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Eurozone Groupthink and Denial on a Grand Scale

William Mitchell

Abstract

This paper is drawn from Mitchell (2015), which traced the origins of the Eurozone back to the desire in the immediate post-World War II period to end the destructive Franco-German rivalry that had caused several major military conflicts, which culminated in German aggression in 1939. Against this background, Mitchell (2015) also examines the way in which the discussions of European economic integration, which had initially begun with the general context of a Keynesian approach to economic policymaking, were transformed by the emergence of Monetarism in the 1970s. The flawed design of the Economic and Monetary Union (EMU) that was finally agreed on and formulated in the Maastricht Treaty in 1991 reflected both these elements. The dysfunctional response to the Global Financial Crisis (GFC) is a direct result of the mistakes made in the lead up to Maastricht and reflect the dominance of what we might call neo-liberal Groupthink over sound macroeconomic management.

Published on 7 Jul 2016 in World Social and Economic Review No 7, July 2016 – Worldwide Fiscal Crisis: Fact or Fiction?