Tuesday, February 16, 2010

Guess who is causing the Greek crisis?

Jean-Claude Juncker, chairman of the eurozone's council of finance ministers, is irritated that the financial markets are being unkind to a debtor nation running huge deficits and falsifying its numbers.

From today's FT:
Mr Juncker signalled that eurozone policymakers were increasingly irritated at pressure building up on Greece in the credit default swap market, which measures the cost of insuring debt exposure but is regarded by some as a weapon used by irresponsible speculators against vulnerable governments. “Financial markets are clearly wrong if they believe they can break Greece into little bits,” Mr Juncker said. “We shouldn’t accept being the target of financial markets. I am concerned by the financial markets irrational way of behaving.”

So is Mr Juncker saying that the German and French banks with their huge exposures to Greece should not be allowed to buy protection in the CDS market? Are the big German and French banks "irresponsible speculators"? Are they irrational? When Greece defaults and they go down with it, what will he say then? That they shouldn't have bought the government bonds of a eurozone country--or that they should have bought more protection?

1 comment:

daniel said...

Somebody's got to post, so it may as well be me.
I cannot comment about the details of the Greek financial crisis, except to say it frankly doesn't sound that different to me than the American housing/mortgage crisis - both involved inflated numbers, misleading assessments or valuations, and of course, lying about the creditworthiness of the debt, either by ignoring risks of default, or simply ignoring relevant facts about the debtors' ability to repay.
What I want to hear more about is reconciling, as a policy matter, the libertarian impulse and the admission that some of our institutions are "too big to fail." Is this the latter day equivalent of Thomas Aquinas' purported reconciliation of faith and reason?
The essence of libertarianism is responsibility for the consequences of one's actions. Once we (politics aside) agree that certain institutions are absolved from those consequences, we're no longer libertarians. We're simply capitalist corporatists, and the only question is who gets the money.
dan stern
bankrupt harrisburg, pa - where we are not too big to fail