Professor John Quiggin takes a
look at the so called "European crisis" and finds fault with guess who - the banks;
Banks and other financial institutions lent too much money without worrying about the capacity of the borrowers to pay it back. Some of this money went to profligate governments, but most, as in the first round of crisis, went to stimulate booming real estate markets in Spain, Ireland, Iceland and elsewhere.
Which must make uncomfortable reading for those who profit out of speculation.
The main problem for the governments in this countries have arisen because they have been forced to bail out their domestic banks. As the losses are too big to be managed by the governments in question, their own solvency is called into question.
So speculators can bring down governments? - perhaps
It remains to be seen whether the eurozone governments can manage this crisis, or whether the whole euro project will collapse. Whatever the outcome, the main policy lesson is that light-handed regulation of a ‘too big to fail’ financial sector is a recipe for disaster.
