Mortgaging Europe's Periphery

This paper asks why peripheral European countries have been particularly
vulnerable to housing and mortgage booms in recent decades; how these booms have
shaped their exposure to the global financial crisis (GFC), and how the GFC has
affected peripheral housing finance. To answer these questions, it explores the interaction
between European processes of financial integration and domestic housing
(finance) policies in four peripheral countries. It argues that the EU framework for free
movement of capital and financial service provision as well as the availability of cheap
credit has induced a trajectory of housing financialization, which has taken two forms:
funding from wholesale markets and direct penetration of foreign financial institutions.
These two forms attest to a core-periphery relationship in housing financialization,
whose hierarchical character came to the fore in the crisis. Peripheral European
countries experienced sudden stops and reversals of capital flows, which badly affected
their banking systems. Unable to solve the looming banking crises on their own, they
had to turn to creditors to gain access to much needed capital. A combination of
international conditionality and domestic policy responses, and the original level of
mortgage debt result in different trajectories in housing finance after the crisis.