11
Dec
11

Not letting a crisis go to waste

Here’s Clive Crook on the ongoing Eurozone trainwreck:

It seems to me that the root cause of the Eurozone crisis is the fact that one central bank cannot set good monetary policy for both economies like Germany and economies like Spain, with a side order of calculated obliviousness on the part of everyone involved towards violations of things like the Stability and Growth Pact, perpetrated by pretty much everyone involved.  The proximate cause of the present crisis is the dubious solvency of Greece and Italy, and the exposure of a fuck-ton of European banks to Greek and Italian sovereign debt.  With this in mind, you might expect the Eurozone countries to be interested first in organizing some sort of vaguely organized bankruptcy option for Euro-denominated sovereign debt, if not a full-on ECB backstop (directly or through Euro-bonds), and trying to set the groundwork for more flexible monetary policy… somehow*.

Of course, that’s not what’s happening.  Instead, Germany’s taking the opportunity to bully the rest of the Eurozone — er, ah, I mean to teach them a lesson about violating the Stability and Growth Pact.  You know, like Germany did in 2003.  *cough*  Merkel et al. are staunchly opposed to any sort of debt guarantee, with which I can sympathize on purely emotional grounds but which I find utterly suicidal at the moment.

Not to be outdone by their Teutonic neighbours, France is taking the opportunity to consolidate their technocratic hold on the political centre of the European Union.  So far they’ve managed to “isolate” Britain by attempting to impose EU-administrated fiscal discipline upon all European Union members, even those which sensibly retained their own currency and central banks.  To which one of the largest investing centres of the world said, “Uh, no.”

So Germany and France have cemented their command of the bridge of a sinking ship.  They’re welcome to it.  Try not to wreck the rest of the world’s economy when you go down, guys.

——

* Unicorn giggles might be involved in providing monetary policy that’s appropriate to both Germany and Spain through a single central bank.

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