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Greece and, in a sense, all of Europe are at a point of dramatic crisis. The country has defaulted on its debts, its banks are closed, and its citizens now face drastic limits on their ability to withdraw money from ATMs or make foreign purchases with credit or debit cards. Exit from the eurozone — an outcome all the relevant parties have loudly insisted for years that they want to avoid — seems likely.
In the midst of a serious meltdown, what the world needs is forward-thinking solutions, not finger-pointing. But if you're just some random resident of an English-speaking country that has no real say in what happens in the eurozone, then there's really no reason not to play the blame game. The key thing is to play it well.
Here are 11 culprits — not in any particular order — you can point the finger at.
1) The current Greek government
Alexis Tsipras and his Syriza party took office in January and were greeted with a good amount of optimism in international circles. After all, their basic critique of the status quo in Greece had a lot of merit. To improve on it, they needed to do two things:
- Persuade Greece-skeptical foreigners that an outsider political party that had no role in creating the mess in Greece was going to be able to deliver on reform in a massive way — so much reform that Greece should be allowed to engage in less austerity
- Form a broad front with the Social Democratic politicians who lead the governments of France and Italy and play key roles in coalitions in Germany and the Netherlands to shift Europe's overall strategy to one more focused on creating adequate aggregate demand rather than cutting wages
They delivered on neither of these things, instead alienating all potential partners with irresponsible rhetoric about Nazis and unreasonable demands that the main left-of-center parties elsewhere in Europe wouldn't endorse.
2) Europe's private banks
Right now Greece owes money to a variety of European countries and government institutions. But Greece originally got into such a terrible debt situation because it was borrowing money on private financial markets.
Had private banks and bond purchasers correctly processed Greece's likely ability to pay back so much money, Greece would have been unable to become so severely indebted. That would not leave it without economic problems. Spain, which ran a very prudent fiscal policy during the bubble years, has nonetheless been in big trouble since the crash. But Spain is still far better off than Greece.
Assessing credit risk is the primary job of a lender, and the people who loaned the money to Greece did an awful job of it.
3) The European Central Bank
The proximate cause of the current crisis is that the European Central Bank decided in February to proclaim that if Greece could not come to terms with its creditors, there would be consequences for the Greek banking system.
It is not entirely clear why the ECB did this, but it was a matter of its discretion, not a move forced by any aspect of European law. As Karl Whelan of University College Dublin writes, "The ECB can single out specific institutions and decide to not lend to them for pretty much whatever 'risk-related' reason they feel like putting forward" with the decision not "based on any hard and fast rules."
The stakes in a default — Greece cut off from international financing and forced to engage in even more austerity — were already high, but the ECB raised them dramatically when it could have been lowering the temperature.
4) European policymakers circa 2010
With Greece facing insolvency five years ago, the people running Europe came up with a deeply unsatisfying solution. Rather than default on its debts to private creditors, Greece would be given money by its European partners to pay them off. But the debt would not actually be forgiven. It would simply be transferred to the European Central Bank, the International Monetary Fund, and a passel of other European states.
This succeeded in kicking the can down the road, but the fact remained that Greece could not pay what it owed.
It probably wouldn't have been possible to put together a comprehensive solution in the heat of the crisis. But the Euro policy elite never publicly admitted to their own electorates that what they'd thrown together wasn't viable in the long term. That ended up poisoning the political wells and making Greek requests to revisit the terms of the arrangement look much less reasonable than they really were.
5) The IMF
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The various European politicians making decisions for Greece kept relying on economic forecasts, primarily done by the International Monetary Fund, that were wildly too optimistic about the extent of the collapse that was being forced on the Greek economy.
Had policymakers back in December 2010 known that they were choosing something closer to the yellow line than the red line, they might not have chosen it.
6) The Obama administration
Nah ... not really. The Greek debt crisis really stands out among world crises in that nobody is blaming the United States of America for it and it pretty clearly isn't the US's fault. Ed Luce at the Financial Times makes a strong effort at a "blame America" column, but he's ultimately forced to agree that the US role has been largely constructive, just not especially significant.
We do have our own debt crisis unfolding in Puerto Rico, though, so there's that.
7) Angela Merkel
The German chancellor's defenders will tell you, not unreasonably, that she has a domestic electorate that she needs to answer to. They will tell you, not unreasonably, that German voters would rather see their hard-earned tax dollars go to German citizens or to citizens of truly poor countries around the world and not to middle-income Greece. Lastly, they will tell you, also not unreasonably, that most living Germans experienced the massive financial expenditures associated with German reunification and the big lesson they learned was that all the government spending in the world hasn't closed the economic gap between East and West.
This is all very true, and those who ignore it are making a serious mistake.
That said, Harry Truman faced domestic political constraints when he orchestrated the Marshall Plan. George Washington faced domestic political constraints when he passed the Compromise of 1790. The British and French leaders who agreed to participate in the 1953 cancellation of German debts faced political constraints. At times of crisis, great leaders manage to elevate the needs of statecraft beyond short-term interests and recognize the larger interest that major countries have in stabilizing situations and creating conditions conducive to global growth.
Germany is the largest economy in Europe (by far), and if anyone is going to play a leadership role, it is going to be Germany. But leadership is always moderately costly, and under Merkel, Germany has been unwilling to pay that price choosing instead to conduct itself like a small, narrowly mercantilist state.
8) Finland (and the Netherlands and Austria)
The Eurozone's small creditor nations (especially the Netherlands, Finland, and Austria) have a small-state mentality for good reason — they really are small.
And small countries have a distinctive outlook on macroeconomic affairs. Fiscal stimulus doesn't work very well because you are so engaged in international trade that there is massive "leakage" across borders. Similarly, monetary policy has its effect largely through exchange rates and international trade rather than domestic investment. And because you are small, your domestic economic policies don't have a big impact on the global economy. Because you are small, your foreign policy lacks grand ambitions and largely exists as an extension of economic growth policy.
This small-state outlook is harmless in a Norway or a New Zealand, but even though Finland really is small, when Finnish politicians speak on Eurozone policy they are influencing economic policy for the largest economic bloc in the world. Fiscal policy matters a lot for Europe as a whole, European monetary policy acts primarily on domestic investment, and the state of the European economy is very significant for global growth. Failure to appreciate these facts has been a consistent drag on continent-wide growth and has exacerbated Europe's problems.
9) Helmut Kohl and François Mitterand
The former leaders of Germany and France, respectively, have long since departed the scene. But they bear substantial blame for the eurozone's badly flawed design.
Operating in the context of imminent German reunification, Mitterand desperately wanted a "win" for French foreign policy, and Kohl wanted a reassuring gesture that would induce Germany's neighbors to accept reunification. What they came up with was a huge symbolic deepening of the project of European integration, including the creation of a single currency. Important questions like "What will we do if a member of the currency zone faces a severe depression" were simply not answered by the eurozone's architects. They were practicing high geopolitics and were focused on making a very ambitious vision acceptable to the relevant domestic political constituencies.
They got what they wanted, but Europe's economies have been paying the price ever since.
10) Greece's other political parties
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Syriza has made a hash of things since taking office in January. But if you look at the available alternatives, it is very easy to see why Greek voters turned to Tsipras and his team. The previous government, after all, was simply a grand coalition between the two main parties — New Democracy on the right and PASOK on the left — which had landed Greece in the mess in the first place.
Those were the parties who'd gotten Greece so deeply in debt, those were the parties who'd set up Europe's least effective tax collection system, and those were the parties who'd created the bad economic policies they were now claiming to be "reforming."
Combine all that with a 25 percent unemployment rate, and of course the opposition won the election. Besides Syriza, the opposition included the Communist Party and a neo-fascist party called Golden Dawn. Who would you have voted for?
11) Europe's Social Democrats
The policies favored by the European right — austerity budgets and business-friendly labor market deregulation — have not been a striking success over the past five years. But the main alternative to the European right — the continent's various social democratic or labor parties — has completely failed to put forward any kind of compelling alternative.
In particular, many people hoped that the election of François Hollande as president of France in 2012 would provoke a rethinking of the policies associated with the Merkel-Sarkozy Franco-German duo that had been at the heart of earlier European policymaking. When the 2013 German parliamentary elections forced Merkel to abandon her right-wing coalition partner in favor of a coalition with Germany's Social Democrats, the opportunity for a center-left perspective on European affairs to gain steam only grew.
But nothing happened.
Europe's Social Democrats haven't espoused an alternative Keynesian or monetarist set of solutions for Europe's economic woes, they haven't put forward any innovative debt relief schemes, and they haven't come up with an alternative to the European right's vision of structural reform. Instead they've mostly argued for a form of austerity that involves a bit more tax hikes on the rich and a bit less cuts in old-age pensions.
