“Financial Repression and Liberalization in Europe’s Southern Periphery: From ‘Growth State’ to ‘Stabilization State’”

Pagoulatos, George. (1999) “Financial Repression and Liberalization in Europe’s Southern Periphery: From ‘Growth State’ to ‘Stabilization State’”. In: UNSPECIFIED, Pittsburgh, PA. (Unpublished)

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Abstract

Postwar economic growth in Spain, Portugal and Greece was premised, more or less, on a system of state-directed finance. After the 1970s and especially after the mid-1980s, all three Southern European economies led by Spain entered a process of gradual financial liberalization. To account for liberalization, four explanations are examined: (a) the external constraint posed by the prospect of European financial and capital liberalization/integration (which is held valid for the cases of Portugal and Greece but not for Spain); (b) financial liberalization as a strategy for Europeanization (which applies mostly to the case of Spain, and secondarily to Portugal and Greece); (c) financial sectoral pressure (an explanation rejected); (d) financial liberalization as a prerequisite for effective disinflation and macroeconomic stabilization (which is singled out as the most important explanation). Further, the paper argues that the transformation of the state’s role in finance over the 1980s and 1990s denotes a shift from a “growth state” to a “stabilization state.”

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