The European corporate elite on trial: the foundation of the Eurozone and the navigation of its crisis

“Europe’s industrial bosses oscillate between fear, anger and disbelief…. Company bosses long to yell “You’re fired!” at any number of European politicians… But a majority of Europe’s businesspeople definitely wants politicians to do more to hold the euro zone together.” (The Economist, October 2011)

The recent Eurozone crisis is widely discussed topic in academic literature, conferences ans forums. Most political economy analyses of the Eurozone crisis and its handling have focused on political leaders and dynamics, the role of the EU institutions and the global governance, clashes between creditor and debtor member states and public opinion. But private actors and the business community have been given an insufficient attention in this respect. An interesting (open access) article “The Eurozone Crisis and the European Corporate Elite: Bringing Corporate Actors into Focus” by Christakis Georgiou (University of Montpellier) greatly contributes to mend this scholarly lacune.
Highlighting the relation between the setting up of the EMU and the gradual emergence of pan-European corporations, the paper uses a framework referred to as the ‘corporate reconstruction of European capitalism theory of integration’ to understand the European Union’s response to the Eurozone crisis. Georgiou argues that both the foundation of the European Monetary Union (the independence of the ECB and the Maastricht convergence criteria) and the handling of the recent crisis were congenial to corporate preferences. Europe’s nascent corporate elite was concerned with eliminating currency risk stemming from the traditional pattern of macroeconomic imbalances in Europe when the EMU was set up and therefore did not push for fiscal federalism. When the flawed architecture of the Eurozone transformed that currency risk into sovereign credit risk, corporate preferences adapted and now favoured fiscal liability pooling and ultimately the setting up of a fiscal union. European corporate elites also unanimously supported the policy of adjustment through internal devaluation in the deficit economies. However, their differential exposure to credit risk led them to support diverse institutional forms entailing a lesser or greater degree of fiscal liability centralization. Those most exposed to sovereign credit risk – mostly domiciled in deficit member states – supported more extensive forms of fiscal liability pooling such as Eurobonds, whereas their counterparts domiciled in surplus member states were less favourable.
This empirically rich paper shows that there is a crucial link between powerful pan-European corporations, the setting up of the Eurozone and the (mis)management of its recent crisis. In the longer term, this analysis suggests that European corporations will also be a key constituency in favour of permanent forms of fiscal union such as a Eurozone treasury and budget. Researchers (as well as citizens and journalists) must pay attention to which extant special interest groups lobby and penetrate state and EU bureaucracies to promote their needs. Because finance and industrial capital preferences may contradict building the economy working for all and undermine the public wellbeing.