European economic policies, stock-flow relations and the great double crisis

• Main Author: Vittorio Valli
• Format: Article
• Language: English
• Published: Università Carlo Cattaneo LIUC 2017-06-01
• Series: The European Journal of Comparative Economics
• Subjects: financial and real crises; eu economic policies; vulnerable countries; stock-flow analysis
• Online Access: http://ejce.liuc.it/18242979201701/182429792017140106.pdf

The 2007-2015 crisis has been the most devastating economic depression in the last seven decades. It has struck in different ways and with different amplitude the US and most European countries. In most countries it has been a double crisis (financial and real), but in Eurozone's financially vulnerable countries it has also badly worsened public finance indicators. There was therefore in those countries, a complex perverse feedback between public finance weakness, the harsh application of austerity policy and a further increase in the depth and duration of real and financial crisis. The paper focus on the importance of stock-flow relations in worsening and prolonging economic depressions triggered by structural bubbles or other chronic imbalances. It also gives a critical assessment of some aspects of EU economic policies, outlining some elements for a possible alternative economic strategy.