structural and multidimensional. As liberal prescrip-tion on how market should work has proven a failure, there is an increasing demand to look for an alternative system. Some propose Marxian economy based-system arguing that Marx’s economic model provides better platform than capitalism’s.
In the light of the so called multidimensional crisis, the paper attempts to provide a brief overview of European financial crisis and demonstrates the key failure of neoliberalism and capitalism in which Euro-pean Union political and economy policy is built upon. Although numerous factors have been claimed as the principal causes of the crisis and no single factor
insufficiently contributes to the crisis, Marxian conceptual model of inequality or constructed eco-nomic imbalance provides a better explanation on the causes the crisis. To show the merit of Marxian’s analysis, three aspects of the inequality will be dis-cussed. First, the introduction of Euro; second, the accumulation of profit and capital; and third, the current European financial system which is made to provide benefits for major EU countries and private corporations. These three aspects show how some members of EU countries, and private corporations not only play significant role in contributing to the crisis but also gain economic benefit from the crisis. The crisis disadvantages the others, notably southern European countries in which they are hit the most. The paper begins by addressing the background of European financial crisis followed by an analysis of the crises using Marx’s theoretical framework.
Author : Petrus K Farneubun