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Eurozone Crisis Scapegoats
To gain a better understanding of the root causes of the eurozone debt crisis, The Beginner asked readers who was to blame
Forty-four percent of respondents believed that the debt policies of euro countries where to blame for the eurozone crisis. They are in agreement with recent comments by Germany’s finance minister, Wolfgang Schäuble: “Whatever role the markets have played in catalysing the sovereign debt crisis, it is an undisputable fact that excessive state spending has led to unsustainable levels of debt and deficits that now threaten our economic welfare.”
Another 33% of The Beginner readers thought that a lack of European fiscal policy was to be blamed for the eurozone crisis. The call for greater fiscal discipline means stringent enforcement of the 3% budget deficit limit, the 60% indebtedness rule and, most recently, the notion that all Eurozone countries should follow Germany in adopting a constitutionally binding ‘balanced budget’ (debt brake) provision.
Twenty-two percent of voters believed that the underlying economic system, Europe’s common currency, was at fault for the current crisis. In fact, one of the principle goals of Europe’s common currency has always been to promote greater financial market integration between member countries. It was hoped that the common currency would make it easier for investors in one euro country to find good investment opportunities in other euro countries since they would no longer have to worry about fickle exchange rates.
The adoption of the euro as a common currency was designed to cause large capital flows from the eurozone core to the periphery. Many believe it is those very capital flows that set the stage for the crisis. The problem is that such surges in capital flows depend on the whims of international investors, and therefore have a notorious tendency to come to a sudden stop if investor sentiment changes.
In the case of the eurozone, the sudden stop to capital flows in 2009 indiscriminately hit all of the periphery countries, regardless of how well they had managed their finances.
Our readers seemed to have shared this view as none of them thought that these periphery countries - Portugal, Ireland, Italy, Greece, Spain - were to be blamed for the onset of the eurozone crisis.