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Bust: Greece, the Euro and the Sovereign Debt Crisis (Bloomberg
In 2001, Greece saw its application for membership into the Eurozone accepted, and the country sat down to the greatest free lunch in economic history. However, the coming years of global economic prosperity would lead to unrestrained spending, cheap borrowing, and a failure to implement financial reform, leaving the country massively exposed to a financial crisis—which duly struck. In Greece, the Euro, and the Sovereign Debt Crisis , Bloomberg columnist Matthew Lynn explores Greece's spectacular rise and fall from grace and the global repercussions of its financial disaster. Page by page, he provides a thrilling account of the Greek financial crisis, drawing out its origins, how it escalated, and its implications for a fragile global economy. Along the way, Lynn looks at how the Greek contagion has spread like wildfire throughout Europe and explores how government ineptitude as well as financial speculators compounded the problem. Blending financial history, politics, and current affairs, Lynn skillfully tells the story of how one nation rode the wave of economic prosperity and brought a continent, a currency, and, potentially, the global financial system to its knees. Lively, engaging, and thought provoking, Bust reminds us just how interconnected the world really is.
Q&A with Author Matthew Lynn
Author Matthew Lynn Bust looks at how the sovereign debt crisis started in Greece, but why did it start there?
Greece was one of the most profligate nations in the world. It has been virtually continually in default on its debts in one form or another ever since the modern Greek state was created in the nineteenth century. So it was always a fairly good candidate. At the start of 2010, the markets were already getting worried about sovereign debt. It was essentially Act II of the credit crunch. Governments all around the world had fixed a private debt crisis by turning it into a public debt they ran up these huge deficits, both to bail out their banking systems and to boost their economies. But the public debts were never any more sustainable than the private debts. Greece happened to be the easiest country to make an example of. But if it hadn’t been Greece, it would have been someone else. This was really a crisis about the markets refusing to sanction unending government deficits – and that’s what the book explores. But the book implies this is a story about the euro as well? Why is that?
It certainly is. The sovereign debt crisis blew apart the euro, and it is going to be very hard to put it back together. Europe’s single currency celebrated its first decade of existence in pretty good shape. The currency was stable, new members were joining, and it was gaining ground on the dollar as the world’s most important currency. But then the Greeks came along and put a bomb underneath it. Greece lied and cheated its way into the euro. It completely made up the figures that squeezed it into the euro, and, once it was inside, made no attempt to play by the rules. When confidence in the country collapsed, they expected the rest of Europe to bail them out. But what kind of club is it where you can cheat your way in, ignore the rules, then expect the other members to pick up your bar bills? Not one that anyone is going to want to belong to for long. So this is not just a story about the sovereign debt crisis – it is a story about how the euro is falling apart, and how that will change the European Union as well. What did you learn from writing the book?
The book was a real education for me. That was one of the reasons I wrote it. I wanted to learn more about how this fairly small country right on the edge of Europe which no one usually paid very much attention to was suddenly right at the epicentre of a major financial crisis. It’s not the kind of story you can make sense of just by reading a few headlines. There were so many strands that had to be pulled together. The history of Greece, and why its economy was so underdeveloped. The design of the euro, and all the compromises that led up to its creation that proved to be crippling once the crisis struck. The changing nature of Germany, how it had overcome post-war guilt, and why it was refusing to bail-out the rest of Europe any more. The build-up of government debt right around the word. All of these big themes came together to produce this crisis, and that is what made it such a fascinating book to write. What are the implications for the world economy of the themes you explore in the book?
Firstly, it’s the end of the euro, at least in its current form. It was a disaster to bail-out Greece, and, curiously enough, I think a lot of the people right at the very top of the policy-making debate knew that. It created a single currency with all the wrong incentives. It would have been far better to let Greece go bust and then to deal with the consequences of that than to try and patch up a broken system. But, in the end, and this process is detailed in ...
Q&A with Author Matthew Lynn
Author Matthew Lynn Bust looks at how the sovereign debt crisis started in Greece, but why did it start there?
Greece was one of the most profligate nations in the world. It has been virtually continually in default on its debts in one form or another ever since the modern Greek state was created in the nineteenth century. So it was always a fairly good candidate. At the start of 2010, the markets were already getting worried about sovereign debt. It was essentially Act II of the credit crunch. Governments all around the world had fixed a private debt crisis by turning it into a public debt they ran up these huge deficits, both to bail out their banking systems and to boost their economies. But the public debts were never any more sustainable than the private debts. Greece happened to be the easiest country to make an example of. But if it hadn’t been Greece, it would have been someone else. This was really a crisis about the markets refusing to sanction unending government deficits – and that’s what the book explores. But the book implies this is a story about the euro as well? Why is that?
It certainly is. The sovereign debt crisis blew apart the euro, and it is going to be very hard to put it back together. Europe’s single currency celebrated its first decade of existence in pretty good shape. The currency was stable, new members were joining, and it was gaining ground on the dollar as the world’s most important currency. But then the Greeks came along and put a bomb underneath it. Greece lied and cheated its way into the euro. It completely made up the figures that squeezed it into the euro, and, once it was inside, made no attempt to play by the rules. When confidence in the country collapsed, they expected the rest of Europe to bail them out. But what kind of club is it where you can cheat your way in, ignore the rules, then expect the other members to pick up your bar bills? Not one that anyone is going to want to belong to for long. So this is not just a story about the sovereign debt crisis – it is a story about how the euro is falling apart, and how that will change the European Union as well. What did you learn from writing the book?
The book was a real education for me. That was one of the reasons I wrote it. I wanted to learn more about how this fairly small country right on the edge of Europe which no one usually paid very much attention to was suddenly right at the epicentre of a major financial crisis. It’s not the kind of story you can make sense of just by reading a few headlines. There were so many strands that had to be pulled together. The history of Greece, and why its economy was so underdeveloped. The design of the euro, and all the compromises that led up to its creation that proved to be crippling once the crisis struck. The changing nature of Germany, how it had overcome post-war guilt, and why it was refusing to bail-out the rest of Europe any more. The build-up of government debt right around the word. All of these big themes came together to produce this crisis, and that is what made it such a fascinating book to write. What are the implications for the world economy of the themes you explore in the book?
Firstly, it’s the end of the euro, at least in its current form. It was a disaster to bail-out Greece, and, curiously enough, I think a lot of the people right at the very top of the policy-making debate knew that. It created a single currency with all the wrong incentives. It would have been far better to let Greece go bust and then to deal with the consequences of that than to try and patch up a broken system. But, in the end, and this process is detailed in ...
- GenresEconomics
288 pages, Hardcover
First published December 21, 2010
2 people are currently reading
86 people want to read
About the author
Matt Lynn
20 books76 followersI am a thriller writer, living near London. 'Death Force' is the first in a series of books following a group of mercenaries around the world. It owes a lot to action, adventure writers like Alistair MacLean, and World War Two writers like Sven Hassel. It also owes a lot to Westerns. When I'm not writing thrillers, I write a financial column for Bloomberg, and I write for The Spectator.
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Displaying 1 - 8 of 8 reviews
July 17, 2012
"The Snake and the EMS were both quite rightly regarded as failures. They had foundered on two main rocks. Any attempt to fight the foreign exchange markets was always doomed to ultimate failure. And any attempt to tie together very different economies was always going to produce strains and tensions that would in the end tear the system apart." (19)
"Between 1999 and 2001, something very mysterious -- and indeed convenient happened. The Greek economy completely transformed itself. Just like that. The budget deficit came down to just 1 percent of GDP. Inflation dropped to just 5 percent. Public debt was still running at around 100 percent of GDP, but at least it wasn't going up as fast as it had been, and since it was now below that of both Italy and Belgium, which were already inside the euro-zone, it was going to have to use that as a reason for keeping Greece on the outside." (51)
"There is no activity that bankers are more skilled at than collecting a generous fee for acting as middlemen on an essentially risk-free trade. It is, to put it kindly, the purpose for which God put bankers on the planet." (105)
"In reality, the sovereign debt crisis was a verdict -- and a damning one -- on three decades during which governments across most of the developed world had pushed up spending without paying any serious attention to whether their economies, and and often-dwindling, over-taxed workforce, could pay for it all." (204)
"Between 1999 and 2001, something very mysterious -- and indeed convenient happened. The Greek economy completely transformed itself. Just like that. The budget deficit came down to just 1 percent of GDP. Inflation dropped to just 5 percent. Public debt was still running at around 100 percent of GDP, but at least it wasn't going up as fast as it had been, and since it was now below that of both Italy and Belgium, which were already inside the euro-zone, it was going to have to use that as a reason for keeping Greece on the outside." (51)
"There is no activity that bankers are more skilled at than collecting a generous fee for acting as middlemen on an essentially risk-free trade. It is, to put it kindly, the purpose for which God put bankers on the planet." (105)
"In reality, the sovereign debt crisis was a verdict -- and a damning one -- on three decades during which governments across most of the developed world had pushed up spending without paying any serious attention to whether their economies, and and often-dwindling, over-taxed workforce, could pay for it all." (204)
April 14, 2013
A well-written and very accessible primer. Highly recommend it to anyone interested in learning about the root-causes of the sovereign debt crisis. Not sure I agree with all of the author's conclusions and predictions, but credit to him for the having the courage of his convictions to make them, and put it down in writing.
February 1, 2026
In 2011 this Cassandra predicts an eminent financial collapse and the end of the Euro. Premature, but not wrong.
The copyright date is 2011, less than a year after the "resolution" of the Greek debt crisis over what Lynn calls the "trillion dollar weekend" of May 8 and 9, 2010. The Greek debt crisis was solved in exactly the way that the initiators of the euro project, notably the Germans, has said it should not: by throwing money at it.
The leaders of Europe decided that they had to break the rules they themselves had established. Rule number one said that no European government would bail out another government when one got into financial trouble. They bailed out the Greeks. Rule number two said that the European Central Bank would never intervene in financial markets. They intervened in a big way, buying corporate debt and corporate stock. In doing so they created a vast moral hazard. If there was no consequence for breaking the rules, countries and the European Union itself were free to run deficits as large as they pleased.
Lynn concluded in 2011 that it wouldn't work. The concluding paragraph of the book is "Most significantly, Europe and the United States won't be able to just borrow themselves out of trouble anymore, nor paper over the feelings of their own economies with more and more debt. They are bust. And like all bankrupt, they will have to slowly and sometimes painfully pay down their debts and find new ways of making a living."
Lynn is certainly right in the long term. He has been dramatically wrong in the short term. On the eve of 2018 the central banks are papering over their problems at an increasingly furious pace. Mario Draghi of the European Central Bank has promised to do "whatever it takes" to prevent another financial crisis. The United States Federal Reserve, The Bank of Japan, and essentially all other European central banks are doing the same. What Lynn observed was a house of cards that could not stand, and predicted would fall within a year or two, has been built higher and higher. Though wobbly, it is still standing after seven years.
This book is valuable for what Lynn observes about why it cannot last forever. All of the developed countries are in a demographic vise. There are more and more all people, fewer and fewer young working people. The pensions and health benefits that have been promised simply cannot be paid. The banks, private and central, or holding increasing amounts of debt that will never be repaid. Rather than allowing bankruptcies, they continually "extend and pretend" that the debts can be serviced and eventually extinguished.
The pernicious downside, which has become much more visible since Lynn wrote this book, is the squeeze of the middle class and the pensioners. There is simply no safe place to put one's money. The banks offer almost no interest. Lynn observed, commonsensically, that one cannot reduce interest rates below zero. In defiance of all logic, European banks have done exactly this. A pensioner cannot live off bank interest. Stocks pay almost no dividend. One cannot live off dividend income. The reduction of dividends and interest has resulted in a huge, unrealistic, unsustainable inflation in the value of financial assets such as stocks and bonds, and an echo increase in the value of hard assets such as real estate. This has priced housing out of the range of the middle class. The economic policies that Lynn said in 2011 could not endure have in fact endured. They have brought a great deal of discomfort to all except the financial elites throughout the world.
Moreover, this financial house of cards must fall. He quotes Carmen Reinhart in This Time Is Different: Eight Centuries of Financial Folly to the effect that uncontrolled money printing inevitably leads to financial collapse. All that they are doing differently is forestalling it.
We learn a few interesting things from Lynn, such as the origin of the term of art "quantitative easing." It means nothing – which is precisely as intended! It obscures rather than clarifies the process of printing money.
I bought this book intending to learn more about Greece in particular. I have recently reviewed "looting Greece," and "adults in the room," specifically about the crisis in Greece. This book does not add much illumination. Rather, it sets the context. It provides a history of Greek economics, indicating why including Greece and the euro in the first place was folly. Rather than lead the reader step-by-step through the scenes in the drama by which Greece failed, Lynn is content to paint in broad strokes a picture of why it was bound to fail. This is valuable because, as every reader knows, Greece is not the only vulnerable country. In the end they all will fail.
It is a five-star effort. The strengths of the book are the history of the first decade of the euro, the 2000's, and a strong argument for why it must ultimately fail. The arguments remain as valid today as in the year 2011. Nothing has been fixed. Lynn has waited quite a while for his vindication, but reading the book leaves the reader absolutely certain that it is coming.
The copyright date is 2011, less than a year after the "resolution" of the Greek debt crisis over what Lynn calls the "trillion dollar weekend" of May 8 and 9, 2010. The Greek debt crisis was solved in exactly the way that the initiators of the euro project, notably the Germans, has said it should not: by throwing money at it.
The leaders of Europe decided that they had to break the rules they themselves had established. Rule number one said that no European government would bail out another government when one got into financial trouble. They bailed out the Greeks. Rule number two said that the European Central Bank would never intervene in financial markets. They intervened in a big way, buying corporate debt and corporate stock. In doing so they created a vast moral hazard. If there was no consequence for breaking the rules, countries and the European Union itself were free to run deficits as large as they pleased.
Lynn concluded in 2011 that it wouldn't work. The concluding paragraph of the book is "Most significantly, Europe and the United States won't be able to just borrow themselves out of trouble anymore, nor paper over the feelings of their own economies with more and more debt. They are bust. And like all bankrupt, they will have to slowly and sometimes painfully pay down their debts and find new ways of making a living."
Lynn is certainly right in the long term. He has been dramatically wrong in the short term. On the eve of 2018 the central banks are papering over their problems at an increasingly furious pace. Mario Draghi of the European Central Bank has promised to do "whatever it takes" to prevent another financial crisis. The United States Federal Reserve, The Bank of Japan, and essentially all other European central banks are doing the same. What Lynn observed was a house of cards that could not stand, and predicted would fall within a year or two, has been built higher and higher. Though wobbly, it is still standing after seven years.
This book is valuable for what Lynn observes about why it cannot last forever. All of the developed countries are in a demographic vise. There are more and more all people, fewer and fewer young working people. The pensions and health benefits that have been promised simply cannot be paid. The banks, private and central, or holding increasing amounts of debt that will never be repaid. Rather than allowing bankruptcies, they continually "extend and pretend" that the debts can be serviced and eventually extinguished.
The pernicious downside, which has become much more visible since Lynn wrote this book, is the squeeze of the middle class and the pensioners. There is simply no safe place to put one's money. The banks offer almost no interest. Lynn observed, commonsensically, that one cannot reduce interest rates below zero. In defiance of all logic, European banks have done exactly this. A pensioner cannot live off bank interest. Stocks pay almost no dividend. One cannot live off dividend income. The reduction of dividends and interest has resulted in a huge, unrealistic, unsustainable inflation in the value of financial assets such as stocks and bonds, and an echo increase in the value of hard assets such as real estate. This has priced housing out of the range of the middle class. The economic policies that Lynn said in 2011 could not endure have in fact endured. They have brought a great deal of discomfort to all except the financial elites throughout the world.
Moreover, this financial house of cards must fall. He quotes Carmen Reinhart in This Time Is Different: Eight Centuries of Financial Folly to the effect that uncontrolled money printing inevitably leads to financial collapse. All that they are doing differently is forestalling it.
We learn a few interesting things from Lynn, such as the origin of the term of art "quantitative easing." It means nothing – which is precisely as intended! It obscures rather than clarifies the process of printing money.
I bought this book intending to learn more about Greece in particular. I have recently reviewed "looting Greece," and "adults in the room," specifically about the crisis in Greece. This book does not add much illumination. Rather, it sets the context. It provides a history of Greek economics, indicating why including Greece and the euro in the first place was folly. Rather than lead the reader step-by-step through the scenes in the drama by which Greece failed, Lynn is content to paint in broad strokes a picture of why it was bound to fail. This is valuable because, as every reader knows, Greece is not the only vulnerable country. In the end they all will fail.
It is a five-star effort. The strengths of the book are the history of the first decade of the euro, the 2000's, and a strong argument for why it must ultimately fail. The arguments remain as valid today as in the year 2011. Nothing has been fixed. Lynn has waited quite a while for his vindication, but reading the book leaves the reader absolutely certain that it is coming.
August 24, 2025
Thorough review, I liked the angle of thought
May 17, 2015
Great writer, good voice, clearly and articulately explained complex economic ideas so that a layman can understand. Moral of the story is: socialism and poor financial management, along with an almost pathological hatred of austerity, ruined Southern Europe, and the introduction of the euro ruined the rest of the euro zone shortly after. Hopefully this sad currency can be put out of its misery soon.
October 29, 2011
Interesting, recently familiar and very sad
December 19, 2015
Not essential for an understanding of the crisis. A good newspaper would do.
Read
April 18, 2016A nice overview
Displaying 1 - 8 of 8 reviews