GEOFIN Blog #18 – Central banks should be fighting the climate crisis – here’s why (by Martin Sokol and Jennie. C. Stephens)

Central banks should be fighting the climate crisis – here’s why

Martin Sokol, Trinity College Dublin and Jennie C. Stephens, Northeastern University

Climate finance was a major focus at the recent COP28 summit, but one set of game-changing institutions remains largely missing in such conversations: central banks.

Central banks are public institutions, charged with maintaining economic stability through controlling the supply of money in an economy. These banks have enormous power to catalyse a more just, equitable and climate-stable future.

However, our recent research points out that their policies have been slowing down – rather than speeding up – transformative climate action. The problem is these banks focus on financial stability in the near term, which means propping up a status quo which promotes further climate instability. And that means they are making things more unstable in the long term.

Our research suggests that long-term stability cannot be achieved without first disrupting and transforming the existing financial system. One way to do this would be for central banks to use tools already available to them to trigger a short-term intentional disruption in order to redirect financial flows and create greater stability in the long-term – we call this “creative disruption”.

Short-term v long-term stability

Central banks generally try to keep the economy stable by controlling inflation through interest rates. With climate disruptions causing more and more instability every year, many central banks are starting to take the climate more seriously. Yet, when price stability is threatened by increasing inflation or when the overall financial stability is questioned by a looming financial crisis, central banks quickly forget about the climate.

For example, recent aggressive increases in interest rates have disproportionately hit the renewable energy sector and made it harder for people and governments to raise money for other measures that would help cut emissions or adapt to climate change. From a long-term perspective and from a climate justice lens, this is counterproductive.

To maintain short-term economic stability when COVID hit, central banks around the world quickly lent money to commercial banks in a variety of ways – even at negative interest rates. But no strings were attached, so banks lent this money to the fossil fuel industry and other wealthy corporate interests, among others.

During the pandemic many central banks also increased the money supply, in a process called quantitative easing, to stimulate the economy, and some of this money ended up in the pockets of carbon intensive industries. These efforts to stabilise financial markets reinforced and exacerbated huge inequities in wealth and power, and were a missed opportunity to increase support for a green economy.

Central banking, climate-justice style

That’s why in our latest research we analysed central banks from the lens of climate justice. Climate justice is an approach to climate action that goes beyond a narrow focus on decarbonisation and emissions and focuses on social change and economic equity as a way to make people less vulnerable to climate change. This means restructuring the financial system to work for the benefit of all people rather than just the top 1%.

So instead of stabilising markets by supporting corporate interests and the financial sector in the short-term, we suggest that central banks need to start prioritising long-term stability. An intentional short-term “creative disruption” would reverse established financial flows and would start funnelling investments towards the most vulnerable.

For example, central banks could use their power to create money to help local governments finance ambitious climate infrastructure projects or directly support community-oriented public investment programmes.

Rather than continuing to focus narrowly on inflation to determine economy-wide interest rates, central banks could create different interest rates for different kinds of investments – establishing high interest rates for carbon-intensive activities and low or zero-interest rates for renewable energy. The Bank of Japan is one of a few central banks that have already started experimenting with such schemes.

Central banks can also create zero or negative-interest rates for climate justice investments. Imagine households could insulate homes, install heat pumps and solar panels – and get paid for it. And the most vulnerable communities should be served first, not last. If central banks can use negative interest rates to save banks during the COVID crisis, they surely can use such tools to save people and the planet in the climate crisis. Innovations like this could transform the financial landscape, and reshape the financial injustices that dominate today. And there is much more central banks can do.

Central banks have the power and the tools to trigger a rapid transformation towards a more just, fossil-fuel free future at a global scale. Instead of continuing to use their power to accelerate climate chaos, central banks could catalyse a shift toward a more equitable financial system. Going forward, the transformative role of central banks needs to be at the top of the climate policy agenda.

Martin Sokol, Associate Professor of Economic Geography, Trinity College Dublin and Jennie C. Stephens, Dean’s Professor of Sustainability Science & Policy, Northeastern University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How to cite:

Sokol, M. and Stephens, J.C. (2023) Central banks should be fighting the climate crisis – here’s why. GEOFIN Blog #18. Dublin: GEOFIN research, Trinity College Dublin.

Available online at

Further information:

More information about GEOFIN can be found here:

GEOFIN blogs are available here:

Download the blog: PDF

Back to GEOFIN blogs

GEOFIN Blog #17 – Why the Fed should treat climate change’s $150B economic toll like other national crises it’s helped fight (by Jennie C. Stephens and Martin Sokol)

Climate disasters are now costing the United States US$150 billion per year, and the economic harm is rising.

The real estate market has been disrupted, as home insurance rates skyrocket as wildfire and flood risks rise with the warming climate. Food prices have gone up with disruptions in agriculture. Health care costs have increased as heat takes a toll. Marginalized and already vulnerable communities that are least financially equipped to recover are being hit the hardest.

Despite this growing source of economic volatility, the Federal Reserve – the U.S. central bank that is charged with maintaining economic stability – is not considering the instability of climate change in its monetary policy.

Earlier this year, Fed Chair Jerome Powell declared unequivocally: “We are not, and we will not become, a climate policymaker.”

Powell’s rationale is that to maintain the Fed’s independence from politics and political cycles, it should use its tools narrowly to focus on its core mission of economic stability. That includes price stability, meaning keeping inflation low and maximizing employment. In Powell’s view, the Fed should stay away from social and environmental concerns that are not tightly linked to its statutory goals.

However, it is getting increasingly difficult for central banks to ensure stability if they do not integrate climate instability into their monetary policies.

As researchers with expertise in climate justice and central banks, we recently published a paper reviewing the monetary policy tools available to central banks around the world that could help slow climate change and reduce climate vulnerabilities.

With the new U.S. National Climate Assessment and other research making clear that U.S. policies and actions are insufficient to minimize climate instability and manage the growing economic costs, we believe it’s time to reconsider the role of central banks in responding to the climate crisis.

Rethinking interest rates

One thing central banks could do is set lower interest rates for renewable energy development. The Bank of Japan has used this strategy.

The Fed’s aggressive increases in interest rates in response to rising inflation have slowed the transformation toward a more sustainable society by supporting fossil fuels and making investments in renewable energy infrastructure more expensive. Offshore wind power has been particularly hard hit, with multiple multibillion-dollar projects canceled as higher interest rates raised the projects’ costs.

One way to introduce differentiated rates would be to create a special lending facility under which commercial banks could borrow money from the central bank at preferential interest rates if used for renewable energy deployment or other climate-friendly investments. Whether the Fed already has authorization to do that depends on interpretation of its current mandate.

While the U.S. Federal Reserve has not done it before, China’s central bank has used similar tools to incentivize renewable energy, and the Bank of Japan’s lending facility offers zero-interest loans for green investments.

Nudging banks to rethink investments

Despite the Fed’s proclaimed efforts not to pick winners and losers, its monetary policies have taken steps that favor established industries and companies, including the fossil fuel industry.

For example, the Fed supported the financial sector unconditionally during the COVID-19 pandemic to keep credit available to limit economic harm. Its massive purchases of corporate bonds resulted in subsidies to the fossil fuel sector.

Our analysis suggests two ways to help manage climate change now: The Fed can reinterpret its current statutory duties and start viewing climate action as a critical part of its role in maintaining economic stability within its existing mandate, as the European Central Bank has done, or the mandate of the Fed can be changed by Congress to explicitly include “green” transformation objectives, similar to the U.K.‘s mandate for the Bank of England.

Either of these options could empower the Fed to address climate change and support the government, businesses, banks, households and communities in financing climate mitigation and adaptation efforts.

Two maps showing extreme heat days rising almost everywhere and extreme precipitation increasingly common, particularly in the Eastern U.S.
Rising temperatures exacerbate climate risks, including droughts, wildfires and extreme storms. Global temperatures have already warmed by more than 1 degree Celsius (1.8 Fahrenheit) compared to preindustrial times. The projected changes with 2 C (3.6 F) of warming, which the world is on pace to exceed this century, are relative to the 1991-2020 average.
Fifth National Climate Assessment

The Fed could also discourage banks and investors from investing in assets that ultimately harm the economy – for instance, by setting collateral requirements for banks that would reduce the attractiveness of holding carbon-intensive assets. The European Central Bank recently announced that it would tilt purchases of corporate bonds toward “green” assets.

The Fed has recently taken steps to push large financial institutions to monitor climate-related risks in their portfolios, drawing the ire of Republicans, who claimed the bank had no authority to consider climate change. Whether this risk management approach will pressure banks to change their lending patterns is not yet clear.

The Fed and other central banks could go further and mandate energy transition planning with an eye toward economic stability. The European Union developed a whole new sustainable finance framework designed to discourage investment in economic activities that do not support an energy transition along the lines of the European Green Deal, which aims to turn Europe into a climate-neutral continent with no one left behind. The European Central Bank is obligated to support EU economic policies, including the green transition.

The Fed has used creative tools before

Many times in its 110-year history, the Fed has provided financial support to the U.S. government during major crises, such as wars and recessions, by offering direct lines of credit or by directly purchasing Treasury bonds. During the pandemic, it took extraordinary steps to keep U.S. businesses running.

Now that the U.S. is facing rising costs from the climate crisis, we believe the Fed should treat climate change with the same urgency and importance.

In our analysis of the tools available to central banks, we took a climate justice perspective, looking beyond greenhouse gas emission reductions to incorporate social justice and economic equity. Instead of focusing on supporting corporate interests and the financial sector in the short term to stabilize markets, we believe central banks could prioritize longer-term stability by funneling investments toward vulnerable communities and people.

The Bank of England, the European Central Bank and other central banks are already implementing some pro-climate measures. At the Fed, Powell seems more concerned with political backlash than the economic damage to the U.S. economy outlined in the latest climate assessment.

We believe it is past time that the Fed consider climate destabilization as a major economic crisis and use more of the tools in the central bank toolbox to tackle it.The Conversation

Jennie C. Stephens, Dean’s Professor of Sustainability Science & Policy, Northeastern University and Martin Sokol, Associate Professor of Economic Geography, Trinity College Dublin

This article is republished from The Conversation under a Creative Commons license. Read the original article.


How to cite:

Stephens, J.C. and Sokol, M. (2023) Why the Fed should treat climate change’s $150B economic toll like other national crises it’s helped fight’. GEOFIN Blog #17. Dublin: GEOFIN research, Trinity College Dublin.

Available online at


Further information:

More information about GEOFIN can be found here:

GEOFIN blogs are available here:


Download the blog: PDF

Back to GEOFIN blogs

GEOFIN Blog #16 – Central banks, the climate crisis and the need for a ‘creative disruption’ (by Martin Sokol and Jennie C. Stephens)

How should central banks respond to the worsening climate crisis that threatens to destabilise the economy and society? As climate disruptions become more frequent and intense, it seems clear that changes in central banks and their monetary policies are urgently needed. One bold, innovative approach is for central banks to create an intentional disruption of the financial system to change course to allow for major shifts in financial flows. In our recent paper in Climate and Development (Stephens and Sokol, 2023) we argue that a short-term ‘creative disruption’, informed by the principles of ‘climate justice’, could trigger a financial transformation to redirect financial flows and investments toward climate vulnerable communities rather than continuing to reinforce financial markets that benefit wealthy investors and large corporations. Climate justice, an approach to climate action that goes beyond decarbonisation and greenhouse gas emissions reduction (Stephens, 2022), focusses on the urgent need to prioritize social justice and economic equity as a way to reduce climate vulnerabilities. Central banking that is fit for purpose in the age of ‘polycrisis’ needs to embrace climate justice principles as these are fundamental for achieving transformative change towards a more equitable, just, healthy, and sustainable future for all.

This idea of a ‘creative disruption’ goes against the prevailing wisdom about how central banks should respond to climate change risks, which is to maintain financial stability at all costs. Indeed, financial stability is one of the key aims of central banks and their monetary policies. So why would any central bank want to ‘disrupt’ the financial system? The reason is simple; long-term stability requires transformation and transformation requires disruption. The proposal for an intentional ‘creative disruption’ recognises that it does not make sense to keep stabilising an inherently unstable system that is also causing climate chaos. We argue that central banks’ current focus on near-term financial stability is short-sighted because it undermines longer-term stability. The current global financial system is inherently unstable, and decades of financialization has made the system even more crisis-prone. The climate crisis, which is getting worse in part due to central banks’ monetary policy that continues to incentivize and support fossil fuel investments, contributes to expanding inevitable volatility.

While many central banks are increasing their ‘green’ rhetoric, they are still supporting fossil fuel reliance and other investments that are accelerating climate change. In their narrow pursuit of near-term financial stability, the actions of central banks are putting long-term ecological and financial stability at risk. Unless transformative change is made, climate-induced financial crises are inevitable, and these forthcoming crises will have dire consequences for many, especially among those who are already marginalized. Many of the same vulnerable households, communities and regions who are already bearing the brunt of the climate crisis will also suffer the most from forthcoming financial upheavals.

With a ‘climate justice’ approach, a shift away from continuing to prop-up an unjust, inequitable and unstable financial system is essential. Instead of waiting for a climate-related financial calamity to arrive, climate justice principles call for a pro-active, short-term disruption of the financial system, with the aim of securing long-term, durable stability and sustainability. The goal and strategy of such a disruption would be to allow for investments that provide direct support for hard-working families, disadvantaged people and vulnerable communities. While the market economy is well known for its ability to produce  ‘creative destruction’, the urgent need for transformative climate justice requires a creative disruption (not destruction).

Advocacy for ‘creative disruption’ recognises that central banks now play a central role in managing  ‘financial chains’ (Sokol, 2023), a term that refers to the interconnected flow of money and power in financialised economies (see figure). When central banks incentivize financial flows to benefit some and disadvantage others, they are also manipulating the flow of power by empowering some while disempowering others. Transformative climate justice requires disrupting the flows of both money and power, which means managing financial chains in a new and different way. Central banks, therefore, have a key role to play in the much-needed transformative change that is necessary for a better future. Instead of being part of the problem, central banks can become a central part of the solution. The idea of this proposed ‘creative disruption’ is to turn the financial system upside down. Instead of central banks propping up investments in financial markets, central banks could incentivize investments in vulnerable communities, facilitate community wealth-building and support climate resilience. Central banks could promote stability by reversing the existing flows of value and power away from the richest 1% towards workers and families.

There is a growing range of tools in central banks’ toolbox that could be mobilised for this proposed ‘creative disruption’ for climate justice. For example, ‘green’ quantitative easing could be implemented to support urgently needed climate resilience investments. A ‘climate bailout’ could involve central banks acquiring fossil fuel assets in order to close them down. And direct monetary financing of households could be deployed to support the most vulnerable in society. By applying these and other measures (see Stephens and Sokol, 2023, for more), central banks could trigger a rapid phase-out of fossil fuels and redirect the power and influence of financial flows towards a more just, renewable-based future that prioritizes public needs rather than corporate profits.

To steer humanity towards a more stable future, central banks also need to disrupt the self-defeating imperative of endless growth. Given that humanity is pushing past the earth’s planetary boundaries, a new approach to monetary policy aligned with climate justice principles and ecological health will have to be coordinated with a range of other policies as well. This also requires new kinds of global coordination. The urgency for transformative change is growing as climate chaos expands around the world. This change requires new ways of thinking about transforming financial systems. An intentional ‘creative disruption’ triggered by central banks could be the catalyst that is needed to achieve such transformation.

Dr Martin Sokol

Associate Professor

Department of Geography

Trinity College Dublin, Ireland


Prof Jennie C. Stephens

Dean’s Professor of Sustainability Science & Policy

Northeastern University, School of Public Policy & Urban Affairs, Boston, MA USA

Climate Justice Fellow at Harvard-Radcliffe


Figure: Central banks and financial chains in a financialised economy

(Source: Stephens and Sokol, 2023)




Sokol, M. (2023). Financialisation, central banks and ‘new’ state capitalism: The case of the US Federal Reserve, the European Central Bank and the Bank of England. Environment and Planning A: Economy and Space, 55(5), 1305-1324.

Stephens, J. C. (2022). Feminist, Antiracist Values for Climate Justice: Moving Beyond Climate Isolationism. In J. Agyeman, T. Chung-Tiam-Fook, & J. Engle (Eds.), Sacred Civics: Building Seven Generation Cities. Routledge.

Stephens, J. C., and Sokol, M. (2023). Financial innovation for climate justice: central banks and transformative ‘creative disruption’. Climate and Development, 1-12.


How to cite:

Sokol, M. and Stephens, J.C. (2023) Central banks, the climate crisis and the need for a ‘creative disruption’. GEOFIN Blog #16. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Further information:

More information about GEOFIN can be found here:

GEOFIN blogs are available here:



GEOFIN project received funding from the European Research Council (ERC) Consolidator Grant under the European Union’s Horizon 2020 research and innovation programme (Grant Agreement No. 683197).

Download the blog: PDF

Back to GEOFIN blogs

Lause 11 building, Berlin (photo by Zsuzsanna Pósfai)

GEOFIN Blog #15 – Degentrify.Europe seminar in Berlin (by Zsuzsanna Pósfai)

Degentrify.Europe seminar in Berlin

I participated in the workshop of the freshly established Degentrify.Europe network in Berlin between the 21-23rd of October 2021. The network was established by different initiatives engaged in anti-speculative real estate projects in Brussels, Riga, Rennes, Berlin and so on. Most of them have been engaged in the social-purpose temporary use of abandoned buildings, and have developed quite successful mechanisms that match urban vacancy with social initiatives’ need for space. However, they have come to a point where they aim to build structures that are able to take the buildings off the market in the long term, and which provide stability to the initiatives and residents occupying the buildings. In practical terms, this means buying the buildings with some kind of anti-speculative structure. In order to learn about the possibilities for anti-speculative buyout, the network was expanded with initiatives who have experience in this field (such as community land trusts or cooperative housing initiatives). Also, the Berlin location was chosen because of the high number of alternative real estate projects in this city.

During the workshop, we had a number of site visits to inspirational Berlin-based projects (photos and short descriptions of these follow below), learned about the work that each of the participants does, and also had discussions about the possible legal-institutional models, as well as potential financial mechanisms for anti-speculative real estate. Concerning the legal-institutional issues, we had support from a member of the Mietshäuser Syndikat (one of the most famous anti-speculative housing networks), and for the financial questions we were given input by a representative of the GLS Bank (the main ethical bank in Germany).

What was perhaps missing, was a more in-depth discussion of the potential role of the public sector in countering gentrification processes. I think it is definitely worthwhile to reflect on how bottom-up, community-controlled initiatives for alternative real estate can be scaled up, and in what ways they can collaborate with the state (local or national) in order to make their achievements accessible more broadly. On the other hand, it was emphasized by the initiatives from Berlin, that due to the earlier strategy of the local state to sell out all properties, they do not necessarily have trust towards this not happening again. This was one of the reasons why many initiatives aimed to transfer real estate into anti-speculative legal structures that are independent from the state. This is an experience that organizations in Eastern European countries can easily relate to, due to successive waves of privatization since the 1980s.




This is one of the oldest initiatives. It was established in close collaboration with the city in two different ways:

– One part has working spaces and community spaces (photo above). This was (and remains) in the ownership of the city, with the collective only managing it in the long term.

– The other, residential part was owned by a private owner until recently, and the residnts had renovated it with the help of a grant from the city in the 1990s. The grant scheme aimed to restore abandoned buildings and in return, the owner had to give the organization of the tenants a 25-year contract. This expired recently, and with the help of foundation (Stiftung trias) the cooperative of the residents managed to buy it.


Lause building

Lause 11:

This is a working space, that was recently meant to be sold off by its owner to create luxury housing. The collective of the tenants organized themselves and managed to pressure the owner to sell the building to them instead. The land was bought by the city and the building by the collective of tenants, who will pay a land rent to the city.


ex rota print building


This former printing house (now also a working space and cultural space) is owned and managed by its tenants since 2007. Owned by the city after the bankruptcy of the printing company, they wanted to sell it to investors in the years before the financial crisis. After years-long negotiating and political pressuring, finally the collective of tenants managed to buy with the help of two foundations (Stiftung trias, Stiftung Edith Maryon).



community building

This is a very interesting new project of the TRSFRM real estate development cooperative in the area of Vollgut, a large area being transformed in Neukölln. Apartments of the building will be contracted to different social organizations, who work with different target groups in a difficult housing situation (such as single mothers, those coming out of shelters, drug users, etc). These organizations will also become members of the cooperative owning the building, and land on the site is owned by the municipality.


people entering a church building

Some neighborhood initiatives use churches for their community activities, and church property is also being considered for housing purposes in the city. For these projects to become feasible, progressive local churches are needed.


tempelhofer former airport

Tempelhofer Feld:

This former airport was the subject of much debate and contestation – the main lines being whether to have new real estate development on the site or preserve it as a green area. Finally, as a result of citizen organizing, the latter one, and today it is a park (there are also some community gardens).

Dr Zsuzsanna Pósfai
Research Fellow
GEOFIN research


Download the blog: PDF


How to cite:

Pósfai, Z. (2021) Degentrify.Europe seminar in Berlin GEOFIN Blog #15. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs

GEOFIN Blog #14 – ENHR conference paper: Housing finance beyond individual mortgages – how to finance new forms of affordable housing in Eastern Europe?

The paper I presented at the annual (online) conference of the European Network of Housing Researchers (ENHR)  explored how the boundaries of the current system of housing finance could be pushed in a way to produce more affordable housing in Eastern Europe generally and in Hungary specifically. An important aspect of this inquiry is to investigate how new institutions of rental housing could be financed in a context of housing markets extremely dominated by homeownership, and where individual mortgage lending – although systematically reaching its limits – is pushed forward by governments.

Crisis periods shed light on the vulnerability of conventional forms of housing finance; especially in (semi)peripheral economies such as Hungary and Eastern Europe more generally. The 2008 crisis led to dramatic housing instability in the region, especially through mortgages denominated in foreign currencies. The housing market effects of the current, Covid-19 induced economic crisis are yet to unfold, but it will surely bring a reorganization in the field of housing finance. As the pool of individuals eligible for a mortgage decreases due to income uncertainties, financial institutions may become more interested in experimenting with new forms of financing organizations engaged in the development of sustainable and affordable housing.

In my paper I explored what potential these new forms of rental housing (and within that, cooperative and collaborative housing) have to even out the volatility and risk of conventional forms of housing finance. My hypothesis was that housing finance can not only be a destabilizing, but also a stabilizing force, if money is invested into forms of housing ownership and tenure that are anti-speculative in their nature, and which aim to secure long-term affordability. In order  for this to happen, pioneering financial institutions and new housing organizations need to develop – and also need to meet. Understanding how they can come together and what aspects of housing finance need to change for this to happen is a fundamental question for housing researchers in the near future.

Dr Zsuzsanna Pósfai
Research Fellow
GEOFIN research


Download the presentation: PDF (slides) | PDF (paper)

Download the blog: PDF


How to cite:

Pósfai, Z. (2021) ENHR conference paper: Housing finance beyond individual mortgages – how to finance new forms of affordable housing in Eastern Europe? GEOFIN Blog #14. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs

GEOFIN Blog #13 – Conference news: Thirty years of capitalist transformations in Central and Eastern Europe: inequalities and social resistance (by Zsuzsanna Pósfai)

This was a conference organized by the Institute for Social Solidarity at the Babeș-Bolyai University, Cluj, Romania. Originally planned to happen in April 2020, postponed multiple times due to the Covid-19 pandemic, and eventually organized online in May 2021, this conference was a great gathering of critical scholars working on the Central and Eastern European region. Keynote speakers were Dorothee Bohle (European University Institute, Florence), Jonathan Hopkin (London School of Economics), and Costas Lapavitsas (SOAS University of London). The recordings of their presentations are accessible here.

Together with Márton Czirfusz (Periféria Policy and Research Center), I presented a paper entitled “Dependent housing financialization in Hungary through the case of household debt”.

We were part of a panel on Uneven Urban Development, Subordinated Housing Financialization and Racialized Inequalities in the European Semi-Peripheries. The session was a very friendly and lively exchange on how pressures of financialization shape local possibilities of access to housing (or expulsion from housing) in Serbia, Romania and Hungary. Enikő Vincze and George Zamfir spoke about the trajectories of evictions in Cluj and the formation of a segregated Roma neighborhood. Ioana Florea presented a paper they are working on together with Mihail Dumitriu on the four phases of the financialization of housing in Romania from 2001 until today. Ana Vilenica and Vladimir Mentus presented the case of evictions in Serbia, as a way of dismantling social infrastructure.

In our presentation, we first spoke about how broader processes of financialization are connected to household debt, focusing on the post-2008 situation. Our main aim was to highlight how the peripheries of Europe play a special role in this process: how the broader relations of dependent economic integration also play out in how households become indebted. Hungary is often cited as an example of post-crisis housing de-financialization, but in our view this merely meant a process of shifting to nationalized forms of financialization on the housing market. We then went on to analyze differences between just household debt (or loans), and household over-indebtedness, which is a different category, focusing on how much debt results in economic difficulties for the given household. Over-indebtedness also has its specificities in peripheral Europe, such as the very high level of utility arrears, the importance of consumer loans, or the growing size of the debt-collection market in post-crisis years. We finished our presentation by outlining a few potential progressive policies, such as steps to de-financialize housing and livelihoods more generally.

The presentation can be downloaded here.

Dr Zsuzsanna Pósfai
Research Fellow
GEOFIN research


Fig 1. Dr. Zsuzsanna Pósfai delivering her presentation online on 21st June 2021. Photo by Martin Sokol (used with author’s permission)


Download: PDF


How to cite:

Pósfai, Z. (2021) Conference news: Thirty years of capitalist transformations in Central and Eastern Europe: inequalities and social resistance. GEOFIN Blog #13. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs

GEOFIN Blog #12 – Financialisation of households in the ECE region: what can we learn from the secondary statistical data? (by Alicja Bobek)

The financialisation of households in East and Central Europe (ECE) is a relatively new phenomenon which is often described as part of a process of ‘catching up’ with countries in Western Europe. The delayed nature of household financialisation in the ECE region is evident in the secondary statistical data. As I have written in a recent GEOFIN Working Paper (Bobek, 2021a), such data remains limited, particularly in relation to long-term trends[1]. Nevertheless, the available data shows an interesting picture of recent trends in household financialisation in the ECE region, and it allows for some comparisons with the ‘Old’ EU member states.

There are different measures of household financialisation. These include household debt to GDP ratio and household debt ratio to their disposable income. In both cases, countries in the ECE region started from a relatively low base in the mid-1990s. For example, in 1995 household debt as a percentage of disposable income was as low as 3 percent in Poland; this compares to the ‘Old’ EU average of nearly 85 percent in the same year. While this ratio reached an average of 63 percent among countries in the ECE region by 2016, it remained much lower than the ‘Old’ EU average of almost 150 percent in the same year.

As argued by many scholars researching the subject of financialisation, housing and mortgage markets constitute one of the most important elements of the financialisation process, particularly in relation to households. It needs to be emphasised that mortgage markets for retail customers in the ECE region were almost non-existent during the socialist period and did not start to develop until the late 1990s. Prior to the transition, most ECE countries were characterised by the ‘East European Housing Model’, with public housing and housing estates as dominant models. However, due to the mass privatisation of housing which occurred after the collapse of communism, these countries experienced a major shift towards homeownership.

Indeed, ownership is a dominant form of tenure across all ECE states (Fig. 1). The average rate of homeownership in this region remains higher than the average rate of homeownership in Western Europe. Quite importantly, however, most households in ECE countries can be categorised as ‘owner with no outstanding mortgage or loan’. Nevertheless, the percentage of ownership with mortgage or loan in this region has been growing since the early 2000s. This suggests that ownership is still a desired form of tenure, but new entrants to the market have no other choice but to take on a mortgage. Furthermore, relatively higher levels of material deprivation among those who rent in the private market may suggest that ownership, even with a mortgage, is more ‘attractive’ than renting.

While the growing importance of mortgage markets in the ECE region is perceived by some as a positive development, there are also issues that require further consideration. These include the proportion of Foreign Currency (FX) loans, which grew at a rapid pace between 2004 and 2010. While the share of FX loans granted to households in selected countries in the region has decreased since 2010, rates recorded in 2014 were still relatively high. This can be problematic, especially when we take into account the low levels of so-called ‘financial literacy’, at least in some ECE countries (Fig. 2). Even though the concept of financial literacy itself can be controversial, it can be useful for highlighting the problematic nature of promoting complicated financial products in societies where the availability of any financial product was very limited until the mid-1990s.

Finally, it needs to be emphasised that the data not only shows us the overall trends among ECE countries, particularly the relatively low rates of household engagement with financial markets when compared to Western Europe, but also highlights some important variations within the region. What emerges from the secondary data are the differences between countries in the ECE region and also possible variations within each of these countries. Significant differences observed between ECE countries call for more scrutiny in analysing household financialisation as a unified and equal process occurring across this region. Variations on sub-national levels are more difficult to capture due to the data limitations, however some of the regional data on Poland (for details see Bobek, 2021c) suggests possible differences in financialisation of households between NUTS regions, and between the capital city and the rest of the country. All these should be taken into account in future research on the financialisation of households in the ECE region.

Alicja Bobek
Research Fellow
GEOFIN research


[1] This data is also available as part of two databases available on the GEOFIN website – for details see Bobek 2021b and 2021c



Bobek, A. 2021a. Financialisation of households in East-Central Europe: Insights from secondary statistical data. GEOFIN Working Paper No. 12. Dublin: GEOFIN research, Trinity College Dublin.

Bobek, A. 2021b. Financialisation of households: secondary statistical data. GEOFIN Database No. 2. Dublin: GEOFIN research, Trinity College Dublin. URL: (accessed 19/04/21).

Bobek, A. 2021c. Financialisation of households: secondary statistical data. GEOFIN Database No. 3. Dublin: GEOFIN research, Trinity College Dublin. URL: (accessed 19/04/21).

Klapper, L., Lusardi, A. and van Oudheusden, P. 2015. Financial Literacy Around the World: Insights from the Standard and Poor’s Ratings Services Global Financial Literacy Survey. FinLitt. URL:, (accessed 23/08/18).



Fig. 1. EU: Tenure Status (2019)

Source: Eurostat


Fig. 2. Financial literacy levels, EU (2014)

Source: Klapper et al., 2015



Download: PDF


How to cite:

Bobek, A. (2021). Financialisation of households in the ECE region: what can we learn from the secondary statistical data? GEOFIN Blog #12. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs

GEOFIN Blog #11 – The post-pandemic city: what could possibly go wrong (by Martin Sokol)

The Covid-19 pandemic has reignited debates about the future of cities. Optimists hope that – in response to the pandemic – our cities can become greener, healthier, smarter, more pleasant to work and live in, more economically resilient and more sustainable. This blog post argues that while such positive goals are potentially achievable, there is also a good chance that things could go horribly wrong. Indeed, in a ‘pandemic city’ scenario outlined here, the pandemic leads to a vicious circle where the health crisis is compounded by economic, financial, social, political and ecological crises, accompanied by a ‘technological apartheid’.

As a starting point, it is worth remembering that cities and city-regions now operate within the framework of a financialised economy, where finance has growing power over the economy and over society. The so-called ‘real economy’ is now sandwiched between financial markets and real estate markets (that are themselves increasingly financialised). Households, firms, banks and states are all caught up in a web of ‘financial chains’ (Sokol, 2017) driven by a profit-making imperative. The future shape of city-regions is thus inextricably linked to the operation of financialised financial flows (Fig. 1).

The pandemic has, of course, severely disrupted these financial chains (e.g. see Sokol, 2020; Sokol and Pataccini, 2020), but the logic of financialisation remains largely intact. In fact, one could argue that under the conditions of pandemic-induced economic stress, the emphasis on profitable financial streams will only intensify. The year 2021 was supposed to be a year of hope – the expectation being that with the arrival of vaccines the battle against the pandemic can eventually be won. But let’s just imagine for a moment that, for whatever reason (vaccine supply delays; vaccine hesitancy; new virus variant; etc.), the pandemic is not going to be brought under control as hoped. What happens then?

In the ‘pandemic city’ scenario outlined in this blog post (Fig. 2), coronavirus will continue to cause a major health crisis (both directly and indirectly). The continuing health crisis will in turn inflict further economic and financial damage, with severe implications for people’s jobs (and joblessness) and homes (and homelessness). The economic and financial hardship will not be felt equally across society, however. Indeed, there is good reason to believe that parts of society will be hit much harder than others and, as a consequence, social polarisation will grow. This social polarisation will go hand in hand with spatial polarisation – both within and between cities. Simply put, some cities and some parts of cities will do much better than others. The financialised nature of property markets will only exacerbate this process. Uneven social and economic impacts will, in turn, fuel political polarisation. Extremist forces will become mainstream within an increasingly fragmented and unstable political scene. Amid such political polarisation, it will be impossible to find a much-needed consensus on how to tackle the climate emergency. As a result, the environmental crisis will deepen. It is not inconceivable that amid growing environmental chaos (compounded by the economic, financial, social and political crisis), law and order will disintegrate. The collapse of law and order in cities (or parts of cities) will also mean that it will become increasingly impossible to impose any public health measures to control the spread of the virus. This will only serve to accelerate the pandemic and will further deepen the multiple aspects of the crisis.

Faced with such a dire situation, attempts will undoubtedly be made to implement technological solutions. However, these ‘solutions’ will only cause further polarisation within cities. A ‘technological apartheid’ may emerge where some people will enjoy a growing range of exciting online services and technology-enabled solutions, while others will be completely disconnected from digital services and face increasing social and economic marginalisation. The divide will not just be digital. Technology will also act as a spatial barrier: physical access to certain facilities, transport systems, particular zones or whole neighbourhoods of cities will be controlled by ‘smart’ IT systems (using digitalised personal health records and increasingly intrusive surveillance methods). However, it is unlikely that such a ‘technological apartheid’ will succeed in ending the pandemic. Indeed, as long as pockets of disease continue to persist in parts of the community, Covid-19 and its mutations will continue to threaten to reinfect the whole city. Under this scenario, there will be no such thing as a post-pandemic city. Instead, the pandemic will become permanent, and cities will be epicentres of its perpetuation. The vicious circle will continue with devastating consequences.

This ‘pandemic city’ scenario may appear rather extreme and disturbingly dystopian. But it would be hard to completely dismiss it as unrealistic. In fact, it is possible that various elements of the vicious circle described above are already in operation in many cities. The longer the pandemic lasts, the harder it will be to reinstate anything resembling the ‘normal’, let alone achieving the more optimistic and more sustainable visions. In order to break the emerging vicious circle, bold actions are needed. In the context of financialised economies, the critical players are central banks (see Fig. 1). Indeed, it is only gargantuan monetary interventions by central banks that have so far prevented a total economic and financial meltdown (by propping up financial markets). We now urgently need central banks not only to provide financial muscle to beat the pandemic, but also to devise ways to support green recovery and just transition, in which cities will be key battlegrounds.


Dr Martin Sokol
Principal Investigator
GEOFIN research



This blog is based on a presentation entitled “European cities beyond Covid-19: Critical reflections” (Sokol, 2021), delivered as part of the ‘European cities beyond Covid-19’ webinar organised by the Trinity Development & Alumni office within the Inspiring Ideas @ Trinity series. You can find the recording of the full webinar on the Trinity Development & Alumni website: ; or watch back on YouTube here: .



Sokol, M. (2017) Financialisation, financial chains and uneven geographical development in Europe: Towards a research agenda. Research in International Business and Finance. Vol. 39, Part B, pp. 678-685. DOI:

Sokol, M. (2020) From a pandemic to a global financial meltdown? Preliminary thoughts on the economic consequences of Covid-19. GEOFIN Blog #9. Dublin: GEOFIN research, Trinity College Dublin. Available online at

Sokol, M. (2021) “European cities beyond Covid-19: Critical reflections”. Presentation for the ‘European cities beyond Covid-19’ webinar, Inspiring Ideas @ Trinity webinar series, 10th February 2021. Dublin: Trinity Development & Alumni, Trinity College Dublin. Available online at: (or via YouTube at: )

Sokol, M. and Pataccini, L. (2020) Winners and losers in coronavirus times: Financialisation, financial chains and emerging economic geographies of the Covid-19 pandemic. Tijdschrift voor Economische en Sociale Geografie111(3): 401-415. DOI: 10.1111/tesg.12433, [OPEN ACCESS].


Photo 1. Dublin under lockdown during the pandemic.

(Photo © M. Sokol, 2021)



Fig. 1. Financialised economy

Source: Sokol, 2021



Fig. 2. The ‘pandemic city’ scenario

Source: Sokol, 2021


Download: PDF


How to cite:

Sokol, M. (2021) The post-pandemic city: what could possibly go wrong. GEOFIN Blog #11. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs

GEOFIN Blog #10 – Western banks-led financialisation in Croatia: A paper delivered at the workshop for Ireland-based postgraduate students researching Central and Eastern Europe (by Sara Benceković)

Writing a PhD thesis is an individual endeavour, but that does not mean one has to do it alone. Often, I find that I can advance my dissertation when I work together with my colleagues, discussing puzzling topics or stuck-points over coffees or running my notes on different readings. This drive towards making my PhD more sociable explains my jump of joy when I heard about an annual workshop that brings together Ireland-based graduate students working on Central European, Eastern European and Eurasian topics. This year’s workshop was themed Central and Eastern Europe: Past, Present and Future, and was hosted by the University of Limerick on 28 February 2020. I decided to present the thesis chapter I have been working on at the moment on the transformation of banking in the post-socialist Croatia.[1] This paper is an account of the post-socialist historical conjuncture in Croatia, in specific relation to the country’s banking system and its credit-making activity.

Particularly, the presentation describes the transformation of socialist financial institutions into joint-stock companies, accounts for their subsequent privatisation and records the changing ownership structure. Moreover, the paper locates key local banking crises and traces how the big, Western financial groups used these crises to make their move on the region. Indeed, the emphasis of the paper is on consolidation processes by which the Croatian banking system came to be foreign-dominated (see Figure 1) and increasingly concentrated. The article also notes certain particularities of the Croatian financial system. Some of the unique points feature the Independence war being constitutive of the Croatian-type of financialisation, the Croatian kuna effectively acting as an exchange system rather than a currency under the influence of FX-loans, and the development of state debt-collection system carried outside the legal system by public notaries. Nevertheless, the paper locates Croatia as the country of subordinated and peripheral-type of financialisation, by the feature of being foreign-led, developmentalist, and over-indebted. Banking and lending make up the backbone of a society and are a vital facilitator of its prosperity. This way, breaking down the order of wealth ought to be one of the critical tasks of a researcher interested in regional development. The feedback I received at the workshop showed to be indispensable, and the knowledge of the other issues faced by the region made me better apt in framing some of the features of Croatian financialisation. In the next paragraph, I will tell you more about the workshop itself.

The workshop consisted of two special lectures and six panels. At the opening, prof. Joachim Fischer (University of Limerick) introduced us to Valeska Grisebach’s movie ‘Western,’ which eased us into the theme of a cultural clash between the East and the West through a storyline of German construction workers in Bulgaria. Panels that followed worked out the theme of East-West divide through their particular fields, namely the financial sector, inter-ethnic relations, EU accession and Europeanisation processes, memory and myth, as well as the post-Soviet transition. The presenters together painted a picture of CEE as a complex political landscape, constituted through the dialectical relationship with the West, involving tensions, struggles and interplay between contrary tendencies, and still in becoming. The closing lecture by Dr Sinisa Malesevic (University College Dublin) on Balkan wars, state formation and nationalism struck me as a central piece of the event, carrying a message: Pay attention to what was there before. Indeed, as of my concern, legacies of any one area play into the type of financialisation that takes place. That question now lingers over my chapter, and for that, I am truly grateful for the opportunity to attend this workshop.

Sara Benceković
PhD Researcher
GEOFIN research

[1] For a brief summary of the aims of my PhD project see GEOFIN blog #8 – Financialisation and sub-national banking geographies in Croatia (by Sara Benceković).


Fig. 1. Bank ownership by assets in Croatia (1990-2018)










Data source: HNB (Croatian National Bank)


Fig. 2. Workshop in Limerick












Source: Photo courtesy of workshop organisers


Download: PDF


How to cite:

Benceković, S. (2020) Western banks-led financialisation in Croatia: A paper delivered at the workshop for Ireland-based postgraduate students researching Central and Eastern Europe. GEOFIN Blog #10. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs

GEOFIN Blog #9 – From a pandemic to a global financial meltdown? Preliminary thoughts on the economic consequences of Covid-19 (by Martin Sokol)

While fighting against Covid-19 continues and saving lives must remain the priority right now, some unavoidable questions are starting to bite: What will be the economic consequences of the pandemic? Are we heading for a wide-spread economic collapse? Is a global financial meltdown coming? In the current fast-evolving situation, with global infections and death toll rising each day, with over half of the planet’s workforce under movement restrictions or lockdowns, with economies coming to a halt and financial markets in disarray, it is difficult to predict how this will end. One thing is increasingly clear though: the hope that economic life will quickly return to normal once the health emergency has passed, is fading away. Indeed, even if a vaccine or a magical cure was found tomorrow and the pandemic was somehow successfully brought under control globally, the economic tsunami that has already been unleashed will be difficult to contain, with potentially devastating consequences. Will this unprecedented situation force us to rethink the ways in which our economic and financial systems are organised? My fear is that unless a fundamental paradigm shift is adopted, the coming crisis will further exacerbate social inequalities and deepen economic disparities at multiple geographical scales, while also failing to put us on a sustainable development path.


Unprecedented economic impacts

In terms of the immediate economic impact, it appears that we are entering unchartered waters. While an economic slowdown has been predicted, the speed and severity of the economic collapse in the leading economies have taken many by surprise. An expectation of a quick V-shaped recession (in which a rapid sharp decrease in economic activity would be followed by an equally quick rebound once the health emergency is over) has evaporated[1].

For Nouriel Roubini, one of the economists who predicted the last crisis, the economic contraction we are seeing now is neither V-shaped, U-shaped or even L-shaped (the latter being a sharp downturn followed by stagnation). Rather, he observes, “it looks like an I: a vertical line representing financial markets and the real economy plummeting”[2]. It is still unclear just how deep this free-fall will be. But it is already becoming obvious that the coming economic calamity may be similar or bigger than that caused by the Great Recession/Global Financial Crisis of 2008. Indeed, there are serious warnings that the coronavirus-triggered credit crunch will make the 2008 crisis look like ‘child’s play’[3]. Kenneth Rogoff, another prominent economist, observes that the 2008 crisis increasingly resembles “a mere dry run for today’s economic catastrophe”[4]. Rogoff also contends that the collapse of the global economic output witnessed today “seems likely to rival or exceed that of any recession in the last 150 years”. Adam Tooze, meanwhile, suggests that while the last global economic crisis was a ‘financial heart attack’, the coronavirus crash might be a ‘full-body seizure’[5]. Worries grow that instead of a recession (technically defined as two consecutive quarters of falling output) we may be heading for a depression – a much more serious, longer-term crisis. Comparisons have already been drawn with the Great Depression of the 1930s. For her part, Kristalina Georgieva, the IMF chief, anticipates “the worst economic fallout since the Great Depression”[6]. Meanwhile, Roubini (‘Dr. Doom’) is predicting that the current crisis will be greater still. According to him we are heading for a ‘Greater Depression’[7].

One of the most striking and visible aspects of this economic calamity is a dramatic increase in unemployment in all major economies. The speed and the size of the labour market collapse seem unprecedented. Within the first three weeks of Covid-19 emergency in the US, 16 million workers were laid off, with the predicted unemployment rate soon reaching 15%[8], breaking post-War and post-Depression records[9]. In the UK, the Institute for Employment Studies estimated that up to 2 million people lost their jobs within the first month of the crisis, with unemployment jumping from 3.9% to 7.5% of the workforce, already surpassing the peak of the last recession[10]. Here in Ireland, the Central Statistics Office estimated that a new COVID-19 Adjusted Measure of Unemployment (which includes those receiving Pandemic Unemployment Payment) was as high as 16.5% in March 2020[11]. These figures are likely to grow, hitting disproportionally low-pay and precarious workers, and driving social inequality to new highs.


Extraordinary policy responses

The realisation that this crisis is threatening the entire economic edifice has been reflected in the policy responses seen so far. Proposals that would ‘normally’ be considered as unworkable ‘loony-left’ fantasies, have now been rolled out, with a speed of light, as mainstream policies on both sides of the Atlantic. In the US, the neo-liberal mantra of ‘small government’ has been swiftly abandoned in favour of the $2.1tn rescue package, the biggest economic stimulus in history. Much of this will of course be used to bail-out failing US corporations, but the US Government is also sending a $1,200 cheque to every adult earning less than $75,000 per year. While this may not be enough, the unprecedented state intervention has already been described as ‘pandemic socialism’[12]. In the UK, similarly, a bazooka-style ‘whatever-it-takes’ approach has been taken. Rishi Sunak, the UK’s Chancellor of the Exchequer, took “unprecedented measures for unprecedented times”[13], spending some 7.5% of GDP on coping mechanisms[14]. The rescue package includes a job subsidy scheme through which the state will provide employers with 80% of a worker’s wage up to a limit of £2,500 a month to prevent workers being laid off due to the pandemic[15]. The scheme also extends to the self-employed. It has been noted that the scheme is “more generous than some of the high welfare Scandinavian countries” – a move described as “an incredible intervention for any British government, let alone a Conservative one”[16]. Faced with the pandemic, many other countries have adopted extraordinary, socialist-like policies (e.g. free childcare in Australia) as part of their response.

In addition to such unprecedented fiscal interventions, we are also witnessing a dramatic mobilisation of monetary policy instruments. Indeed, the massive government spending in countries such as the US and UK is being matched by colossal interventions of their central banks. Apart from slashing interest rates, both the Fed and the Bank of England are pumping billions of dollars and pounds into financial markets in order to keep them afloat, while also expanding credit lines to their governments in order to cover their extraordinary expenditure. The money creation programmes of quantitative easing (QE) which helped to contain the Global Financial Crisis have been activated again, on a gargantuan scale. It is likely that, without such decisive actions, financial markets may have already collapsed – demonstrating just how central the central banks really are in sustaining contemporary financialised economies and their ‘financial chains’ (see Fig. 1).


Eurozone convulsions

The economic response of the Eurozone to the pandemic threat did not get off to the best of starts. Christine Lagarde, the European Central Bank (ECB) chief, made an unfortunate comment at a press conference on 12th March about the role of ECB saying “we are not here to close spreads”[17]  – referring to the worrying divergence between the borrowing costs of Germany and those of crisis-hit Italy. The press conference was supposed to calm the markets, but achieved the opposite. Lagarde’s slip of the tongue sent spreads on Italian bonds  sharply higher and caused political outrage[18]. While Lagarde quickly rowed back on her comments, the ECB’s commitment to Italy has been questioned[19]. The ECB President’s seven words may come down as being the most expensive in history yet. It has been estimated that they could cost Italy €14 billion in interest payments over next ten years – i.e. €2 billion per word![20] Since then, on 18th March, the ECB announced a massive €750bn Pandemic Emergency Purchasing Programme (PEPP) to step up its purchases of sovereign and corporate debt[21]. With other measures already in place this will go some way to help eurozone economies to cushion the impact of the crisis[22].

However, the Lagarde slip-of-the-tongue incident put in sharp focus one of the key weaknesses in the Eurozone architecture: the lack of a common debt instrument – ‘eurobonds’ – which would allow member states to borrow on the same terms. Eurobonds were previously proposed by Greece as a way out of the eurozone sovereign debt crisis in the wake of the Global Financial Crisis (but rejected mostly due to Germany’s strong opposition). Now, in the face of the coronavirus pandemic wreaking havoc across Europe, such a eurobond mechanism would make even more sense[23]. The crisis is a perfect opportunity for Europe to demonstrate its usefulness and strength. Economic solidarity is what is needed right now. With this in mind, on 25th March, nine eurozone countries (France, Italy, Spain, Portugal, Ireland, Greece, Luxembourg, Slovenia and Belgium) proposed the so-called ‘coronabonds’, a position backed by the ECB[24] and reportedly winning support of further five countries (Latvia, Lithuania, Estonia, Cyprus and Slovakia)[25].

Unfortunately, the proposal to create such a common European bond has been strongly opposed by the “frugal four” – Germany, Holland, Austria and Finland. Their position is, of course, self-defeating. A failure to agree on mutualised European bonds could rip the Eurozone apart[26] [27] [28]. As the Spanish foreign minister Arancha González poignantly put it: “We are in this EU boat together. We hit an unexpected iceberg. We all share the same risk. No time for discussions about first- and second-class tickets … History will hold us responsible for what we do now” [29].

Unfortunately, such pleas have largely fallen on deaf German and Dutch ears. The EU’s economic response to Covid-19 thus for now basically mirrors the fragmented and uncoordinated response to the health emergency itself (which included a collapse of a common travel area due to widespread unilateral closures of internal EU borders by individual member states). Without ‘coronabonds’, each EU member state is left on its own devices when it comes to borrowing money to fight the pandemic’s economic fallout. However, to use the above metaphor, some countries hold first-class and other countries second-class rescue tickets – duly reflecting the uneven economic geography of Europe. This uneven geography is likely to be further exacerbated by the pandemic. It is unclear at this time which rescue boat Ireland will be in.


Economic geography of pandemic Europe

The first-class and second-class tickets in Europe are traditionally distributed along a long-established division line between the economic ‘core’ and the ‘periphery’, or geographically speaking, between Europe’s north and south. This, of course, is an oversimplification of a rather more complex economic geography of Europe (e.g. see Sokol, 2001). But the fact remains that there are significant economic differences between the core (e.g. Germany) and southern periphery (Portugal, Spain, Italy, Greece). Unfortunately, decades of European integration have not managed to eradicate these differences. The Global Financial Crisis of 2008 and the subsequent sovereign debt crisis in Europe have brutally exposed, and further deepened, the north-south divide. EU-imposed austerity may have stabilised the eurozone as a whole, but left the southern periphery weaker and more vulnerable.

In 2019, Germany’s output was 16% higher than in 2007, while Italian GDP was still 4% lower[30]. Italy, having gone through three recessions since the 2008 Global Financial Crisis[31], is also shouldering the largest sovereign debt load in Europe (and the fourth largest in the world)[32]. The Italian banking sector also happens to among the most fragile in Europe – overburdened by non-performing loans and heavily exposed to the Italian government’s debt[33]. As Jerome Roos notes, it is a “cruel irony” that Italy has also been the most heavily affected by the pandemic[34]. The economic consequences for Spain, in turn also heavily hit by Covid-19, will be dire too. Unemployment in Spain was already 14% before the pandemic (second highest in the EU after Greece and contrast with Germany’s 3.2%) and Spanish joblessness rate is likely to increase significantly, perhaps to over 20% (while German unemployment is expected to peak at 6%)[35]. Indeed, the economic and employment structure of the southern periphery makes it extremely vulnerable to the current crisis. Tourism accounts for a significant proportion of employment in Greece (over 25%), Portugal (over 20%) as well as Italy and Spain (nearly 15%), yet this is the sector that is taking a massive hit. The southern periphery is also more dependent on small businesses which may have a harder time surviving the crisis or taking advantage of any employment protection schemes[36]. It is not surprising that, in the absence of any significant EU support, the outlook for Southern Europe is bleak. One prediction is that the eurozone’s overall GDP will fall by about 10% in 2020 – with Germany performing a little better than average and recovering moderately in 2021, while Italy’s and Spain’s GDP will fall more than average and recover less[37]. Thus, the uneven economic impact of the crisis combined with the uneven recovery, playing out on an already uneven terrain, could mean that the pandemic will drive the north-south divide to new levels.

In the absence of a strong supporting mechanism, such as the ‘coronabonds’ discussed above, this can lead to unpredictable outcomes. Indeed, the trouble, according to Wolfgang Münchau, is that Italy’s falling GDP combined with rising debt could push its debt-to-GDP ratio from the current 135% to between 160% and 180%, in turn raising doubts about Italy’s solvency and potentially leading to a default[38]. A similar scenario has been described by Yanis Varoufakis, highlighting an “impossible conundrum” for countries such as Italy, being hardest hit by the pandemic, yet “being the most indebted and thus the least able to shoulder the necessary new debt”. In this instance “the new debt needed to revive the private sector will push the state into default, so destroying the banks whose capital is mostly government debt and, in short order, the rest of the private sector”[39]. Such a scenario highlights the way in which key economic actors (in this case the state, banks and firms) are interlinked by ‘financial chains’ (Sokol, 2017a). One could add that the vulnerability of the system will be further underlined by a direct transmission mechanism between firms, households, and banks, as soon as both firms and households start defaulting on their debts[40]. As Willem Buiter observed, “[b]anks and non-bank financial intermediaries did not start the crisis this time, but they will inevitably become a part of it”[41]. It is likely that the pressure on banks in the southern periphery will be enormous. And, during a crisis, as Emma Clancy rightly argues, “capital flees to the ‘safe’ countries’ banks”. Inside the eurozone, she observes, “the trend has been for capital flight from banks in the periphery to the core, particularly Germany”[42]. This may mean that German banks will benefit at the expense of their southern European counterparts, further exacerbating the problem while highlighting the international dimension of ‘financial chains’ and their contribution to uneven economic geographies. However, there is only so much economic inequality that a single currency area can take. A sovereign debt default by Italy or any other country in the southern periphery could rip the eurozone, and the EU, apart. Such a grim scenario is of crucial concern to EU member states in the ‘eastern’ periphery of Europe.


East-Central European dimension

It is worth remembering that one of the key reasons post-socialist countries in East-Central Europe were keen to join the EU was to help them to catch-up economically with their Western European counterparts. Closing the economic gap between the ‘West’ and the ‘East’, however, has been proving challenging. Deep ‘transition’ recessions in the early 1990s that followed the collapse of state-socialism have meant that the economic divide between the Western and Eastern halves of Europe has actually grown larger, as have differences within the East itself. Through the combination of old historical legacies and uneven effects of transformation processes, Central and Eastern Europe has established itself as a ‘super-periphery’ of Europe while itself displaying increasing divergence of economic fortunes (e.g. see Sokol, 2001). From the ‘varieties of capitalism’ perspective, the economies of East-Central Europe (ECE) have been described as ‘dependent market economies’ (Nölke and Vliegenthart, 2009) – their productive capacity became dominated by Western European FDI and their financial systems became heavily dependent on Western European banking groups. The economic fortunes of the entire region have thus became inextricably linked to those of Western Europe. In the early 2000s this dependence helped to foster a remarkable economic revival and rapid catching-up of many ECE countries. Part of this boom was related to increasing financialisation, not least through the Western banks that were instrumental in rapidly expanding credit across the region, on the back of newly created ‘financial chains’ (Sokol, 2017b). The effects of the credit boom seemed like a fast-track upgrade from third-class to first-class.

However, for many people and places, all this came to a rather abrupt end when the Global Financial Crisis hit in 2008. The economic damage caused by the crisis was enormous (e.g. see Smith and Swain, 2010), in many cases wiping out any gains made in the previous decade. The impacts, however, were unevenly distributed, as was the recovery. Poland, for example, emerged as the only country in the entire European Union to avoid a recession, while Baltic countries experienced deep falls and took nearly a decade to get back to pre-crisis level (e.g. see Pataccini and Eamets, 2019; Pataccini, 2020). For many ECE countries, even the best performing ones, the prospects of fully converging to GDP levels of Western Europe appear as distant as ever. In parts of the region, the disillusionment with the European project have grown.

The coronavirus-induced crisis will be the third major economic calamity in as many decades and perhaps the biggest yet. Indeed, the impact could be explosive – both economically and politically. Economically, the crisis will be playing out on an already uneven economic terrain and is likely to have uneven impacts. The exact contours are hard to predict at this time – but much will depend on the way in which economic and financial links with Western Europe will unfold. The exposure of ECE economies is both to the northern core (e.g. German automotive industry) as it is to the southern periphery (e.g. Italian banking). It remains to be seen in what ways the existing ‘financial chains’ will survive, be disrupted, transformed and/or replaced. One way or another, the crisis is likely to exacerbate some existing inequalities while also creating new ones – both between and within countries. Indeed, social inequalities and regional disparities within ECE countries are likely to get worse.

Crucially, many ECE states may find it harder than Italy or Spain to borrow money to fund their recovery, let alone to worry about social inequality or regional disparities. Major economic upheaval in the ‘eastern’ periphery which would further increase disparities between the East and West could, in turn, put additional strain on the European integration project. Centrifugal tendencies and Euro-sceptic sentiments (already well entrenched in Poland and Hungary, for example) may grow. Without a comprehensive European approach to tackling the fallout of Covid-19, the future of Europe will be at stake. ‘Left-behind places’ have a proven ability to deliver crushing blows to even the most honourable causes. After Brexit, can the EU afford Huxit, Polend or Czechout? It is useful to remember that economic dependencies usually run both ways: a core needs a periphery as much as the periphery needs the core.


Beyond Europe

A big concern here is that if Europe itself is incapable of finding a common ground in dealing with this unprecedented emergency, there is little hope that a consensus will be found at a global level. This is extremely bad news because while the economic impact of the pandemic on the advanced economies of the Global North is likely to be massive, the impacts on the Global South will be catastrophic. Indeed, emerging and developing economies have a much weaker capacity to deal with either the health crisis or the economic one. The twin crises will most likely feed off each other, with devastating impacts. Meanwhile, as workers everywhere are being asked to stay put, capital has been moving freely around the globe – mostly from the Global South to the Global North – rapidly abandoning the sinking ship in a capital flight of unprecedented scale. This will sink developing economies ever faster. The financial outflows will trigger a range of knock-on effects. Worries grow that a global ‘debt deluge’ may be unavoidable[43] [44]. There is a high risk that many indebted countries in the Global South will simply not be able to repay their debts. This, combined with a word-wide pile of corporate debt that has accumulated since the last crisis but now may be defaulted on, will threaten the stability of the global financial system. A financial meltdown cannot be ruled out. Finance may not be where this crisis started, but it may be where it will end.


Concluding remarks

Will this force us to rethink the ways in which our economic and financial systems are organised? The post-pandemic instinct of policy-makers will be to try to return to ‘normal’ as soon as possible. But going back to ‘normal’ will mean continuing an economic and financial system that creates grotesque inequalities (both social and spatial) and that is bringing us ever closer to environmental collapse. Returning from the Covid-19 emergency back to ‘normal’ would be returning straight to global climate emergency. If there is one positive thing about the pandemic, it is that it showed that governments can take brave decisions and adopt measures that would previously have been unthinkable. We need to find new ways of organising our societies – societies where ‘the economy’ is not at odds with humanity and the environment. As Nelson Mandela would remind us, “it always seems impossible until it is done”.


Dr Martin Sokol

Principal Investigator

GEOFIN research


Fig. 1. Financial chains in a financialised economy












Source: Adapted from Sokol, 2019



Nölke, A. and Vliegenthart, A. (2009) Enlarging the Varieties of Capitalism: The Emergence of Dependent Market Economies in East Central Europe, World Politics, Vol. 61, No. 4, 670–702.

Pataccini, L. and Eamets, R. (2019) Austerity versus pragmatism: a comparison of Latvian and Polish economic policies during the great recession and their consequences ten years later. Journal of Baltic Studies, 50:4, 467-494.

Pataccini, L. (2020) ‘Western banks in the Baltic States’. GEOFIN Working Paper No. 11. Dublin: GEOFIN research, Trinity College Dublin. (forthcoming).

Smith, A. and Swain, A. (2010) The global economic crisis, Eastern Europe, and the Former Soviet Union: models of development and the contradictions of internationalization, Eurasian Geography and Economics, 51 (1): 1–34.

Sokol, M. (2001) Central and Eastern Europe a Decade After the Fall of State-socialism: Regional Dimensions of Transition Processes, Regional Studies, Vol. 35, No. 7, pp.645-655. (ISSN Print 0034-3404).

Sokol, M. (2017a) ‘Financialisation, financial chains and uneven geographical development: towards a research agenda’, Research in International Business and Finance, 39:678–685.

Sokol, M. (2017b) ‘Western banks in Eastern Europe: New geographies of financialisation (GEOFIN research agenda)’. GEOFIN Working Paper No. 1. Dublin: GEOFIN research, Trinity College Dublin. Available on-line at:


[1] E.g. see the views of Angel Gurría, OECD secretary general –

[2] Nouriel Roubini, 25/3/2020, The Guardian –

[3] Martin Farrer, 20/3/2020, The Guardian –

[4] Kenneth Rogoff, 8/4/2020, The Guardian –

[5] Adam Tooze – Foreign Policy – 18 March 2020 –







[12] Willem Buiter, 9/4/2020, Project Syndicate –


[14] Philip Inman, 28/3/2020, The Guardian –

[15] Larry Elliott, 20/3/2020, The Guardian –




[19] Christopher Marsh, 13/3/2020, The General Theorist –

[20] Christopher Marsh, 13/3/2020, The General Theorist –

[21] Emma Clancy, 10/4/2020, Tribune –

[22] See also Lagarde’s official blog post of 9th April 2020 on ‘How the ECB is helping firms and households’ . It remains to be seen if these interventions will be enough.

[23] See also Adam Tooze’s opinion piece here

[24] Emma Clancy, 10/4/2020, Tribune –

[25] David Adler and Jerome Roos, 31/3/2020, The Guardian –

[26] Adam Tooze and Moritz Schularick, 25/3/2020, The Guardian –

[27] David Adler and Jerome Roos, 31/3/2020, The Guardian –

[28] See also an excellent analysis by Emma Clancy

[29] David Adler and Jerome Roos, 31/3/2020, The Guardian –

[30] Adam Tooze and Moritz Schularick, 25/3/2020, The Guardian –

[31] Hung Tran, 10/3/2020, Financial Times –

[32] Jerome Roos, 22/3/2020, Tribune –

[33] Jerome Roos, 22/3/2020, Tribune –

[34] Jerome Roos, 22/3/2020, Tribune –

[35] Martin Arnold and Daniel Dombey, 12/4/2020, Financial Times –

[36] Martin Arnold and Daniel Dombey, 12/4/2020, Financial Times –

[37] By Wolfgang Münchau, 12/4/2020, Financial Times –

[38] Wolfgang Münchau, 12/4/2020, Financial Times –

[39] Yanis Varoufakis, 11/4/2020, The Guardian –

[40] See also Katharina Pistor –

[41] Willem Buiter, 9/4/2020, Project Syndicate –

[42] Emma Clancy, 10/4/2020, Tribune –

[43] Jayati Ghosh, 19/3/2020, Social Europe –

[44] Jerome Roos, 22/3/2020, Tribune –



Download: PDF


How to cite:

Sokol, M. (2020) From a pandemic to a global financial meltdown? Preliminary thoughts on the economic consequences of Covid-19. GEOFIN Blog #9. Dublin: GEOFIN research, Trinity College Dublin. Available online at


Back to GEOFIN blogs