I’m glad you take the trouble to address this from a political angle. The endless line of analysts insisting that only a full or much more substantial rescue can save the eurozone seem to have no idea that taxpayers in the north are very upset over having to finance another bailout of another country. Especially one that could and should have been avoided, the writing has been on the wall since 2008 on this one.
In 2012 Finland almost blocked a Greek rescue. They had to be pressured strongly to agree to assist. Prime Minister Rutte of the Netherlands repeatedly promised not to bail out countries anymore. The latest polls see Geert Wilders’ party profiting from his breaking his promise. Wilders’ party now is the largest in polls. A change of heart in any of the northern nations can shipwreck the Eurozone more effectively than a Cyprus default or exit would have.
So I’m glad you explain the position of the Germans and other northerners. Oddly enough it is necessary to do so. It also is necessary to detail what happened in Cyprus that they needed to be bailed out. It wasn’t just their exposure to Greece, it was their inability to reign in spending (avg 6% overrun over the last 4 years) and their inability to control the banking sector. Also lets not mince words: the previous Communist-lead government of Christofias simply was lightweight and immature, (see http://www.guardian.co.uk/commentisfree/2012/dec/19/demetris-christofias-cyprus-sorry-state ) incapable of taking the necessary measures. Locked in an attitude that saw Cyprus as a victim of large forces it couldn’t control. Its difficult to run a world class economy when you only have 800,000 citizens to pick a government from.
We’ve seen the writing on the wall for a few years now. Berlin is the capital of Europe. The next largest northern Eurogroup country is 6 times smaller than Germany and in these matters defers to Berlin’s institutional powers and the judgements of the Kanzler. This alliance of Germany plus the northern dwarves has secured hundreds of billions of debt of other Euro countries, only to save the Euro. The political consequences are clear enough: debitor countries do not have sovereignty over their budgets. If they assume such sovereignty, they are playing with money owed to northern taxpayers. And also none of the dwarves can bail, or they would place an even greater burden on Germany and the remaining ones.
The great risk is that someone will try to spend more, or someone will try to bolt. Germany’s patience will then be sorely tested. Its indignation will be righteous, increasing the risk of political fallout and even risking an end to the cool of the Kanzler.
3 years ago: http://www.ft.com/intl/cms/s/0/d0c12cd6-3b5d-11df-b622-00144feabdc0.html Ingram’s picture is brilliant.