This study adopts a dynamic perspective on the transformation of the Eurozone architecture, using the macro-financial model developed in Murau (2020) as conceptual framework. It analyzes changes in the web of hierarchical interlocking balance sheets via case studies in three transition phases: the 2007-9 Global Financial Crisis, the 2009-12 Eurocrisis, and the COVID-19 crisis that started in March 2020.
Within the logic of the macro-financial model, the study describes the changes that have taken place in the Eurozone during each of the transition periods. This refers to institutions, instruments, and elasticity space in all four segments of the monetary architecture—central banking, commercial banking, non-bank financial institutions, as well as the fiscal ecosystem, which is made up of treasuries and off-balance-sheet fiscal agencies. This descriptive aspect of the transformation is expressed via changes in the structure of interlocking balance sheets. On that basis, the study will ask what the causal forces were that induced those changes. For each of the transition phases, the study depicts four possible agents of change: (a) policymakers as agents of the state with a clearly delineable democratic legitimation; (b) technocratic actors; (c) representative of corporate interest; or (d) endogenous dynamics within the credit money system.
The key intellectual interest of this study lies in the question to which extent the modern credit money system on its own is causing the transformation of itself. Is a state-vs-markets framework—the baseline assumption of scholarship in International Political Economy (IPE)—sufficient to explain institutional change? What role do technocrats play? Or is there an endogenous tendency of credit money systems to transform due to the possibility of creating money out of nothing? The framework of hierarchical interlocking balance sheets, which this macro-financial model provides, allows to further investigate this question.