Someone’s a little touchy about being properly blamed for destroying their own economy. José Manuel Barroso, the President of the European Commission, lit up at critics at the G20 summit in Mexico:
The opening day of the G20 summit was threatening to deteriorate into a fractious row between eurozone countries and other non-European members of the G20, notably the US, as EU commission president José Manuel Barroso insisted the origins of the eurozone crisis lay in the unorthodox policies of American capitalism [...]
Asked by a Canadian journalist: “Why should North Americans risk their assets to help Europe?” he replied: “Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy.
“This crisis was not originated in Europe … seeing as you mention North America, this crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices, from some sectors of the financial market.”
Barroso was the former Prime Minister of Portugal. Right next door to him, in Spain, they had an unsustainable housing bubble. I suppose in some sense you can say that European banks learned the practices of securitization and financial fraud from their American counterparts, but that only goes so far until you realize that one of the leading trustees for mortgage backed securities here in the US was Deutsche Bank.
Obviously, US banks played a role in the initial crashing of the economy. But US banks did not tell European leaders to then exacerbate the problem by engaging in austerity that caused a double-dip recession. The European Union had agency on that. They could have also bailed out their people instead of their banks. Instead, they followed the elite course that led to ruin.
And they did this despite knowing that austerity couldn’t work given the situation in which they found themselves. If they didn’t know that two years ago, a simple check of the scoreboard makes it obvious now:
Europe and the UK are committed to austerity, and – not coincidentally – they’ve seen growth deteriorate and unemployment jump (to over 20 percent in Greece and Spain). The figure below, from this excellent – and pretty readable – paper by economist Jay Shambaugh reveals the expected positive correlation between governments that cut spending and slower GDP growth.
Bernstein makes the not-implausible statement that, in the case of many countries, the inability to borrow at affordable rates necessitated the austerity to some degree. But there were, and are, options for that as well. Most of them run through Germany, which has been so scarred by the sins of the Weimar Republic that they cannot see themselves clear to take the necessary steps. Moreover, the real trouble lies in creating a common currency in the first place, when the mechanisms surrounding it were completely unequipped for dealing with any kind of major crisis. Germany having to bail out its neighbors is obviously a distasteful scenario. But it was caused by Germany getting fat off a favorable monetary policy for almost a decade and dominating the Eurozone.
So while I feel for those suffering under the rule of Barroso and people like him, I don’t have much sympathy for the Eurozone leadership and their cascading set of problems. They got themselves into this mess.





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US companies refinanced European debt with complex schemes that were never sustainable. It is the same thing the companies did to municipalities here.
How much does José Manuel Barroso make as the President of the European Commission? How wealthy is Sr. Barroso? How did he make his gazillion$$ (as I’m guessing that he’s insanely wealthy)??
I wish we could fire *everyone* and do a re-boot.
Sr. Barroso’s whining sounds familiar… just like egregious CROOK, Jamie Dimon’s bitter whining about how us serf’s don’t tug our forelocks hard enough or something.
ptoui!
“… much of our financial sector was contaminated by, …, unorthodox practices …”
LOL
I am sure the European financial sector was coerced, threatened and dragged kicking and screaming to the party. On the other hand, perhaps they were just greedy.
when trying to decide where to point the finger-o’-blame for the economic collapse, it is problematic to focus that decision on geography when it has a lot more to do with ideology.
“this crisis originated in North America” i would disagree. i would say the “crisis” originated in think tanks, and in talks amongst the finance ministers, central bankers and execs, etc. as the crisis was not some unforeseen aberration. no it was created like frankenstein’s monster by technocratic bumbling aimed at wealth redistribution that blew up in the creators’ faces.
for one of the members of the neoliberal cheersquad to point at his fellow neoliberal cheerleaders in some other part of the globe and say ‘there, there is the problem’ seems both wrongheaded and unhelpful.
David – while I agree with you that the responsibility does not lie solely with US Banks I must point out that Goldman Sachs was largely responsible in the orchestration of the various bubbles and especially in Greece’s financial shell game.
The corrupt and widespread greed that is forcing austerity on the people in Europe originated here. I think you also fail to draw a comparison to the austerity being forced on us in the US. While Europe is doing it, so are we. Cuts to social services, teaching layoffs and school closures, increased tuition, continuing tax cuts for the wealthy…
None of those things are spending our way out of a recession.
On this – I’m so sick of us using the FINANCIAL INDUSTRY’S definition of recession and depression. It’s not a double-dip. It never ended. A couple quarters of weak-ass growth didn’t mean it was over. It meant people were desperate and got their fucking tax returns and spent a little extra money, or went deeper into debt to replace things that needed replacing after 2-3 years. That wasn’t a recovery. Unemployment is still brutally high, people are still brutally poor, more people are hungry and homeless than have been in decades. There was never a recovery. We’ve been in an outright depression for 4 fucking years. Artificial capital injections forced into various parts of the market on a daily basis are propping up the entire system, and the US Government is enabling that through the printing of money and overnight zero interest loans to the financial industry.
But hey, pay no attention to the corrupt-ass punk motherfuckers behind that silk curtain.
On edit – that came off a little harsh. I’m not upset with DDay :) . Sorry if it seemed that way!
“Central banks across the world are standing ready to shower markets with emergency liquidity. A dust-up in Athens is the excuse they need to launch a fresh blitz of stimulus as the global economy flirts with recession once again.
Fed chair Ben Bernanke requires a crisis somewhere to outflank his own hawks and slip another round of quantitative easing (QE) past the Tea Party Congress before the ‘fiscal cliff’ – 4.5pc of GDP in tightening – hits the US economy with a sledgehammer this winter.”
http://www.telegraph.co.uk/finance/comment/9337283/Greece-will-have-to-leave-EMU-whoever-is-elected.html
We’ll show those Germans that there’s no need to be afraid of a wheelbarrow.
Interesting piece today.
Also, the US did not have a part in stitching trogether the defective treaties and agreements for the EU.
Their undoing (if there is one) will be driven by the inability of the various sovereign countries to build a federal/political union. It should have been the first step, or at least a required milepost somewhere before they converted to the Euro, which was tempting too soon.
It seems so unlikely any federalism will be attainable now. Too many new commitments, new treaties and agreements, parliaments, voters, sovereignty unlikely to budge regardless of the merits.
Still, it’s all the fault of the US, of course, as Barroso says.
While I agree with your view David that this guy owns a lot of the austerity that made the crisis worse, I agree with HIM wholeheartedly that the cause of the crisis ITSELF was American…. “capitalism.” Or, more apt, unregulated greed with nothing to lose with the knowledge that taxpayers would save their greedy asses because they were TBTF.
Excellent post as usual.
I am like you. A pretty happy-go-lucky guy most of the time. But this whole mess is starting to take its toll on me too. Bad news on top of bad news and our government being the cause of most of the strife will wear anybody down.
Paxil anyone????
OFG, you can analyze this thing a million ways to Thursday, but THAT is it in a nutshell. And, ifn wwe don;t do something to stop it and punich theoffenders, it WILL happen again.
More Paxil anyone???
Here I politely (!) disagree with you David. We did cause this, and Mr. Barroso is right to resent being pilloried, even as we wish the Europeans had had more insight. You only have to go back to the chapter of ‘The Shock Doctrine’ where South Africa’s Nelson Mandela was confronted by the Chicago Boys to realize these neoliberal policies have been meant to go viral all along, and the power perpetrators come from the US; the buck stops here.
This doesn’t excuse the leaders of the EU, who should well have known what they were getting into, being in positions where their decisions could make a difference, and the populace of such countries would do well to do as we are doing and blame their leaders as well as us. But I think we, who spread the contagion in the first place, don’t get to blame them for hosting it, pretending because they did that we are now at risk. No, that is not what happened.
:))
Peach, among peaches of comments.
It must also be noted that our banks and our banking regulations have conducted a type of warfare against the rest of the world wherein it was necessary (or seemed so) to adopt our tactics in order to compete.
I have watched with great dismay our virtual war in this regard with Switzerland and Swiss banks and their utter inability to recognize the attack for what it is. The “American way” was not inevitable but a good portion of the world simply did not and is still reluctant to recognize that the U.S. takes no prisoners in economic warfare and that the only way to respond to us is by making us into the international pariah we in fact are.
Sure, European nations exacerbated the problem but they sure the hell didn’t create it. Barroso is absolutely correct in stating that we started this disaster; that blame lies squarely at our feet. Our corrupt; greedy fucking bankers spread their plague worldwide. And our corrupt, greedy fucking politicians let them do it.