Stop the Greek blame game

In: Uncategorized

3 May 2010

This is my comment on the Greek financial crisis from the latest Fund Strategy. Although it was written before this weekend’s agreement it is still relevant to the debate. I will be writing more on the subject soon.

Despite the huge volume of comment on the Greek financial crisis and its spillover into the eurozone, there is a remarkable omission. Instead of discussing the root causes of the turmoil there is a bizarre blame game in which everyone seems intent on holding someone else responsible for the troubles.

It should surprise no one that speculators are among the favourite targets. Markets are routinely blamed for attacking the economies of the weaker eurozone member states and helping to spread contagion between them. Angel Gurria, the secretary general of the Organisation for Economic Cooperation and Development, even warned last week of the crisis spreading “like Ebola”.

Then there are different countries held to blame for the crisis. Greece is the obvious target. Some have attacked its government for being too lax on public spending and too reluctant to impose austerity. Others have criticised striking Greek workers as a symbol of the people’s unwillingness to stop being greedy and make the necessary sacrifices.

Nor has Germany escaped criticism for its role. Many critics both inside and outside the country have blamed Angela Merkel, the German chancellor, for her prevarication during the crisis. At times, usually when she is addressing a domestic audience, she talks tough against Greece while at other times, such as when she is in Brussels, she is more conciliatory. Others have blamed ordinary Germans for desiring prosperity and not accepting concessions towards Greece.

All of these are a form of finger pointing rather than a genuine attempt to grapple with the causes of the turmoil. One group wants to blame another so it can absolve itself of any responsibility for the crisis. Few are interested in investigating the relationship between the real economy and the financial volatility.

The closest commentators generally get is to point out the inherent inflexibility of the eurozone as an economic bloc. If the economy of one member state weakens relative to another, it is not possible to reflect this shift in a currency movement. The European Central Bank also sets a uniform interest rate for all member states.

However, a more fundamental problem is the overall weakness of the eurozone economies. Substantial public deficits have emerged largely as a result of measures to stimulate sluggish domestic economies. States have also felt obliged to bail out troubled banks in the midst of the financial crisis.

In this important respect the eurozone crisis is similar to Britain’s general election campaign. No one will discuss the underlying economic weaknesses.