Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

With Europe’s credibility draining away, what was needed was a “reset,” a clarifying intervention that would restore credibility and stop the crisis of confidence from widening. That is what Dominique Strauss-Kahn, as head of the IMF, seems to have had in mind when he scheduled meetings, first with Angela Merkel and then with the Eurogroup, for mid-May 2011. Strauss-Kahn “was going to push for a big firewall,” recalled one senior US official. “We were putting a considerable amount of expectation on the outcome of those meetings.”39 Inside the IMF, a new head of steam of opposition to extend-and-pretend was building. The Fund’s Ireland team had never been satisfied with the inequitable deal forced on Dublin by the ECB and the G7 in November 2010. Ireland’s problems, Ajai Chopra insisted, were not merely Irish in scope, “they are a shared European problem” that required joint European action.40 What was needed was to beef up the EFSF, giving it more resources and wider authority to intervene. Furthermore, as Ireland showed, Europe’s banks were too big to bail by any but the largest states. So Chopra insisted that if banks could not raise enough capital from private sources, there should be coordinated recapitalization across the