Dooley, Neil. "Who’s Afraid of the Big Bad Wolf? Rethinking the Core and Periphery in the Eurozone Crisis". New Political Economy, Vol.24, No.1 (2019): 62-88.

Dooley, Neil. "Who’s Afraid of the Big Bad Wolf? Rethinking the Core and Periphery in the Eurozone Crisis". New Political Economy, Vol.24, No.1 (2019): 62-88.

• The standard narrative of the Eurozone Crisis being caused by the profligate and irresponsible spending of Portugal, Italy, Ireland, Greece, and Spain -- collectively 'PIIGS' -- has been increasingly challenged by the idea that German was actually the instigator of the crisis by using the Eurozone to expand its export-led economy at the expense of peripheral countries and then opposing the measures needed to solve the resultant crisis (62-64). 
• The 'blame Germany' narratives looks at German resistance to the European Central Bank [ECB] serving as a lender of last resort, Germany's role in designing and benefitting from the destructive trade relations within the Eurozone, and how Germany's focus on blaming the profligacy of southern Europeans led to further market downturns (64).  
• German is absolutely guilty of the accusations of resisting early solutions to the Euro Crisis and caring more about shielding its banking sector than about rescuing the periphery economies (77).
• Both narratives are incorrect and overly concerned with assigning blame among European countries. In reality, the Euro Crisis is not the fault of any country or set of countries, but the result of the particular path of European integration pursued under the monetary union (63).
• The core-periphery model of the Euro Crisis blames Germany for its role in impressing ordoliberal values into the European Monetary Union [EMU], creating current account imbalances through its trade policy, and facilitating southern European debt through capital account imbalances (65).
• Germany was skeptical about the EMU and demanded that it reflect German ordoliberal values in return for German support. This was reflected in the independence of the ECB, a low interest rate for the euro, and the cancellation of planned fiscal, financial, and governance unions. The pressure to develop economic models with low inflation and little wage growth was unsustainable in the European periphery and led to high levels of debt (65).
• Germany's own economic success comes on the back of other Eurozone members, with 40% of its account surplus generated within the EU, primarily from trade with deficit countries in southern Europe. This allowed German to retain high savings and low wages, while forcing up wages in southern Europe and causing deficits (66).
• The idea that trade surpluses in the European core have come at the expense of the peripheral depend on the assumption that wages are primary determinate of competitiveness, that the European core needs the periphery for its exports, and that competition from the core reduced the export market share of the periphery (67).
• The inclusion of peripheral European economies into an EMU based around an independent central bank with a mandate for low inflation was a path towards disaster as it did not match the needs of these countries, although it did compliment the German economic model (78-79).
• These assumptions are all wrong. The competitiveness of core countries, like Germany, is more the result of non-wage factors, including better trade connections with major markets like the USA and China. Moreover, the current account deficits in peripheral Europe are more a result of increased imports, financed through debt, rather than any decrease in exports. This is further shown by the lack of substantial trade deficits with Germany in Greece, Ireland, and Portugal (67-69). 
• It could be argued that there was a relationship between trade surpluses in core Europe and trade deficits in Italy and Spain, but this relationship does not apply to the rest of the periphery. For most countries, trade balances within the Eurozone are much more complicated. Many core trade surpluses actually came at the expense of other core countries, while many peripheral countries ran trade deficits with other parts of the periphery (71-72).
• The establishment of the EMU gave peripheral Europe access to much larger amounts of capital, most of it from core states, which funded both consumer and public debt in southern Europe. The debt and speculation in the peripheral would not be possible without the capital provided by the core (66-67).
• There is a clear relationship by which core Europe lends to peripheral Europe, although Germany is most substantial lender only in the case of Spain. Belgium, Netherlands, and especially France and Britain are also prominent lenders to peripheral Europe. In some cases, periphery countries were also major lenders to other periphery countries, especially in the case of Italy (74-77).
• The provision of cheap credit to periphery Europe would have continued regardless of the trade balance of core Europe, as the credit available to the periphery was largely unrelated to export levels within the EU (79).
• Some European countries, particularly the UK and Germany, already had the institutions in place to deal with large capital flows and were used to this. Periphery Europe was much less prepared for the sudden increase in capital flows after the establishment of the EMU and thus suffered more negative consequences (80).
• Rather than being uncompetitive due to the upward wage pressure created by the Eurozone, peripheral countries had been and were uncompetitive for different reasons: Greece had never actually completed industrialization and was already deindustrializing by the 1990s; Portugal had been dependent on labor-intensive industries, like textiles, and suffered many from competition with China and other developing countries internationally. Its attempt to develop more advanced industry have run into competition with Eastern European countries within the EU; and Ireland never actually experienced competitiveness problems (72-73).
• Different periphery economies had different economies problems. Ireland and Spain, for example, had very low levels of public debt and instead faced economic collapse due to private sector speculation and assets bubbles. Italy, Greece, and, to a lesser degree Portugal, did have high levels of public debt that contributed to their economic crises. Greece's problem was almost entirely public debt, with household and private debt being at very low levels (80-81).
• Cramming many different types of economies inside the same monetary system resulted in the underlying issues that troubled the Eurozone. This situation benefitted some core countries, particularly Germany, but was approved by all Eurozone members, reflecting an elite consensus in periphery Europe (82).