Don’t lend money to friends, EU edition
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If you borrow a lot of money from a friend, or lend a lot of money to a friend, then ultimately your friendship is likely to suffer. The same dynamic is now at work in the EU.
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Felix:
What you are describing–rich regions of the Eurozone funding poor regions–has happened for years in the U.S. currency union and it is not being torn apart. Of course, the U.S. regions are culturally more alike and do not view the other regions as foriegn. This is not so for the Eurozone. So maybe it is an issue of nationality more than income differences (i.e. Germans dread funding the Greeks regardless of income differenes).
Also, I would note that the rescue package may put into motion the creation of a centralized fiscal authority for the Eurozone.
Having just learned the price for not paying attention to Economic History, why would Europeans want to not pay attention to Political History? Europeans have already paid a lot of dues coming together. The choice is to cement those ties or loosen them. Put me down as one who’d like them to cement ties and not loosen them. The forces pushing people apart nowadays aren’t a positive trend.
There’s a relevant variation on the “Don’t lend to friends” rule: “Don’t lend a friend more money than you would give them.”
OK, so you don’t lend money to friends, Felix. That much is clear. But if your analogy really were more than a load of old cobblers, Northern Italy would’ve spun off the Mezzo Giorno long since and West Germany would never have been so darn keen to reunite with its poverty-stricken cousins in the East as it did, the Iberian peninsula would be one gigantic prison camp and the United States would never have united…
On and on goes this list until even your friends will eventually lend you money as long as it doesn’t totally roger them somewhere down the line, which I submit it needn’t.
Now if Greece had just been a little more up-front with its friends at the appropriate juncture, it wouldn’t have had to go shopping for bad loans from enemies of the state. Greece’s friends may be gritting their teeth right now, getting rather annoyed, even. Yes, it’s analogously true, they are. But with countries as in real life, friends can and do get over stuff like this.
The temporary displeasure of Greece’s friends is nothing compared to what’s coming down the pike for the grifters who tried to ‘jack a piece of Europe and overlooked the fact that, when the chips are down, Greece actually has friends.
Whereas Wall Street has none. And at the rate it’s going, it never will.