With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child).
I won't claim to understand all the economic arguments involved, but I do think it speaks well to the degree to which the EU's handling of the Greek crisis is symptomatic of an overall disintegration over the last few years in any sense of solidarity between European countries. Not so much a Union increasingly as a real-life franchise of Big Brother, wherein the various roommates squabble more and more over time as their proximity in a shared household (to the upkeep of which the various roommates' contributions vary wildly) breeds enmity.
The complete disunity over how to handle the refugees from North Africa is another example, what with Britain refusing to participate in any apportionment of the refugee-populations, and Denmark reintroducing border-controls.
When the game was up, when the global house of credit cards collapsed in the late Aughts, European leaders had a choice. They had knowingly and purposefully brought weak states into the Eurozone, because they genuinely, even nobly, wished to build a large, strong, United Europe. When they did so, they understood there would be crises. A unified Europe, they had always claimed, would be forged one crisis at a time. The right thing to have done for Europe at this point would have been to point out the regulatory errors and misaligned incentives that encouraged profligate lending and enabled corruption and waste among borrowers, and fix those. Banks that had made bad loans would acknowledge losses. The banks themselves would have to be restructured or bailed out.
But “bank restructuring” is a euphemism for imposing losses on wealthy creditors. And explicit bank bailouts are humiliations of elites, moments when the mask comes off and the usually tacit means by which states preserve and enhance the comfort of the comfortable must give way to very visible, very unpopular, direct cash flows.
The choice Europe’s leaders faced was to preserve the union or preserve the wealth, prestige, and status of the community of people who were their acquaintances and friends and selves but who are entirely unrepresentative of the European public. They chose themselves. The formal institutions of the EU endure, but European community is now failing fast.
It is difficult to overstate how deeply Europe’s leaders betrayed the ideals of European integration in their handing of the Greek crisis. The first and most fundamental goal of European integration was to blur the lines of national feeling and interest through commerce and interdependence, in order to prevent the fractures along ethnonational lines that made a charnel house of the continent, twice. That is the first thing, the main rule, that anyone who claims to represent the European project must abide: We solve problems as Europeans together, not as nations in conflict.
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The fact of the matter is no country, not Germany, not France, would voluntarily put up with the sort of “adjustment” that has been forced on Greece, for the good reason that gratuitous great depressions are not actually helpful to an economy. Creditors have had five years to mismanage Greece and they’ve done a startlingly effective job. Syriza has had five months to object. However much you may dislike their negotiating style, however little you think of their competence, Greece’s catastrophe was not Syriza’s work. If creditors respond to Syriza’s “intransigence” with maneuvers that cause yet more devastation, that will be on the creditors. Blaming victims for having insufficiently perfect leaders is standard fare for apologists of predation. Unfortunately, understanding this may be of little comfort to the disemboweled prey.
Europe’s creditors are behaving exactly as one might naively predict private creditors would behave, seeking to get as much blood from the stone as quickly as possible, indifferent to the cost in longer-term growth. And that, in fact, is a puzzle! Greece’s creditors are not nervous lenders panicked over their own financial situation, but public sector institutions representing primarily governments that are in no financial distress at all. They really shouldn’t be behaving like this.
I think the explanation is quite simple, though. Having recast a crisis caused by a combustible mix of regulatory failure and elite venality into a morality play about profligate Greeks who must be punished, Eurocrats are now engaged in what might be described as “loan-shark theater”. They are putting on a show for the electorates they inflamed in order to preserve their own prestige. The show must go on.
Austerity may or may not be a viable option* for a country like the UK, but Greece is not the UK. Greece's GDP is in freefall, and its ability to repay debtors will only worsen even more the longer this is dragged out, no matter what reforms are put in place. It needs to be able to default, with all the consequences that brings, and/or inflate its currency. If we had any sense we'd have let it do so long ago. But Deutschland et al want to maintain the image of Europe, the illusion. And letting Greece default or exit the Euro makes for bad optics.
Of course, were this truly a Union, then the debts of one would be the debts of all...
* Last time I checked, most patients who received a treatment of leeching didn't actually die.
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