Euro Crisis: Who is the real culprit?

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 there are other important causes to the crisis, such as the ignorance, incompetence, selfishness, short-sightedness and other factors of not only the governments of the troubled countries, but also all the authorities in Europe and the U.S. All these negative elements historically played important roles in creating serious economic crises. It is not rational to accept the idea that people were responsible for this or that crisis. They individually cannot comprehend the overall situation of the economy, they do not understand economic jargon such as  “sovereign debt,”  “primary balance,”  “double deficit”  and so on and so forth; only governments, with every piece of data in its hands, can follow what is happening.

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During the European Commission’s latest two-day summit, commission head José Manuel Barroso said the origin of the euro crisis was the United States, blaming it for causing all of Europe’s troubles. This accusation is only partly true. Everybody is aware that the origin of the recent worldwide crisis, as with all similar other ones beginning with the 1929 Great Depression, is the U.S. However, it must be accepted that this country is not responsible for Europe’s debt and deficit problems. In other words, Europe had already been facing serious problems when the transatlantic virus began to infect some sick eurozone economies.

In addition, recently revealed figures suggest that leading emerging economies such as China, India, Brazil and Mexico have entered something akin to a period of “growth weariness.” Is it a “middle-income trap” which has currently become an important topic in the literature on new economic development? If this is the case, it is not right to just blame the U.S. for all the problems of emerging economies. There must be other deeply rooted social and political problems in these countries that cannot be explained merely by the faults of the U.S. or the European governments, some of which cannot even be related to the recent crisis.

There is an old saying in Turkish: “Nobody wants to wear it, even if guilt is a fur coat.” In the last four years, prominent politicians, economists and opinion writers first blamed the governments of the troubled countries, leading international banks and all other financial institutions that were responsible for the European debt and deficit problems. Subsequently, however, they also began to periodically direct their accusations toward the people of those countries. For example, it became nearly standard practice to criticize the Greek people for preferring to follow a lifestyle that was beyond their financial limits that ultimately led to their country’s bankruptcy. Similar accusations also began to be directed toward the Spanish, Irish and even Italian people. Jobless and poor people in other parts of the world easily believed such accusations.

Unfortunately, there are other important causes to the crisis, such as the ignorance, incompetence, selfishness, short-sightedness and other factors of not only the governments of the troubled countries, but also all the authorities in Europe and the U.S. All these negative elements historically played important roles in creating serious economic crises. It is not rational to accept the idea that people were responsible for this or that crisis. They individually cannot comprehend the overall situation of the economy, they do not understand economic jargon such as “sovereign debt,” “primary balance,” “double deficit” and so on and so forth; only governments, with every piece of data in its hands, can follow what is happening.

In Europe nearly every government, politician, institution, bank and so forth is responsible for creating serious deficit and debt problems and not sincerely trying to bring about a sound and lasting solution to prevent both the default of a single country, as well as the collapse of the whole system. Italian Prime Minister Mario Monti recently accused some European governments of undermining the credibility of the eurozone. He did not give any name, but as he denounced only northern countries, it is understood that he meant Germany.

As a first step, some important central banks followed the recent interest rate cut of the European Central Bank and even began to print money in order to boost their national economies and prevent a worldwide recession. However, these acts carry important risks. But if this new loose monetary policy cannot stimulate growth but instead awakens inflation, then there will no other way to prevent a “Great Depression.”

As a matter of fact, the famous pessimist soothsayer Professor Nouriel Roubini expects a new crisis in 2013 which will be worse than the 2008 crisis. Is this crisis inevitable? It is up to the acts of leading European governments and the new American administration following the November presidential election. If these acts are done as quickly as possible and are, of course, feasible, Roubini will turn out to be wrong. Otherwise, he might be happy, but we will all be sad.

ERDOĞAN ALKİN

July/23/2012

''Ηurriyet Daily News''

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