Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The result of this compromise was that Greece would pay the reputational price for having restructured its debts, but it would gain precious little financial relief. It would be left carrying a debt burden of 143 percent of GDP, which was clearly unsustainable. As one Goldman Sachs analyst commented: “This tendency to ‘under-size’ otherwise good policy initiatives has been a recurrent feature of European policies.” A member of the UBS economics team was less polite: “This is fiddling around at the margins. . . . The debt needs to halve.” As to the new support facilities provided by the EFSF, Willem Buiter, chief economist at Citigroup, told Bloomberg Television, “The European Financial Stability Facility has gone from being a single-barreled gun to a Gatling gun, but with the same amount of ammo. . . . It needs to be increased in size urgently.”62 If Italy went critical, the EFSF would need not 200–400 billion but 1–2 trillion euros. Otherwise, only the ECB, with its bottomless supply of euros, could backstop the system.

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