Germany’s Greek crisis. 11 years ago Greece faced a sovereign debt crisis because of:
- irresponsible fiscal policy
- bad luck
Today Germany faces a geopolitical crisis because of:
- irresponsible energy policy
- bad luck
Greece’ s bad luck was a global financial crisis triggered in the US housing market. Germany’s bad luck came in the form of erratic decisions from an entrenched tyrant. But, as German officials liked to remind their Greek counterparts, bad luck is no excuse for bad policy.
Greek politicians were free riding on the credibility of the euro that allowed cheap and apparently unlimited borrowing… for a while. They bet that market finance would keep flowing indefinitely. It was cheap. But it was risky.
Being fiscally responsible is like buying insurance against future crises. Greek politicians did not want to pay the price of responsibility. They later imposed a cost on their fellow Europeans when the funds dried up.
Germany did the same with its energy policy. It was a bet that the gas would keep flowing. Germany is depended on gas inflows just as Greece was on financial ones. It refused to pay the cost of insurance in the form of diversification.
And the costs are now born by other countries as Germany’s dependence becomes a constraint on Europe’s policy making.
Vir: Thomas PHILIPPON, @ThomasPHI2