The Correct Degree of Culpability

While in Dublin recently I read an article in the newspaper about the Greek crisis. It was in the Irish Times and was very serious. The author, the well-known economic journalist Martin Wolf, asked a series of questions about the crisis and then answered them.  For example he asked whether the crisis was the fault of the Greeks, to which his answer was no:

Nobody was forced to lend to Greece. Initially, private lenders were happy to lend to the Greek government on much the same terms as to the German government. Yet the nature of Greek politics… was no secret. Then, in 2010, it became clear the money would not be repaid. Rather than agree to the write-off that was needed, governments (and the International Monetary Fund) bailed out the private creditors by refinancing Greece. Thus began the game of ‘extend and pretend’. Stupid lenders lose money. That has always been the case. It is still the case today.

This seems to me at best a partial truth. The lenders were indeed foolish, or worse than foolish, relying as they did on Greece’s fraudulent membership of the common currency to forestall any By E. M. Forester Howa... Best Price: $9.69 Buy New $31.13 (as of 02:25 EST - Details) possibility of default. But the Greeks, or rather the Greek government, can hardly be absolved of all blame for the situation. The latter borrowed huge sums of money to fund current consumption, having previously falsified its public accounts in order to meet the criteria to join the common currency. If nobody had to lend to Greece, Greece did not have to borrow, at least not like it did and for the purposes that it did. And if it is true that stupid lenders lose money, stupid borrowers lose their assets. If this is a tale of stupidity, it is of stupidity – or dishonesty – all round. Ascription of the correct proportions of moral blame, however, may not necessarily be the best method of finding a solution, if there is one, to a situation.

But high finance has never really been my forte or my interest. My attitude to finance is primitive: I spend less than I earn. When, during the heady days of the boom, my bank asked me whether I wanted a loan, I naively told it that I did not need a loan. The bank’s reaction remind me of that of a newspaper for which I used sometimes to write when I refused to do an article for it on the basis of information that was self-evidently false. What, they asked, has that got to do with it? And for the bank (at the time), what had not taking a loan got to do with not needing one?

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