This paper seeks to understand the motivations behind the eurozone sovereign debt crisis and its possible outcomes for the so called ‘PIIGS’ group of Member States (made up of Portugal, Ireland, Italy, Greece and Spain). It focuses especially on the case of Italy.
It is argued that the crisis was mostly triggered by the global financial crisis, which exacerbated a structural problem of competitiveness embedded in the way in which the Economic and Monetary Union was originally devised and implemented. By no means was the crisis only the result of an unsustainable fiscal position in the PIIGS Member States. If anything, it confirmed the lack of sustainability of a structurally asymmetric monetary union in the wake of an extremely serious economic shock. This has meant bringing the PIIGS group to the verge of the abyss, despite many voices having warned at the onset of EMU about the need for more symmetric arrangements in Europe and the development of more fiscal and political integration.
This paper addresses the above issues, starting with the exceptional nature of the global financial crisis. It will start by analyzing how the global financial crisis unfolded and how it sparked a run on the sovereign debt of the weakest EMU countries. It will then proceed by identifying the impact of the crusis on the capitalist structure of southern European states with particular attention to the case of Italy. It will conclude by assessing the future of the EMU and, in particular, the extent to which the development of a new eurozone governance system is likely to become reality.
