Research Papers

The sovereign debt crisis has exacerbated a number of fault lines threatening the very foundations of the two core achievements of European integration, the Single Currency and Single Market. There is, first, an internal North-South divide within the Eurozone. Second, there is an external rift between ‘Ins’ and ‘Outs’, who fear that the goalposts are being moved, and are increasingly concerned about being left on the sidelines by the drive towards tighter eurozone governance and enforced fiscal convergence. Third, there has been a long-standing ideological red line drawn primarily by the UK as regards to European integration in general and monetary integration in particular. And finally, progress in re-launching the Single Market is hampered by the combined effect of these multiple fractures whilst general attention is focused on re-shaping the eurozone. This paper argues that the stance of individual member states and their bargaining positions in the crisis remain shaped by their respective sets of values which find their origin in the persistence of distinct varieties of capitalism. It refers to the Varieties of Capitalism framework to address a number of crucial questions deriving from these divisions. Could a two-tier Europe become a ‘two-belief’ Europe, as argued by Monti? If so, what would be the implications for the long-term stabilisation of the eurozone and the consolidation of the single market? Can the variety of European economic and social models be overcome and real economic convergence be achieved?