European austerity is a bait-and-switch to save banks from themselves without admitting it

Evidence

To get there we encounter some very familiar themes: subprime mortgage special purpose vehicles (SPVs), repo market collateral problems, and banks chasing yield in a low-interest-rate environment, as well as some unfamiliar ones such as bank resolution regimes (who has the responsibility to bail or fail banks), moral hazard trades (too big to fail as a business model), and why national debt issued in a common currency is a really bad idea. Taken together they explain why we really all need to be austere: because once again we need to save the banks, from themselves. But this time around no politician, especially in Europe, is going to admit that is exactly what is being done, which is why the bait and switch is needed. — Mark Blyth, Austerity, 208

Categorization

• XREF: The ‘bait and switch’ framing connects to the earlier US chapter’s account of bank-saving austerity and to Mattei’s argument that austerity is bank protection wearing fiscal-responsibility clothing. — connects to: The Bank of France weaponized debt rollover refusal to force austerity on left governments — Mark Blyth, Austerity: The History of a Dangerous…, 547; Eastern European austerity in 2009 existed to protect Western banks — Mark Blyth, Austerity: The History of a Dangerous…, 601; Iceland and Ireland offer a natural experiment comparing austerity with bank default — Mark Blyth, Austerity: The History of a Dangerous…, 638 (+9 more)
• DEFINE: Lists the unfamiliar toolkit terms — bank resolution regimes, moral hazard trades, common-currency national debt — that define the chapter’s analytic frame.

Broader Connections

• European austerity serves to reserve sovereign balance-sheet space for too-big-to-bail bank rescues #expands (0.85) — Mark Blyth, Austerity, 617
• Governments mislabel banking rescues as sovereign overspending because honesty would be politically fatal #expands (0.82) — Mark Blyth, Austerity, 242