It is difficult to overstate how deeply Europe’s leaders betrayed the ideals of European integration in their handing of the Greek crisis. The first and most fundamental goal of European integration was to blur the lines of national feeling and interest through commerce and interdependence, in order to prevent the fractures along ethnonational lines that made a charnel house of the continent, twice. That is the first thing, the main rule, that anyone who claims to represent the European project must abide: We solve problems as Europeans together, not as nations in conflict. Note that in the tale as told so far, there really was no meaningful national dimension. Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flows on a scale that might encourage a certain indifference to credit quality. These were European problems, not national problems. But they were European problems that festered while the continent’s leaders gloated and took credit for a phantom prosperity. When the levee broke, instead of acknowledging errors and working to address them as a community, Europe’s elites — its politicians and civil servants, its bankers and financiers — deflected the blame in the worst possible way. They turned a systemic problem of financial architecture into a dispute between European nations. The brought back the very ghosts their predecessors spent half a century trying to dispell. Shame. Shame. Shame. Shame.

I don't think I really grasped just how much blame Greece's creditors bore in this clusterfuck until I read through that article. Banks (mostly German and French) knew damn well what a horribly high credit risk Greece is due to its sketchy as fuck government, regardless of any zero risk weightings the EU tries to assign them. Lends them money anyway because of the returns they get through higher interest rates. Greece defaults (what a fucking surprise!). ECB and IMF bail out French and German banks by giving Greece money to repay loans to said banks, turning private debts into public debts. Banks come out clean as a whistle with a tidy profit to boot, and all blame is placed on Greece. This feels a lot like what happened with the US housing crisis, where the banks' fuckups were transferred to the taxpayers.

posted 3216 days ago