Financialisation and Financial Crisis in South-Eastern European Countries

by Dubravko Radošević (Volume editor) Vladimir Cvijanović (Volume editor)
©2015 Edited Collection 319 Pages


The book discusses various cases of financialisation and financial crisis in South-Eastern Europe. While these can be directly traced to the region’s reliance upon the global financial regime, the interplay of international financial institutions, the eurozone’s rigidity and domestic policies have produced various outcomes in the countries of the region. The study presents quantitative and qualitative research and offers new insights into the processes that shape the financial and monetary systems. The ex post analysis of how financial instability was created and how it could have been prevented, hopes to provide insights for policy-makers today.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the editors
  • About the book
  • This eBook can be cited
  • Contents
  • List of Contributors
  • Foreword
  • Introduction
  • Part 1: Finance Dominated Capitalism, Financialization and Systemic Instability
  • Finance-Dominated Capitalism: Potentials for Systemic Instabilities and Crises
  • Financialization, Household Debt and New Vulnerabilities in Post-Socialist Societies
  • Patterns of Financialisation in Southeast European and Visegrád Countries
  • Part 2: Financialization, Exchange Rate Policies, Euroization and Inherent Financial Instability in CESEE
  • Euro zone Debt Crisis, Exchange Rate Policies and Accession to the European Monetary Union
  • Minskyan Liquidity Model Explanation of Financial Crisis in Emerging Europe
  • Capital Account Mismanagement, Deleveraging and Unstable Economy in the European Union Periphery Countries: The Case of Croatia and Slovenia
  • Financialisation in Croatia and Slovenia
  • The Introduction of the Euro and the Financial Instability in Slovenia: Lessons and Policy Recommendations
  • Regarding an “Innocent” Mistake of the IMF: The Greek Case: an Input Output Approach
  • Part 3: Capital Account Management, Capital Flows Reversals and Deleveraging in CESEE Economies
  • Financialization in CESEE Countries – The Story of Debt vs Equity
  • Determinants of External Current Accounts in South Eastern Europe
  • Capital Flows, Credit Crunch and Deleveraging Dynamics: The Case of Slovenia, Croatia and Hungary in Comparison

← 6 | 7 → List of Contributors

Joachim Becker, Professor, Institute for International Economics and Development, Department of Economics, Vienna University of Economics and Business, Austria.

Predrag Ćetković, Project Assistant and Lecturer, Institute for Monetary and Fiscal Policy, Vienna University of Economics and Business, Austria.

Vladimir Cvijanović, Group 22 Founding Member, Zagreb, Croatia and Alternate, European Economic and Social Committee, Brussels, Belgium.

Tomislav Globan, Senior Assistant, Faculty of Economics and Business, University of Zagreb, Croatia.

Eckhard Hein, Professor, Berlin School of Economics and Law, Berlin, Germany.

Aleksandar Kešeljević, Associate Professor, Faculty of Economics, University of Ljubljana, Slovenia.

Srdjan Kokotović, General Deputy Manager, National Bank of Serbia, Department for Financial Stability.

Gordana Kordić, Associate Professor Faculty of Economics & Business, Zagreb, Croatia.

Kosmas Manoudakis, PhD, independent researcher, Greece.

Ognjen Radonjić, Associate Professor, Faculty of Philosophy, Department of Sociology, University of Belgrade, Serbia.

Dubravko Radošević, Senior Research Fellow, The Institute of Economics Zagreb, Croatia.

Petra Rodik, Assistant Professor, Faculty of Humanities and Social Sciences, University of Zagreb, Croatia.

Malcolm Sawyer, Emeritus Professor of Economics, University of Leeds, UK.

Franjo Štiblar, Professor of Economics at the University of Ljubljana, Slovenia.

Aleksandar Stojkov, Associate Professor of Economics at the Iustinianus Primus Faculty of Law, Ss. Cyril and Methodius University in Skopje, Macedonia.

Neven Vidaković, Professor, Effectus University College for Finance and Law, Zagreb, Croatia.

← 7 | 8 → Thierry Warin, Associate Professor of International Business at HEC Montreal, and Vice-President at CIRANO (Montreal), Canada.

Dušan Zbašnik, Faculty of Economics and Business, University of Maribor, Slovenia.

Mislav Žitko, Assistant, Faculty of Humanities and Social Sciences, University of Zagreb, Croatia.

← 8 | 9 → Malcolm Sawyer


The economic and financial crises of 2008 and 2009 (with first signs coming in 2007) were remarkable for their global spread, with virtually no country exempt from their effects on employment and output of these crises. It could be seen the first truly global economic crisis, and has often referred to as the GFC (global financial crisis). On the other hand, the heart of the banking and financial crises were in a relatively few countries (including the USA of course), with others notably within the Eurozone threatened by sovereign debt crises and others suffering from the contagion through international trade and investment links. Some authors such as Bob Jessop have then spoken of the North Atlantic financial crisis with the intense banking crises of USA, UK, Ireland (and Iceland) in recognition that countries outside that North Atlantic area suffered economic losses but in general not financial crises. These crises of 2008/2009 were the most recent and widespread of a high rate of financial crises – Laeven and Valencia (2012) record some 400 crises (banking, sovereign debt, exchange rate) over 4 decades, many of which had devastating effects of employment and output. These financial crises serve to focus our attention on the inherent instabilities of the financial sector, albeit that the nature and forms of those instabilities vary over time and space, and can be constrained by regulation. The recent set of crises has occurred after a number of decades of financialisation, which has involved growth of the economic and social power of the financial sector and major elements of de-regulation.

The most widely quoted definition of financialisation comes from Epstein (2005): ‘financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies’ (Epstein 2005: 3). There are two interesting features of this quote – financialisation is viewed as a process in that it is the increasing role of financial markets etc., rather than the large size of financial markets etc.. The second is that this definition provides the object of study and in itself does not specify the time period or geographical space to which it applies; nor does it provide any analytical framework for its study. Viewed in terms of processes increasing the scale of the finance and the financial sector, financialisation has been with us for a long time – perhaps as reflected in the title of Graeber (2011) five thousand years. In the capitalist era, finance has often taken centre stage, and exerted considerable economic and political power. Vercelli (2014) talks of two eras of financialisation, with the first covering the period from the second half of the 19th century through to 1929, drawing to an end with the Wall Street crash and widespread bank failures across many European countries as well as the USA. It was that era that authors such as Hilfelding (1910) could speak of finance capital as the latest development of capitalism. Vercelli and others portray a second era of ← 9 | 10 → financialisation as starting circa 1980, though a number of revivals of the financial sector started soon after the end of World War II in many of the core industrialised countries. Many countries were though excluded from these financialisation processes – for obvious reasons COMECON countries and ‘third world countries’. Indeed, in the latter, there were many voices advocating financialisation as a route to development – that term was not used but promotion of ideas such as financial liberalisation, removal of ‘financial repression’, exchange and capital controls would be significant components to financialisation.

In the work on the project Financialisation Economy Society and Sustainable Development (FESSUD) (fessud.eu) we discussed financialisation in the present era, drawing heavily on Fine (2011), in terms of eight features, which could be seen as empirical observations on the particular forms which financialisation is taking in the present era. These can be summarised as the large–scale expansion and proliferation of financial markets, de-regulation of the financial system itself and the economy more generally, the expansion and the proliferation of financial instruments and services with the birth of a whole range of financial institutions and markets, at a systemic level the dominance of finance over industry, strongly associated with market mechanisms, complemented or even reinforced by policies that have underpinned rising inequality of incomes and of inequality more generally, consumption has often been sustained by the extension of credit, not least through the use of capital gains in housing as collateral; the penetration of such financing into a widening range of both economic and social reproduction and finally, financialisation is associated with a particular culture which is to be interpreted broadly. van der Zwan (2014) identifies three broad approaches within financialization: these are ‘financialization as a regime of accumulation’, ‘the financialization of the modern corporation’, and ‘the financialization of the everyday’.

Studies of financialisation have often concentrated on a narrow range of countries (notably USA, UK and Germany) and there has been a strong tendency to generalise from those countries. Yet the general processes of financialisation have been operating across most countries, and at the global as well as national levels (see Bonizzi (2014) for recent survey) But within those general processes there are many differences between countries – in timing, in speed and in the nature of financialisation. This book represents a major contribution to the study and understanding of the processes of financialisation with its focus on the experiences of South-Eastern Europe and the Visegrád countries. The chapters can be read as showing the pervasiveness of financialisation here in countries which were members of COMECON until a quarter of a century ago and where market capitalism has arrived in its financialised form. They highlight that features of financialisation found in Western European and North American capitalism are often to be found in the these South-Eastern European countries with the growth of the financial sector, its social and political power, growth of new financial instruments and the expansion of assets, liabilities and financial fragility, the rise of household debt, and the generation of financial instability. Financialisation in the forms of increased financial flows and increased transactions in financial assets ← 10 | 11 → also involves the relationships between countries, and this comes through in many of the studies here. In these ways amongst others individual countries become embedded in a more global financialisation. Yet these studies taken together show that financialisation is not some homogenous process but rather sets of processes which vary between country.

Malcolm Sawyer

Emeritus Professor of Economics,

University of Leeds, UK

Principal investigator for the EU funded project Financialisation Economy Society and Sustainable Development (contract number 266800) (www.fessud.eu)


Bonizzi, B. (2014), ‘Financialization in Developing and Emerging Countries: A Survey’, International Journal of Political Economy, vol. 42, no. 4, Winter 2013–14, pp. 83–107.

Epstein, G. (2005), ‘Introduction: Financialization and the World Economy.’ In G. Epstein (ed.) Financialization and the World Economy. Cheltenham and Northampton: Edward Elgar.

Fine, B. 2011, “Financialisation on the Rebound?”, mimeo

Graeber, D. (2011) Debt: The First 5000 Years. Melville Press

Hilferding, R. (1910, 1981), Finance Capital: A Study of the Latest Phase of Capitalist Development (edited by Tom Bottomore, from translations by Morris Watnick and Sam Gordon: original German publication 1910, English version 1981), London: Routledge & Kegan Paul

Laeven, L and Valencia, F (2012), ‘Systemic Banking Crises Database: An Update’, IMF Working Papers, WP/12/163

van der Zwan, N. (2014), ‘State of the Art: Making sense of financialization’, Socio-Economic Review (2014) 12, 99–129 ← 11 | 12 →

← 12 | 13 → Dubravko Radošević and Vladimir Cvijanović


The South-Eastern European (SEE) economies are very divergent group of economies at various stages of economic development. If we denote the area to be the one from Slovenia, Croatia, Hungary and Romania in the North to Greece in the South we can say that six of these SEE economies are already in the EU (Slovenia, Croatia, Bulgaria, Romania, Greece and Hungary) and that the other countries may be on the path to EU membership in the next 10 years, if real and nominal convergence criteria are met. Two EU economies (Greece and Slovenia) are also full members of the European Monetary Union (EMU), while the other EU member states analysed here will enter into the EMU after the convergence criteria have been fulfilled. Furthermore, the euro is used in Kosovo and Montenegro as the national currency although these two countries are outside the EMU. This implies that such a divergent group of national economies, that are “small open economies” in transition, may have different experiences with the financialisation process, although they share many similarities in this respect. Briefly, financialisation means the predominance of finance over real sector of an economy. A common endeavour of the research presented in this book is to analyze what is common in the financialisation process in this group of European economies, but also what is still specific in the cases presented here.


ISBN (Hardcover)
Publication date
2015 (August)
economic growth monetary polocy fiscal policy
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2015. 319 pp., 4 coloured ill., 64 b/w ill., 37 tables, 3 graphs

Biographical notes

Dubravko Radošević (Volume editor) Vladimir Cvijanović (Volume editor)

Dubravko Radošević is Senior Research Associate at the Institute of Economics in Zagreb. He served as a central bank official and economic adviser to the President of the Republic of Croatia. Vladimir Cvijanović is an independent researcher and consultant. He holds a doctorate from Goethe University Frankfurt.


Title: Financialisation and Financial Crisis in South-Eastern European Countries