agreement on how to stop the threat to the entire eurozone that is caused by lenders and investors losing confidence in Greece.
Standing at the center of the storm is ... no, not Greece. It seems to be getting treated the way one treats a downtrodden member of society who did nothing to cause his or her own troubles. The center of the storm is Berlin, where Chancellor Angela Merkel has been pledging her support for a package for Greece while saying nothing would be signed until Greece comes up with a credible plan to fix the way it does business. If we can't support tough love in the midst of a global downturn, how will it ever be imposed when things are good and people's attention wanders to dreams of easy money again?
Unfortunately, the media -- especially the financial media, which seems to have learned nothing from the past 18 months -- is acting as if Merkel is selfishly pandering to conservative German public opinion, which overwhelmingly opposes any bailout.
Just one example is Christopher Noble at Rupert Murdoch's Marketwatch. In a recent column, Noble blames Merkel for almost single-handedly putting the entire eurozone at risk. Noble mixes in some History Channel-level understanding of history, complaining that Germany is driven to be tough on eurozone financial failures because Germany so wants to be normal again after World War II. (In one particularly ridiculous paragraph, he blames the 1990s' Balkan Wars on Germany.)
Noble might be a particularly ignoble example, but he's part of the majority of the news commentary on the Greek financial crisis that we're being fed in the U.S. Even my beloved Financial Times -- which I love because it generally doesn't drink the kool-aid -- has frequently attacked Germany for being hard-line about a Greek bailout.
Think about this: We are just now starting to realize some upside after this horrendous near-depression that most of the world was dragged into. What dragged us there? Lax lending standards, a dearth of transparency in economic transactions, corruption, weak or nonexistent regulation, a get-rich-now-worry-about-the-details-later attitude. You have heard about the NINJA loans in the subprime lending schemes? No income, no job, no assets. Yet such loans were given to people to buy homes during the housing bubble. It made the lender happy (he could book the loan, get the commission, then sell the loan to Wall Street where suckers were eager to buy it, even if the ratings agencies weren't properly rating the securitized loan packages) and it made the buyer happy (for stupidly thinking the home value would rise forever). Of course, when that house of cards collapsed, nearly everyone lost, even those of us who bought neither homes nor housing securities.
Well, Greece is the ultimate NINJA borrower. Financially irresponsible, refuses to take responsibility for the mess it made, yet it is (to mix American recession metaphors) too big to fail, so Europe has to take painful action.
I recently had a conversation with a Greek man who lives part of the year in Greece, part in the United States. He loves both countries dearly, and I think it pains him to see what's happening to Greece. Yet even he mixed his complaints about Germany with an acknowledgment that Greece has mismanaged its finances and labor market, and that it has little in the way of economic power. Tourism and some agriculture. That's it. There is a popular theme in Greece that says Germany should bail it out (to the tune of tens of billions of dollars) not with loans but with reparations for the bombing of Greece nearly 70 years ago in World War II. (At the risk of indelicateness, Germany bombed a hell of a lot of countries during that war, and the other countries have managed to build real economies in the time since; more important, Germany has ensconced itself in the European Union and eurozone -- and has spent billions to support the weaker members of those systems -- as a direct consequence of its shameful actions in WWII.)
There is reason for optimism.
As my Greek friend and I agreed, Greece will come out of this. I think they've got a good prime minister in Geórgios Papandréou, who assumed power just as the world financial crash was occurring. His irresponsible predecessors made his job even worse, but of course Greek government financial mismanagement goes back a long time and includes more than one party. He seems to understand what needs to be done; whether political realities in his country will allow him to do it remains to be seen
But Greece, if it's smart and makes the changes needed to become competitive (raising its retirement age to Western norms, for starters), will come out of this stronger than before. And they'll have Angela Merkel in part to thank for that. Though they won't.