Conference Paper

Relying solely on austerity, as we have observed during the last two years, is not a sufficient way in which to defuse the crisis. It only concentrates on cutting the budget spending by neglecting the structural problems. In the first part of that paper we analyze the mechanism, which led to a buildup of imbalances in the European Monetary Union and its impact on the structure of production in the southern periphery. In the second part weargue that, due to problems in the private financial sector, the southern states should establish or assign new tasks for existing development banks to facilitate the change in their development model. In this connection we refer to the example of a German development bank - Kreditanstalt für Wiederaufbau - which played an important role in the reconstruction of the German economy after the Second World War. This paper, which focuses on theoretical analysis, is addressed not only to all those interested in solving the Eurozone economic problems, but also to economists and politicians dealing with development and structural policy in non-EU countries.