Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The European institutions did not have the authority to intervene in national banking policy. The funds for recapitalization that had been created in 2008–2009 were spotty and facultative rather than mandatory in their application.51 National governments were too complacent and unwilling to disturb the comfortable status quo. Instead, Europe engaged in a double pretense. The troika went on pretending that Greek debt was sustainable, if only Athens adopted enough austerity. This was not true, as was becoming evident month by month: Greece was simply being driven into the ground. Meanwhile, the stress tests purported to show that Europe’s banks were robust, which they clearly were not. Indeed, their weakness ought to have been the best argument for refusing to risk Greek restructuring. This, however, was not an argument that the ECB could make out loud, for fear of triggering panic. Furthermore, it would have necessitated serious action on the recapitalization front, which both the banks and the national governments resisted. Caught in this double bind, the troika was reduced to pretending that all was well on every front. Meanwhile, in Greece unemployment rose from a low of 8 percent in the summer of 2008 to more than 12 percent in 2010. For young people it was already more than 30 percent. If the Greeks were the victims of extend-and-pretend, who were the beneficiaries? Billions of euros from the first tranche of the May 2010 program were disbursed to Athens, which in turn...

Infuriating