In Euro Crisis, Fingers Can Point in All Directions

The following is an excerpt from an article in 

The New York Times
Saturday, August 25, 2012

In Euro Crisis, Fingers Can Point in All Directions

By JACK EWING

FRANKFURT — The debate about how to distribute the cost of preserving the euro often centers on a fundamental question that is unspoken but implicit: Who caused this crisis anyway?

A hint: It wasn’t just the Greeks.

In Germany, however, the prevailing stereotype is that the dissolute Greeks squandered the privileges of euro zone membership. There is a palpable resentment among German taxpayers who feel they are being asked to pay for the sins of the Greeks as well as the Spaniards and Italians.

It is, of course, not that simple. While it is true that a series of Greek governments bears a large share of the guilt for the euro crisis, for mismanaging their economy and finances, there are plenty of other culprits. They include the German and French banks that lent Greece money and fueled the Spanish housing bubble, and the European political leaders who, more than a decade ago, introduced the euro even though they knew it had basic flaws.

The circle of perpetrators could also include the fickle bond investors who underpriced the risk of Greek debt before 2010 and whose volatile reaction to even minor events has lately been wreaking havoc with Spanish and Italian borrowing costs and, by extension, those countries’ economies. It could include the bank regulators and national governments that created incentives for European banks to load up on European government bonds.

The popular debate, though, seems to revolve around cultural stereotypes. The southerners are dolce vita spendthrifts, while the Germans — and sometimes the Finns, Austrians and Dutch — are Scrooges with no sense of European solidarity. Some of the stereotypes are more offensive: the German chancellor, Angela Merkel, has even been portrayed in the Greek and Italian media as a latter-day Hitler.

“The blaming game that dominates the political debate in Europe is a clear indicator that cross-border policy cooperation in Europe has ground to a halt,” said Giancarlo Corsetti, a professor of macroeconomics at the University of Cambridge.

The question of blame was in the air this week as Ms. Merkel, along with the French president, François Hollande, and other euro zone leaders confronted the likelihood that Greece will need more help than it has already received to avoid a chaotic exit from the currency union.

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