We analyse the long-run imbalances of finance-dominated capitalism underlying the present crisis, which began in 2007, with a focus on developments in the USA, on the one hand, and in Germany and the Euro area, on the other hand. We argue that beyond inefficient regulation of the financial sector, the severity of the present crisis has been caused principally by increasing inequalities of income distribution and rising imbalances in the world economy as well as in the European economy associated with finance-dominated capitalism. From this it follows that in the near and not so near future, the USA will no longer be able to act as the driving force for world demand. In order to avoid a period of deflationary stagnation in major parts of the world economy and a disintegration of the Euro area, we finally propose the policy package of a Keynesian New Deal at the global and at the European level which should consist of: (i) the re-regulation of the financial sector; (ii) the re-orientation of macro-economic policies along (Post-)Keynesian lines; and (iii) the re-construction of international macroeconomic policy coordination, in particular in the Euro area, and a new world financial order.
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