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September 17, 2011



Well presumably if you don't punish the sinners, they just go and do it again? How many times would you bail out your mate with cash, and then write it off, only to see him go on another spending spree with your money, before telling him to go hang?


Great expression of the issue, but don't forget that many of us looked at the Euro experiment with horror, the big ratchety old junket was never going to fly. At least not without the aid of one Gordon Brown helping to propel it by buying Euro's with half of the Nation's gold reserves. It looks less like a problem in misunderstanding and more like a problem of delayed cause and effect: find a way for Germany & France to dole out finance to their less well-off neighbours, so that they can buy their high-class goods, and motor-cars. All its well for a duration, until, yes, a natural order starts to make itself apparent. You could call this a karmic crisis.


You don't think that relative outcome visibility (certain costs now vs uncertain costs later)and negotiation over the distribution of costs might also come into it?

It's not at all obvious what the long run costs are for the average German taxpayer if they don't agree to pay for Greece. Neither is it obvious the extent to which other parties, including the Greeks can be made to contribute.

All of which makes it a little more complicated than a moral objection.


I agree it's more a moral dilemma rather than an economic one - but, in the same way that appeasement never solves anything, simply doling out the cash ( and at what point do you stop?)will never induce better behaviour


I'm with Andrew. What you argue is moral piety may be a gloss to cover sound financial self interest by the Germans.

gastro george

All the talk is about costs, but what about the benefits, and who benefits? Germany, for example has done particularly well in exporting to southern Europe, who can't devalue their way out of this trade imbalance. So German taxpayers (actually, the German managerial class, as the workers haven't done so well at all) have been doing very nicely thank you off the back of this. They can't have it both ways.


Really perceptive piece.

The underlying assumptions of the way the EU operates are all too rarely discussed, as in principle they are controversial and hard to explain to normal people in moral terms. See eg EU vote weighting: why PRECISELY should Germans who are expected to pay the most into the EU pot have the least-weighted votes on how the money is spent?

Some of this spirals off into national sovereignty mysticism.

See eg http://charlescrawford.biz/blog/conservatives-v-liberals-v-universal-moral-intuitions

Or this: http://charlescrawford.biz/blog/whose-keeper-is-germany-and-who-keeps-germany-


Hi Chris,

The more I think about it the more it seems to me that there is not enough political will/imagination for any solution other than a break-up of the Eurozone. That given then the only way to do it without a default is for Germany (and others) to leave the Eurozone with the ECB relocating to say Rome & printing enough EUR to prevent defaults. The FX losses on German holdings of EUR would still be huge but less than those from catastrophic failure as the windfall gain to Greek et al savers (loss to Germany) that would result from internal capital flight within the Eurozone.


Morality has nothing to do with it. The Euro zone monetary union is a badly designed system that combines rigid rules for the state based on hard money ideas, i.e. the euro is a Gold standard system minus the Gold, with all the evils that brings but equally there is no control on private Banks and private capital so they can create booms and now busts by cross border capital flows and liabilities. If you want a monetary Union then it follows that you must create a sovereign state with tax powers and a Government responsible to the body which has the power of the purse. Automatic transfers at a federal level are essential. As is a coherent regulation of Banks and capital movements. So that there can be growth in general and a balanced development in each region. In a political and monetary union paying tax to help others is an unavoidable obligation of the system. The only moral issue is the lies of the political class who refused to admit all this at the start. The USA accepted the logic of this by adopting the Federal Constitution in 1787. Which created the Congress which then assumed the existing debts of the rebellious colonies.

George Carty

Hasn't Greece been dependent on Western economic and/or military aid (provided because the country was revered as the "cradle of Western civilization") for virtually its entire modern existence as an independent state?

P Wilson

Default doesn't solve the problem. They need their own currency to be competitive, not easy I know but inevitable.


Continuing and never-ending series of moral crises in the EU, e.g.

An event entitled ‘Profane citizenship in Europe – Testing democratic ownership in hybrid situations’ will take place from 19 to 21 September 2011 in Lyon, France.


German taxpayer should direct their moral outrage at the German elites who have
1) depressed real wages in Germany for over a decade
2) carried out draconian (why, unconstitutional!) reforms of Germany's welfare state

In effect, the German elites have run higher deficits and debts in Germany than, say, in Spain, until 2008 (debt-to-GDP is still lower in Spain than in Germany) for no benefit to the German public or state. Only German business has benefitted. Then, in order to compensate for the lack of German domestic demand, Germany has loaned its surplus to the Euro periphery so that the pariphery buys German exports. If the German government did this directly it would be illegal state aid. But if the German government's labour and tax policies lead to a capital surplus than gets loaned by the private sector it's okay.

"Hey, here's a BMW, and here's the loan to buy it with" has been Germany's Greece policy for many years.


I think there are two issues here. The Euro is the economic manifestation of a political aspiration. It was doomed as such because it was effectively pushed onto countries who weren't in a position to accept it - purely for political reasons. It is like Germany and France cajoling you to come to their party and then complaining at how much you eat and drink.
The more worrying line is about " the market's annoyance". The financial markets have no sentient controller and to assume as much is the root of our mistake. There is no doubt that economies need to re-adjust, but the markets are compounding the problem with their rampant aggression towards the weaker countries. the solution is to close the markets temporarily until the matters are sorted out. The markets are not the only source of money. We are - they play with our pensions, insurance, bank accounts etc. There is no reason why governments can't borrow directly from the electorate.

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