The Eurozone, as we have been told thousands of times over the past three years, is in a good deal of trouble because governments are straining under the burden of massive debts accumulated due to their big spending of the previous decades. These southern European states were imprudent and reckless to assume that the noughties boom, and spend like crazy based on that assumption.
And yes, that line of argument makes sense. But I don’t understand why the businesses and governments which lent money to the PIGS countries are exempt from any blame or disapproval. I don’t understand why there is a consensus in favour of forcing countries to bust a gut to avoid defaulting on debts- the point of paying interest on bonds is that lenders accept risk in return. I don’t understand why financiers sing the praises of the ‘free’ market, and yet demand international action to protect banks from losses. It seems to me that it’s just as reckless to be the lender to somebody who defaults than it is to be somebody who defaults. Why praise Germany for its supposedly exemplary approach to finance when it lent billions of its funds to countries that were so financially unsound?
So let’s drop the fallacy that Germany is blameless whilst Greece is liable for all the blame. That’s a preposterous line of thought to pursue.
The expectation that governments should never be able to default on their debts must be done away with. Though Britain has made it a point of honor that we’ve always paid what we’re due, even when the Treasury was weeks away from running out of money in 1945, (The closest the country came to outright default was when the government asked bondholders to voluntarily exchange their Gilts from ones with 5% yields to ones with 3%, as a matter of ‘patriotic duty’) it is essential that public services, ultimately, are put ahead of millionaires and banks in search of a profit.
A new understanding should become established, whereby debt ‘haircuts’- partial defaults- are used in preference to loans from institutions like the EU and IMF when a country cannot keep on top of its debt. Where organisations must be recapitalised, such as banks or pension funds, these must be low-interest loans. From subsidising bad investments to a fair burden of losses. This is the basis upon responsible capitalism is built: the fair spread of benefit and risk, not the privatisation of the good and nationalisation of the bad. A small number of financial giants have it within their power to sink an economy, and blackmail a government. Social and economic democracy cannot flourish until this injustice is corrected.
