The New Republic
October 11, 2011
It’s all Greece’s fault. That’s what a lot of Europeans secretly—or not so secretly—think as they grumble at the prospect of coming up with yet more money to bail the eurozone out of its debt crisis. But what if that easy view of how Europe landed in its current predicament is not just simplistic, but wrong?
Nonsense, argue the grumblers. Clearly the crisis started because debt in the eurozone’s periphery—Greece, Ireland, Portugal, and Spain—became so large that investors grew frightened that entire countries were at risk of default. If those countries hadn’t racked up all that debt by shamelessly living beyond their means, then none of this would have happened. But this narrative misses a crucial element of the true origin of the eurozone debt crisis. In particular, it misses the fact that the very design of Europe’s common currency area not only caused, but was meant to cause the eurozone’s periphery to incur large amounts of international debt. Further, there was little that the governments of those countries could do to stop it. Far from causing the crisis, the peripheral eurozone countries were up against powerful forces outside their control, forces that probably made this crisis inevitable no matter how responsibly they behaved.
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