Gambling On American Subprime Mortgages


The official narrative that has taken hold in Germany and EU circles blames the crisis entirely on others, not least profligate and reckless southern Europeans. It argues that since others, not Germany, are responsible for the crisis, they must pay the price for it. Germany does not need to change, others do. As well as paying back their debts in full, they must emulate what Germany did a decade ago: consolidate public finances and bear down on wages to restore competitiveness. That way they can be as successful as Germany supposedly is.

There’s just one problem with this narrative: it is entirely false. The true story is as follows. In the years up to 2007, there was a huge credit boom across the Western financial system, from the United States to Iceland. It involved a massive expansion of cross-border lending by dysfunctional and dangerously undercapitalised banks, abetted by the complacency – and sometimes the complicity – of central bankers, regulators, supervisors and politicians. And Eurozone banks were at the heart of it.

As well as gambling on American subprime mortgages, German and French banks lent too much, badly to Spanish and Irish homebuyers and property developers, Portuguese consumers and the Greek government, both directly and together with local banks. When the bubbles burst and banks began to fail, governments decided to bail them out, protecting banks’ creditors. Banks’ initial losses were often related to American subprime mortgages, over which European governments had no control. But when it became clear in early 2010 that Greece could not pay its debts, Merkel – together with a French trio of Jean-Claude Trichet at the ECB, Dominique Strauss-Kahn at the IMF and President Nicolas Sarkozy – took a different approach.

To avoid losses for French and German banks, they decided to pretend that Greece was merely going through temporary funding difficulties. And under the pretence that the financial stability of the Eurozone as a whole was at risk, they decided to breach the legal basis on which the Eurozone was formed – the “no-bailout rule” – and lend to the Greek government so that it could repay those foreign banks and investors. Further loans from EU governments to Ireland, Portugal and Spain followed, primarily to bail out local banks that would otherwise have defaulted on their borrowing from German and French banks and other financial investors.

As a result of these bailouts, the bad lending of private banks has become obligations between governments. […]


(Philippe Legrain im Interview; via; Hervorhebung von mir)

Legrain war 2011-14 Chef eines Teams, das EU-Kommissionspräsident Barroso in ökonomischen Fragen beraten hat. Ganz offensichtlich sind die fatalen Fehlentscheidungen in der laufenden Eurokrise keinesfalls auf mangelnden ökonomischen Sachverstand zurück zu führen. Legrains Analyse stimmt weitgehend mit jener überein, die von angelsächsischen Ökonomen wie Paul Krugman und Josef Stieglitz vertreten wird. Wie seine amerikanischen Kollegen hatte auch er Zugang zu Entscheidern auf höchster politischer Ebene – sein Standpunkt wurde dort angehört. Man kann darüber debattieren, ob der dort auch verstanden wurde. Fest steht jedenfalls, daß er nicht zur Grundlage für das politische Handeln wurde. Die Frage wäre, warum das so war. Zur gegenwärtigen Stunde kann man wohl nur eines festhalten: die Antwort auf diese Frage kann unmöglich simpel sein.

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