This House would introduce Eurobonds

One of the most important European Union principles is solidarity and mutual respect among European citizens[1] and this can only be achieved by more integration and stronger connections between states. The economic crisis has clearly shown that more integration is necessary if Europe is to prevent suffering and economic hardship.

From the economic perspective, unemployment rates reached disastrous levels in 2012 with Greece at 24,3% and Spain 25%.[2] There is a lack of leadership and connection between countries in the European Union that is not allowing them to help one-another and solve the economic crisis.

From the political point of view the result of this is that extremist parties are on the rise with the best example of Golden Dawn in Greece.[3] While in 1996 and 2009 the party didn’t win any seats in the Greek Parliament, after the crisis hit in June 2012 they won 18 seats.[4]  In time of distress, the logical solution is not that every country should fight for itself but rather the willingness to invest and integrate more in the union to provide a solution for all.

Eurobonds provides the integration that will help prevent these problems, it will both halt the current crisis of government debts because governments will have lower interest repayments and not have the threat of default, and it will show solidarity between members. This in turn will help any future integration as showing that Europe cares for those in difficulty will make everyone more willing to invest in the project. 

[1] Europa, ‘The founding principles of the Union’, Europa.eu,  http://europa.eu/scadplus/constitution/objectives_en.htm#OBJECTIVES

[2] Eurostat, ‘Unemployment rate, 2001-2012 (%)’, European Commission,  27 June 2013, http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Unemployment_rate,_2001-2012_(%25).png&filetimestamp=20130627102805

[3] ‘Golden Dawn party’, The Guardian, http://www.theguardian.com/world/golden-dawn

[4] Henley, Jon, and Davies, Lizzy, ‘Greece’s far-right Golden Dawn party maintains share of vote’, theguardian.com, 18 June 2012 http://www.theguardian.com/world/2012/jun/18/greece-far-right-golden-dawn

Integration cannot happen on the hoof. The euro crisis and the political and social distress in the European Union have created negative sentiments when talking about the Union. The European citizens do not want these kinds of measures and there is a general sentiment of euro skepticism. Countries like Germany are no longer interested in paying for Greek mistakes and Angela Merkel is strongly opposing the idea of Eurobonds, saying that Germany might leave the union.[1] Clearly this is not the time to be forcing through more integration against the will of the people.

More than that extremist parties are on the rise. An anti-Muslim, anti-immigration and anti-integration party, France’s National Front has come out top in a poll of how French people will vote European Union Parliament elections.[2] In contrary to the false connection between poor economy and extremism, it comes in hand the fact that the National Front reached the runoff in the 2002 French presidential elections.[3] In conclusion, people are not willing to invest more in the union but rather wanted to take a step back from integration even before the crisis.

[1] Cgh, ‘The Coming EU Summit Clash: Merkel Vows ‘No Euro Bonds as Long as I Live’, Spiegel Online, 27 June 2012, http://www.spiegel.de/international/europe/chancellor-merkel-vows-no-euro-bonds-as-long-as-she-lives-a-841163.html

[2] Mahony, Honor, ‘France’s National Front tops EU election survey’, euobserver.com, 9 October 2013, http://euobserver.com/political/121724

[3] Oakley, Robin, and Bitterman, Jim, ‘Le Pen upset causes major shock’, CNN World, 21 April 2002, http://edition.cnn.com/2002/WORLD/europe/04/21/france.election/?related

Introducing Eurobonds will lower interest rates for bonds issued by national governments so making the loans affordable. The most recent example of this problem is the need of recapitalization of banks in Cyprus. Although government debt and interest rates were not the direct problem if the government had been able to borrow at low interest rates to recapitalize its own banks then it would have not needed a bailout from the rest of the Eurozone.[1] In order to avoid these kinds of solutions and put people back to work in countries like Portugal, Italy or Spain, national governments need a bigger demand for their bonds so that interest rates go down.

Right now, sovereign-bonds are not affordable for the government as their interest rates are extremely high. Greece has an interest rate of 9.01%, Portugal 6.23%, and Italy and Spain near 4.30%.[2] If we choose to bundle the bonds together we will obtain a single interest rate that will lower the price of bonds and permit countries to borrow more, the price would be closer to Germany’s than Greece’s as the Eurozone as a whole is not more risky than other big economies. More than that, the markets won’t be worry anymore of the possible default of countries like Greece; as the bonds are backed up by the ECB and indirectly by other countries in the union, the debtors will know that their loans will be repaid because in the last resort more financially solvent countries take on the burden. When the risk of default is eliminated, the demand for government bonds will rise and the interest rates will go down. It is estimated that Italy could save up to 4% of its GDP[3] and Portugal would see annual repayments fall by 15bn euros, or 8% of its GDP.[4]

[1] Soros, George, ‘How to save the European Union’, theguardian.com, 9 April 2013, http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-eurobonds

[2] Bloomberg, ‘Rates & Bonds’, accessed 15 October 2013, http://www.bloomberg.com/markets/rates-bonds/

[3] Soros, George, ‘How to save the European Union’, theguardian.com, 9 April 2013, http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-eurobonds

[4] Soros, George, ‘How to save the European Union’, theguardian.com, 9 April 2013, http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-eurobonds

There are some assumptions made in the construction of this argument. First of all, you can’t hide the risk from the economic community. There is no guarantee that when issuing Eurobonds, the interest rates will drop. This is happening for two main reasons.

Firstly, according to the proposition model, the bonds will still be issued at a national level, showing investors if the money is going to Spain, Italy or Germany, France. While these should in theory have the same interest rates will investors really buy Eurobonds where the money is destined for Greece if not getting much interest? Perception still matters to the markets; will Greece and Germany really suddenly be perceived in the same way.

Secondly, even if the European Union decides to borrow money as a whole, its image is not a good one. Everybody knows the major problems that the union is facing right now so it is possible that concerns about the stability of the Euro as a whole will mean Eurobonds drive interest rates up, not down. Greece was still downgraded after its first bailout from CCC to C by the Fitch Financial Service even if the money were backed up by the ECB, being backed by the whole zone did not change the local fundamentals.[1]

[1] AP/AFP, ‘Greek Credit Downgraded Even With Bailout’, Voice of America, 21 February 2012, http://www.voanews.com/content/greek-credit-downgraded-even-with-bailout-139975563/152377.html

The European Union should not only focus on the present but also try to find a permanent solution in resolving and preventing economic crisis. The solution that is implemented right now through the European Stability Mechanism is a temporary one and has no power in preventing further crisis. First of all, the failure of the European Union to agree on banks bailout is a good example.[1] As economic affairs commissioner Olli Rehn admitted the bailout negotiations have been "a long and difficult process"[2] because of the many institutions and ministers that have a say in making the decision.  More than that, it sometimes takes weeks and even months until Germany and other leaders in the union can convince national parliaments to give money in order for us to be able to help those in need.

Issuing bonds as a union of countries will provide more control to the ECB that will be able to approve or deny a loan – one option would be that after a certain limit countries would have to borrow on their own.[3] This will prevent countries from borrowing and spending irrationally like Greece, Portugal, Spain and Italy did in the past. The unsustainable economic approach can be easily seen in the fact that public sector wages in Greece rose 50% between 1999 and 2007 - far faster than in most other Eurozone countries.[4] Clearly Greece could make the choice to go separately to the market to fund this kind of spending but it would be unlikely to do so.

[1] Spiegel, Peter, ‘EU fails to agree on bank bailout rules’, The Financial Times, 22 June 2013, http://www.ft.com/intl/cms/s/0/8bbfdf84-daeb-11e2-a237-00144feab7de.html#axzz2hG9t5YAS

[2] Fox, Benjamin, ‘Ministers finalise €10 billion Cyprus bailout’, euobserver.com, 13 April 2013, http://euobserver.com/economic/119782

[3] Plumer, Brad, ‘Can “Eurobonds” fix Europe?’, The Washington Post, 29 May 2012, http://www.washingtonpost.com/blogs/wonkblog/post/why-eurobonds-wont-be-enough-to-fix-europe/2012/05/29/gJQACjR1yU_blog.html

[4] BBC News, ‘Eurozone crisis explained’, 27 November 2012, http://www.bbc.co.uk/news/business-13798000

The problem with long-term regulations is not that they do not exist but rather the fact that they are not imposed. There is no need for further control and regulation when the European Union already has a mechanism that will prevent economic crisis if it is stuck to. The Maastricht Treaty clearly states that countries in the European Union shall not have a government deficit that exceeds 3% of the GDP and the government debt was limited to be no larger than 60% of the GDP.[1] These measures should be enough to prevent any country in the union to collapse. The major problem was that the Maastricht Treaty was not respected by the member states and little or no sanctions were imposed to ensure compliance. Even comparatively stable countries have deficits above 3%, France had a deficit of 4.8% in last year.[2] The simple solution would be keeping the regulation of the already existing treaty and sanction countries that exceed their deficits and not impose new rules.

[1] Euro economics, ‘Maastricht Treaty’,  http://www.unc.edu/depts/europe/euroeconomics/Maastricht%20Treaty.php

[2] The World Factbook, ‘Budget surplus (+) or Deficit (-)’, cia.gov, 2013, https://www.cia.gov/library/publications/the-world-factbook/fields/2222.html

One of the most important European Union principles is solidarity and mutual respect among European citizens[1] and this can only be achieved by more integration and stronger connections between states. The economic crisis has clearly shown that more integration is necessary if Europe is to prevent suffering and economic hardship.

From the economic perspective, unemployment rates reached disastrous levels in 2012 with Greece at 24,3% and Spain 25%.[2] There is a lack of leadership and connection between countries in the European Union that is not allowing them to help one-another and solve the economic crisis.

From the political point of view the result of this is that extremist parties are on the rise with the best example of Golden Dawn in Greece.[3] While in 1996 and 2009 the party didn’t win any seats in the Greek Parliament, after the crisis hit in June 2012 they won 18 seats.[4]  In time of distress, the logical solution is not that every country should fight for itself but rather the willingness to invest and integrate more in the union to provide a solution for all.

Eurobonds provides the integration that will help prevent these problems, it will both halt the current crisis of government debts because governments will have lower interest repayments and not have the threat of default, and it will show solidarity between members. This in turn will help any future integration as showing that Europe cares for those in difficulty will make everyone more willing to invest in the project. 

[1] Europa, ‘The founding principles of the Union’, Europa.eu,  http://europa.eu/scadplus/constitution/objectives_en.htm#OBJECTIVES

[2] Eurostat, ‘Unemployment rate, 2001-2012 (%)’, European Commission,  27 June 2013, http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Unemployment_rate,_2001-2012_(%25).png&filetimestamp=20130627102805

[3] ‘Golden Dawn party’, The Guardian, http://www.theguardian.com/world/golden-dawn

[4] Henley, Jon, and Davies, Lizzy, ‘Greece’s far-right Golden Dawn party maintains share of vote’, theguardian.com, 18 June 2012 http://www.theguardian.com/world/2012/jun/18/greece-far-right-golden-dawn

Integration cannot happen on the hoof. The euro crisis and the political and social distress in the European Union have created negative sentiments when talking about the Union. The European citizens do not want these kinds of measures and there is a general sentiment of euro skepticism. Countries like Germany are no longer interested in paying for Greek mistakes and Angela Merkel is strongly opposing the idea of Eurobonds, saying that Germany might leave the union.[1] Clearly this is not the time to be forcing through more integration against the will of the people.

More than that extremist parties are on the rise. An anti-Muslim, anti-immigration and anti-integration party, France’s National Front has come out top in a poll of how French people will vote European Union Parliament elections.[2] In contrary to the false connection between poor economy and extremism, it comes in hand the fact that the National Front reached the runoff in the 2002 French presidential elections.[3] In conclusion, people are not willing to invest more in the union but rather wanted to take a step back from integration even before the crisis.

[1] Cgh, ‘The Coming EU Summit Clash: Merkel Vows ‘No Euro Bonds as Long as I Live’, Spiegel Online, 27 June 2012, http://www.spiegel.de/international/europe/chancellor-merkel-vows-no-euro-bonds-as-long-as-she-lives-a-841163.html

[2] Mahony, Honor, ‘France’s National Front tops EU election survey’, euobserver.com, 9 October 2013, http://euobserver.com/political/121724

[3] Oakley, Robin, and Bitterman, Jim, ‘Le Pen upset causes major shock’, CNN World, 21 April 2002, http://edition.cnn.com/2002/WORLD/europe/04/21/france.election/?related

Introducing Eurobonds will lower interest rates for bonds issued by national governments so making the loans affordable. The most recent example of this problem is the need of recapitalization of banks in Cyprus. Although government debt and interest rates were not the direct problem if the government had been able to borrow at low interest rates to recapitalize its own banks then it would have not needed a bailout from the rest of the Eurozone.[1] In order to avoid these kinds of solutions and put people back to work in countries like Portugal, Italy or Spain, national governments need a bigger demand for their bonds so that interest rates go down.

Right now, sovereign-bonds are not affordable for the government as their interest rates are extremely high. Greece has an interest rate of 9.01%, Portugal 6.23%, and Italy and Spain near 4.30%.[2] If we choose to bundle the bonds together we will obtain a single interest rate that will lower the price of bonds and permit countries to borrow more, the price would be closer to Germany’s than Greece’s as the Eurozone as a whole is not more risky than other big economies. More than that, the markets won’t be worry anymore of the possible default of countries like Greece; as the bonds are backed up by the ECB and indirectly by other countries in the union, the debtors will know that their loans will be repaid because in the last resort more financially solvent countries take on the burden. When the risk of default is eliminated, the demand for government bonds will rise and the interest rates will go down. It is estimated that Italy could save up to 4% of its GDP[3] and Portugal would see annual repayments fall by 15bn euros, or 8% of its GDP.[4]

[1] Soros, George, ‘How to save the European Union’, theguardian.com, 9 April 2013, http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-eurobonds

[2] Bloomberg, ‘Rates & Bonds’, accessed 15 October 2013, http://www.bloomberg.com/markets/rates-bonds/

[3] Soros, George, ‘How to save the European Union’, theguardian.com, 9 April 2013, http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-eurobonds

[4] Soros, George, ‘How to save the European Union’, theguardian.com, 9 April 2013, http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-eurobonds

There are some assumptions made in the construction of this argument. First of all, you can’t hide the risk from the economic community. There is no guarantee that when issuing Eurobonds, the interest rates will drop. This is happening for two main reasons.

Firstly, according to the proposition model, the bonds will still be issued at a national level, showing investors if the money is going to Spain, Italy or Germany, France. While these should in theory have the same interest rates will investors really buy Eurobonds where the money is destined for Greece if not getting much interest? Perception still matters to the markets; will Greece and Germany really suddenly be perceived in the same way.

Secondly, even if the European Union decides to borrow money as a whole, its image is not a good one. Everybody knows the major problems that the union is facing right now so it is possible that concerns about the stability of the Euro as a whole will mean Eurobonds drive interest rates up, not down. Greece was still downgraded after its first bailout from CCC to C by the Fitch Financial Service even if the money were backed up by the ECB, being backed by the whole zone did not change the local fundamentals.[1]

[1] AP/AFP, ‘Greek Credit Downgraded Even With Bailout’, Voice of America, 21 February 2012, http://www.voanews.com/content/greek-credit-downgraded-even-with-bailout-139975563/152377.html

The European Union should not only focus on the present but also try to find a permanent solution in resolving and preventing economic crisis. The solution that is implemented right now through the European Stability Mechanism is a temporary one and has no power in preventing further crisis. First of all, the failure of the European Union to agree on banks bailout is a good example.[1] As economic affairs commissioner Olli Rehn admitted the bailout negotiations have been "a long and difficult process"[2] because of the many institutions and ministers that have a say in making the decision.  More than that, it sometimes takes weeks and even months until Germany and other leaders in the union can convince national parliaments to give money in order for us to be able to help those in need.

Issuing bonds as a union of countries will provide more control to the ECB that will be able to approve or deny a loan – one option would be that after a certain limit countries would have to borrow on their own.[3] This will prevent countries from borrowing and spending irrationally like Greece, Portugal, Spain and Italy did in the past. The unsustainable economic approach can be easily seen in the fact that public sector wages in Greece rose 50% between 1999 and 2007 - far faster than in most other Eurozone countries.[4] Clearly Greece could make the choice to go separately to the market to fund this kind of spending but it would be unlikely to do so.

[1] Spiegel, Peter, ‘EU fails to agree on bank bailout rules’, The Financial Times, 22 June 2013, http://www.ft.com/intl/cms/s/0/8bbfdf84-daeb-11e2-a237-00144feab7de.html#axzz2hG9t5YAS

[2] Fox, Benjamin, ‘Ministers finalise €10 billion Cyprus bailout’, euobserver.com, 13 April 2013, http://euobserver.com/economic/119782

[3] Plumer, Brad, ‘Can “Eurobonds” fix Europe?’, The Washington Post, 29 May 2012, http://www.washingtonpost.com/blogs/wonkblog/post/why-eurobonds-wont-be-enough-to-fix-europe/2012/05/29/gJQACjR1yU_blog.html

[4] BBC News, ‘Eurozone crisis explained’, 27 November 2012, http://www.bbc.co.uk/news/business-13798000

The problem with long-term regulations is not that they do not exist but rather the fact that they are not imposed. There is no need for further control and regulation when the European Union already has a mechanism that will prevent economic crisis if it is stuck to. The Maastricht Treaty clearly states that countries in the European Union shall not have a government deficit that exceeds 3% of the GDP and the government debt was limited to be no larger than 60% of the GDP.[1] These measures should be enough to prevent any country in the union to collapse. The major problem was that the Maastricht Treaty was not respected by the member states and little or no sanctions were imposed to ensure compliance. Even comparatively stable countries have deficits above 3%, France had a deficit of 4.8% in last year.[2] The simple solution would be keeping the regulation of the already existing treaty and sanction countries that exceed their deficits and not impose new rules.

[1] Euro economics, ‘Maastricht Treaty’,  http://www.unc.edu/depts/europe/euroeconomics/Maastricht%20Treaty.php

[2] The World Factbook, ‘Budget surplus (+) or Deficit (-)’, cia.gov, 2013, https://www.cia.gov/library/publications/the-world-factbook/fields/2222.html

Introducing Eurobonds will increase the burden for the European Union as a whole and change the responsibility in the long-term. Right now, countries are willing to help one-another and the best example is the European Stability Mechanism, a program designed to help countries in distress with major economic potential. [1] This is happening because the European Union is not fully responsible for the mistakes of the countries in the Eurozone. Of course, Eurobonds is just taking a step further but it also promotes a bigger burden for the union. Such a long term burden should not be decided and imposed in a time of crisis. If we let the European Union and the ECB decide to back national loans and approve Eurobonds it will effectively be imposed upon the people. The idea is not popular with many national electorates and such a decision will have to be taken without their consent. Germany is the clearest example, in a ZDF television poll, 79% said that they are opposing the idea of Eurobonds.[2] The real problem is that this is a one way street, it would be very difficult to reverse course as interest rates would immediately shoot up again thus immediately recreating the crisis if there were such an attempt. Any attempt at imposition without a clear democratic mandate throughout the union could seriously damage the EU by creating a popular backlash.

[1] European Stability Mechanism, ‘About the ESM’, esm.europa.eu,  http://www.esm.europa.eu

[2] AP, ‘Poll: Germans strongly against eurobonds’, Bloomberg Businessweek, 25 November 2011, http://www.businessweek.com/ap/financialnews/D9R7R5J81.htm

Sometimes, a leap of faith is what needs to be taken in order to fix such big problems. First of all the willingness of the union to do more in helping countries that having difficulties will improve its image both in these countries and abroad because it will show the EU sticking to its core principles. Even if we agree that Eurobonds might be a risky idea, something needs to be done to fix the economy. We have clearly seen how bailouts do not work and are not providing a permanent solution. The Eurozone is likely to decide on a third bailout for Greece in November 2013 and little proof that this will make the situation better for the Greeks.[1] Furthermore, the temporary solution of bailouts is taken without the consent of the electorate so the problem of a democratic deficit exists in both cases. Acting now to end the crisis will mean a possible end to such sticking plasters being applied without democratic consent. The EU will then be able to concentrate on demonstrating the advantages of the solution it has taken.

[1] Strupczwski, Jan, ‘Decision on third Greek bailout set for November: officials’, Reuters, 5 September 2013, http://www.reuters.com/article/2013/09/05/us-eurozone-greece-idUSBRE9840NN20130905

The policy proposed will shift responsibility for bad economic decisions and create moral hazard due to the lack of accountability. If the European Union decides to introduce bonds with the same interest rate for all countries, everyone in the union will have to suffer for the mistakes made by Ireland, Greece, Spain, Italy or Portugal (or any other state that may make them in the future). The burden will be shifted to the whole union in the form of higher interest rates for the prudent and countries that made mistakes in the past will pay no price for their economic instability and poor decision-making. This situation will happen if the Eurobonds indeed function as they are planned to and the interest rates will be kept low by comparison to the current rates for Greece, Italy etc. More than that, this situation will lead to what economist call the moral hazard. Moral hazard appears where a person, institution or national government in this case is not made responsible for past actions and so does not change their ways in response; insulating someone from the consequences of their actions takes the learning out of their actions. If countries in distress are not made responsible for their irrational spending made in the past (not just governments but also having trade deficits, banks too willing to lend etc.), there is no reason why these countries should alter their approach to the economy. Accountability to the market is what will resolve the economic crisis and prevent another. This can only be done without Eurobonds. 

Moral hazard is not going to happen in the European Union because alongside the benefits of the Eurobonds comes the control from the European Central Bank or other measures imposed by the rest of the members. This is already happening in the status quo, where countries are forced to impose austerity measures in order to receive bailout founds.[1] Under the model proposed where the ECB can control the lending ability of any country in the union, by allowing the loan or denying it at a certain limit. Countries will most certainly be held accountable if they fail to pay back their loans by not giving them access to further bond issuing. Eurobonds are not a tap governments can use for spending recklessly.

[1] Garofalo, Pat, ‘Greek Austerity, the Sequel’, U.S.News, 9 July 2013, http://www.usnews.com/opinion/blogs/pat-garofalo/2013/07/09/imf-forces-more-austerity-on-greece-in-return-for-bailout-loans

The situation that is implemented in the Status Quo, with the Economic Stability Mechanism trying to save countries in collapse will no longer be an option after introducing Eurobonds. Previous arguments have explained how interest rates will not be lowered enough to make countries stable again but another problem is that they will inhibit any chance of a plan B.

First of all, Germany has low interest rates for its government bonds and had it this way in the last few years through the crisis.[1] This is allows them to take loans cheaply helping to sustain their manufacturing industry and government spending, and allowing Germany to finance bailouts. If Germany's borrowing costs rose to the Eurozone average, it could cost Berlin an extra €50bn a year in repayments – almost 2% of its GDP.[2] This will clearly impact on Berlin’s ability and willingness to contribute to the European Stability Mechanism with the knock on effect that if despite Eurobonds another bailout is needed it may not be possible to raise the funds to actually carry out that bailout.

Secondly, the Eurobonds create obvious winners and losers; Germany and other prudent nations such as Austria and Finland, as well as the slightly more profligate France will have to suffer the consequences of the economic crisis caused by other countries in the union; Greece, Ireland, Spain and  Portugal. With higher interest rates they will need to engage in their own austerity campaigns to compensate which will affect economic growth and create discontent. Why should we punish Germany for the wrongdoing of other states?

[1] Bloomberg, ‘Rates & Bonds’, accessed 15 October 2013, http://www.bloomberg.com/markets/rates-bonds/

[2] Inman, Philip, ‘Eurobonds: an essential guide’, theguardian.com, 24 May 2012, http://www.theguardian.com/business/2012/may/24/eurobonds-an-essential-guide

There is a common responsibility in the European Union for helping countries that are hit harder by economic crises than the others. If Eurobonds create winners and losers, the same thing can be said about the economic crisis. Germany was one of the winners and therefore has the duty to help the others. The Eurozone crisis has created a bigger demand for German bonds and lowered the interest rate they have to pay. Germany has such low interest rates because Spain, Italy and Greece are incapable of sustaining their debt, it is therefore a safe haven for people who want to buy government bonds. It is estimated that Germany gained 41 billion euros[1] in ‘profit’ from these lower interest rates as a result of the crisis and therefore has the ability and the moral duty to help countries that are worse-off. More than that, every prudent creditor has a profligate debtor. French and German banks could risk loosing a few hundred millions each if Greece defaults, the creditor accepted the risk when they lent the money.[2] We should remember that the core of the economic success of countries such as Germany has been the Euro helping to increase exports; these exports were what Greeks were buying with the credit they were getting from foreign banks.

[1] SPIEGEL/cro, ‘Profiteering: Crisis Has Saved Germany 40 Billion Euros’, Spiegel Online, 19 August 2013, http://www.spiegel.de/international/europe/germany-profiting-from-euro-crisis-through-low-interest-rates-a-917296.html

[2] Slater, Steve, and Laurent, Lionel, ‘Analysis: Greek debt shadow looms over European banks’, Reuters, 20 April 2011, http://www.reuters.com/article/2011/04/20/us-europe-banks-idUSTRE73J4BZ20110420