Several theories about the causes & effects of the Euro crisis have been floating around, so I thought I'd take a shot at cutting through the jargon & disinformation to present some of the leading views of this crisis in simple English.
I hope the discussion will help us all get further educated on this topic.
Theory 1 - apparently popular perspective among the German public & economic Austerians:
Greeks are lazy, irresponsible, dishonest overspenders who borrowed more than they could repay, so we're foreclosing on them. If they can't afford to repay their loans, they should suffer brutally, by slashing jobs & social benefits while handing over the keys of their entire cultural & economic heritage to their 'responsible' lenders.
Theory 2 - probably the popular view among Bankers
Greek/Irish/Portuguese banks are in trouble and won't be able to repay their debts to us, so we'll scare their politicians into taking over their banks' bad debts. (Mission Accomplished !!) Now those countries' economies are hemorrhaging, so we'll scare the ECB (read: Germany & France) into repaying the member countries' debts. Sarkozy is on board with our plan but that damn Merkel refuses to capitulate completely. Instead of just handing over the cash to fully repay our worthless loans (which are currently trading around 35-40 cents instead of 1 Euro), she keeps insisting on these cosmetic "haircuts" which will give us "only" 50 cents for our 40-cent assets.
Theory 3 - popular amongst hedge fund Speculators
There's a flaw in the structure of the Euro which was exposed by the 2008 crisis & subsequent recession. The Euro monetary policy (i.e., how much money to print & therefore how many jobs & how much inflation to generate) is dominated by Germany & France. When the economies of Germany & France are strong while the economies of other Euro members are weak, the weak countries will get squeezed because they have no easy way of regaining competitiveness since they can't depreciate their currency any more. As they get squeezed, there will be money to be made on their bonds.
Theory 4 - popular amongst Keynesian economists & Greek citizens
The western economies are stuck in a recession caused by a lack of demand resulting from the banking fraud of 2008. The best way to get out of the ditch is to get governments to spend money and create demand in order to create jobs. The debt/deficit discipline should come after the recession has passed. Instead, the Germans (& French) are vindictively punishing ordinary citizens for the mistakes of their own bank executives who caused the crisis in the first place.
Which theory/theories do you agree with & why?
I'm not sure how to add a poll to a diary any more, with dkos 4 :(