ABSTRACT

The crisis altered the positions of the EU member states, deepened the division between rich "North" and poor "South" and somewhat blurred the traditional division to developed "Old" and developing "New" member states. The deterioration in investments was the crucial trigger for the deepening and prolongation of the crisis, while exports mitigated the crash. European authorities, culprits for the creation of the crisis can also be blamed for its deepening and its prolongation. Obsessed by budget deficits they overlooked the effects of austerity measures on aggregate demand and on the functioning of macroeconomic mechanism.

Key words: economic development, Europe, macroeconomic policy

JEL: O11, O52, E63