Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

It was profoundly disturbing that it was being undertaken to manage a crisis in Greece, a comparatively rich European country, at the behest of the EU. The Greeks were being lent vastly more than their quota, the capital contribution that normally limited a country’s IMF borrowing rights. The Fund was required to share control over the program with the other members of the troika, and its own experts were far from persuaded that Greece’s debts were sustainable. As they put it cagily: It was undeniable that “significant uncertainties around” the program made it “difficult to state categorically” that Greece would ever be able to pay back its debts. Normally this would be a red flag. Who, after all, would benefit from Greece taking on new loans from official lenders to pay off existing private debts it could not service? The outspoken Brazilian board member insisted that the program not be referred to as “a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions.”62 One could hardly ask for a clearer statement of the “bait and switch” substitution, by which a problem of excessive bank lending was turned into a crisis of public borrowing.63 But this substitution resulted less from a skillful ideological conjuring trick than from a lowest common denominator compromise between the main players in the Greek debt drama—Germany, France, the ECB, the IMF and the Obama administrati...