Bettina De Souza Guilherme Christian Ghymers Stephany Griffith-Jones Andrea Ribeiro Hoffmann  Editors Financial Crisis Management and Democracy Lessons from Europe and Latin America Financial Crisis Management and Democracy Bettina De Souza Guilherme Christian Ghymers Stephany Griffith-Jones Andrea Ribeiro Hoffmann Editors Financial Crisis Management and Democracy Lessons from Europe and Latin America Editors Bettina De Souza Guilherme Christian Ghymers Founder and Co-coordinator of the Jean Founder and Co-coordinator of the Jean Monnet Network “Crisis-Equity-Democracy Monnet Network “Crisis-Equity-Democracy for Europe and Latin America” for Europe and Latin America” IRELAC IRELAC Rio de Janeiro, Brazil Brussels, Belgium European Parliament Andrea Ribeiro Hoffmann Brussels, Belgium Pontifical Catholic University of Rio de Janeiro (PUC-Rio) Stephany Griffith-Jones Rio de Janeiro, Brazil Initiative for Policy Dialogue Columbia University Coordinator of the second phase of the Jean New York, USA Monnet Network “Crisis-Equity-Democracy for Europe and Latin America” Institute of Development Studies Rio de Janeiro, Brazil Sussex University Brighton Brighton, UK This book is an open access publication. 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This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Acknowledgements This project has been selected as a Jean Monnet Network and funded with support from the European Commission. This publication reflects the views of the authors alone, and the Commission and the European Parliament cannot be held responsible for any use which may be made of the information contained herein. v Contents 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Stephany Griffith-Jones and Bettina De Souza Guilherme Part I Global Economic Crisis 2 The Road from Prosperity into the Crisis: The Long Cycle of Post-War Economic, Social and Political Development . . . . 11 Stephan Schulmeister 3 The Systemic Nature of the Global Crisis and Some Principles for Tackling It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Christian Ghymers Part II Regional Governance and Crisis Management in Europe and Latin America 4 The Double Democratic Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Bettina De Souza Guilherme 5 European Union’s Democratic Legitimacy after the MoUs: The Political Legacy of an Economic Crisis . . . . . . . . . . . . . . . . . . . . . 111 Dimitris Katsikas 6 Finance Capitalism and Democracy: The Case of the Financial Transactions Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Stephan Schulmeister 7 Regional Governance and Macroeconomic Crisis Management in Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Maria Antonieta Del Tedesco Lins and Andrea Ribeiro Hoffmann vii viii Contents Part III Impact of the Crisis in Europe and Latin America: National Level 8 Managing the Crisis in Greece: The Missing Link between External Conditionality and Domestic Political Economy . . . . . . . . . 145 Dimitris Katsikas and Pery Bazoti 9 The Crisis: Its Management and Impact on Equity and Democracy in Portugal and Possible Consequences for the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Kai Enno Lehmann 10 The 2011 Crisis in Italy: A Story of Deep- Rooted (and Still Unresolved) Economic and Political Weaknesses . . . . . . . . 173 Simone Romano 11 Latin American Economic Crises and Populist Bids: Argentina, Brazil and Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Maria Antonieta Del Tedesco Lins 12 The Fall of a Giant: Greed, Corruption and Abuse of Power Undermining Democracy in Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Andrea Ribeiro Hoffmann and Bettina De Souza Guilherme 13 Venezuela in Crisis: Governability, Equity and Democracy . . . . . . . . 213 José Briceño-Ruiz and Kai Lehmann Part IV Impact of the Crisis in Europe and Latin America: Regional Level 14 The Rise of Right-Wing Populism in Europe: A Psychoanalytical Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Paula Sandrin 15 European Economic Governance and Rising Sovereignism . . . . . . . . 241 Eleonora Poli 16 Eurozone Crisis Management and the Growth of Opposition to European Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 Susannah Verney and Dimitris Katsikas 17 A “Pink Tide” Then a “Turn to the Right”: Populisms and Extremism in Latin America in the Twenty-First Century . . . . . 265 Carolina Salgado and Paula Sandrin 18 The Crisis of Latin American Regionalism and Way Ahead . . . . . . . 281 José Briceño-Ruiz and Andrea Ribeiro Hoffmann Contents ix Part V Conclusions 19 Comparing the Crises in Europe and Latin America: Causes, Management, Impact and Consequences . . . . . . . . . . . . . . . . . . . . . . . 297 Andrea Ribeiro Hoffmann and Bettina De Souza Guilherme Part VI Reform Proposals 20 Financial Instability, Climate Change and the “Digital Colonization” of Europe: Some Unconventional Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 Stephan Schulmeister 21 Promoting Investment in the European Union, Evaluating the Juncker Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Stephany Griffith-Jones 22 Proposal for a Pact for National Responsibility Through EU Solidarity Within the Present EU Architecture . . . . . . . . . . . . . . . 337 Christian Ghymers 23 Proposals for Reforms and Democratization of the EMU . . . . . . . . . 345 Bettina De Souza Guilherme 24 Operational Proposal for an EU-CELAC Strategic Alliance . . . . . . . 361 Christian Ghymers Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 Chapter 1 Introduction Stephany Griffith-Jones and Bettina De Souza Guilherme This book is the result of the 3 years comparative and multidisciplinary Jean Monnet Network, “Crisis-Equity-Democracy for Europe and Latin America”, of senior academics and policy advisors from four European and three Latin American countries, including experts on the European Union and Latin American regionalism. The rationale of the project and the common link is that both Europe and Latin America can learn from their respective experiences on “crisis”, its management and the distributive and democratic implications at national and regional level. The Latin American debt crisis of the 1980s and the global financial crisis of 2008 and the following Eurozone debt crisis have much in common in regard to their eco- nomic and social impacts and the following wave of populism and polarisation. Furthermore, the research and exchange in the network clearly showed that these crises are symptoms and consequences of the same systemic flaws inherent both in the present EU and global financial, economic and governance system. Given that both regions face fairly similar global unsustainability challenges, from a macro- financial as well as an environmental point of view, their similarities should call for the joint elaboration and implementation of a bi-regional strategic alliance for addressing the roots of the global crisis. S. Griffith-Jones Initiative for Policy Dialogue, Columbia University, New York, USA Institute of Development Studies, Sussex University Brighton, Brighton, UK B. De Souza Guilherme (*) Founder and Co-coordinator of the Jean Monnet Network “Crisis-Equity-Democracy for Europe and Latin America”, IRELAC, Rio de Janeiro, Brazil European Parliament, Brussels, Belgium e-mail: [email protected] © The Author(s) 2021 1 B. De Souza Guilherme et al. (eds.), Financial Crisis Management and Democracy, https://doi.org/10.1007/978-3-030-54895-7_1 2 S. Griffith-Jones and B. De Souza Guilherme The main purposes of the project can be summarised as to (1) locate in the cur- rent global financial system one of the very major causes of the financial and debt crises in the EU and Latin America; (2) map and evaluate how both regions and individual countries within both regions have tried to manage these crises; (3) dis- cuss the economic, political and social effects of theses crises on both regions and individual countries; (4) and, finally, to make policy suggestions on how to transi- tion from finance capitalism to a more sustainable real capitalism, on how both regions can better manage/govern/respond to such systemic pressures and on how they can increase their cooperation. The book begins in Chap. 1 with a theoretical introduction which includes a chapter by Stephan Schulmeister that explores the effects of the paradigm change on economic policies in Europe and in Latin America and a second chapter by Christian Ghymers, which analyses some key systemic aspects of the global crisis, i.e. climate change, macro-financial instability and the weakening of democracy and upon their inter-connections. These intertwined aspects reflect myopic prices, the non-incorporation of externalities as well as the lack of needed regulation of finan- cial markets and are also linked by the way public decisions are biased towards the short-term, and influenced by vested interests. The following chapters are divided in five parts. The second part explores aspects of regional governance and how the economic and financial crises were managed in Europe and Latin America. The chapters share a common diagnosis that, with the breakup of the Bretton Woods System and the following liberalisation of capital flows and deregulation of financial markets, the emerging countries have been sub- ject to bubbles and crisis, in which they were confronted with capital flight to safe havens similar to what occurred later to the countries in the euro area most affected by the crisis and in both cases their central banks did not have the control over the currency in which their debts were denominated. Paul De Grauwe, for instance, compares the situation of a debtor country within the Eurozone to the status of the emerging countries in a debt crisis and reveals similarities because “they cease to have control over the currency in which their debt is issued. As a result, financial markets can force these countries’ sovereign defaults. This makes the monetary union fragile and vulnerable to changing market sentiments” (De Grauwe 2012). In both regions, debtor countries had at most insufficient (public) debt relief but suffered major (internal) devaluations (lowering of real wages and pensions and cuts in essential public services, especially health and education) and a prolonged period of economic stagnation, decline or low growth. The IMF adjustment pro- grammes for Latin America and the Troika programmes for Europe’s debt crisis countries bear indeed strong similarities and economic and social consequences leading to a lost decade, decline of the middle class, lowering of living standards of poorest people and fall in investment, the increase of inequality and poverty by reducing the role of the state, cuts in public services and social spending. Griffith Jones identifies the vulnerability of European creditor banks to debt reduction as a key problem in the euro area debt crisis, as it was in the Latin American debt crisis, which was managed in the interests of the creditor banks and countries: this is in one sense much more serious in the European case than in Latin America, because the