Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Berlin’s refusal to stick to the bailout script was worrying for the French and shocking for the Greeks. But it should have been no surprise. Article 125 of the Maastricht Treaty banned mutual bailouts. The Lisbon Treaty that finally came into operation in December 2009, just as the Greek crisis exploded, had reinforced the primacy of nation-state responsibility. It also barred the route to the mutualization of debt, which might have allowed a European consortium to share the burden of backstopping some portion of Greece’s liabilities. In a crucial judgment on the Lisbon Treaty delivered on June 30, 2009, the German constitutional court had put a further obstacle in the way of any further moves toward EU integration.17 Karlsruhe insisted on a stiff test of democratic accountability before any further competences could be transferred to Brussels. What Berlin would agree to on February 11, 2010, was last resort, ultima ratio support for the euro as such. What that meant for a “bad apple” like Greece was unclear. Certainly, Greece should slash its deficits and engage in labor market reform to boost growth. But Germany was in no mood for a bailout. The vast majority of German politicians and public opinion appeared to be willing to let the markets have their way with both Greece and its creditors. If a debt write-down was necessary, so be it. If Athens was unable to pay, then there was support in Germany across the entire political spectrum for the debts to be restructured at ...