Financial crises as catalysts for regional cooperation? Chances and obstacles for financial integration in ASEAN+3, MERCOSUR and the eurozone

This article compares and analyses the different answers from the Association of Southeast Asian Nations+3 (ASEAN+3), Mercado Comun del Dur (MERCOSUR) and the eurozone on financial crises in their respective regions. All three regions were hit by economic turmoil between 1997 and 2012, but whereas ASEAN+3 and the eurozone answered with establishing regional liquidity arrangements (RLAs) in order to fight future crises, financial cooperation did not take off in MERCOSUR. Thus, the paper asks why some regions establish RLAs in cases of crisis and others do not. It argues that the variance of regional financial integration in different world regions is due to different interests of regional powers in their respective regions. The regional powers of ASEAN+3 and the eurozone are institutionally and/or economically highly embedded within their respective regions, but this is not the case for Brazil in MERCOSUR. China and Japan suffered from negative externalities of the Asian crisis, and, consequently, have had an interest to stabilize their neighbours' economies after the crisis. In contrast, Brazil was able to follow a beggar-thy-neighbour strategy at the turn of the millennium, which externalized some of the costs of Brazil's own economic crisis towards Argentina. As a result, Brazil has had no interest in providing liquidity for its regional neighbours after the crisis. France and Germany are not only economically but also institutionally highly embedded in the eurozone because they share a common currency with their regional neighbours. Thus, the stability of the eurozone is a vital interest for Europe's regional powers, and they devote significant resources to stabilize the economies of the eurozone's periphery.