European banks are collectively too big for any sovereign to bail, forcing austerity instead

Evidence

While it is tempting to say that neither German politicians nor ECB bankers understand fallacies of composition and both are allergic to inflation, and leave it at that, there is a more satisfying answer, and it’s the same one we saw in the US case: what starts with the banks ends with the banks. To really understand why Europe has been slashing itself to insolvency, we need to embed these very real ideological and political factors within an account of how the euro as a currency enabled the development of a system of banks that is too big to bail. If the US had banks that were too big to fail, Europe has a system of banks that are collectively too big to bail. That is, no sovereign can cover the risks generated by its own banks because the banks are too big and the sovereign doesn’t have a printing press. In this world there can be no bailout big enough to save the system if it starts to fail. Consequently, the system cannot be allowed to fail, which is the real reason we must all be austere. In the United States we were afraid of the consequences of the banks failing. In Europe they are terrified of the same thing, and as we shall see, they are terrified for good reason. — Mark Blyth, Austerity, 207

Categorization

• XREF: Directly parallels the US too-big-to-fail frame from the earlier US chapter; the euro adding the no-printing-press constraint is the crucial new mechanism to carry into Mattei. — connects to: European austerity serves to reserve sovereign balance-sheet space for too-big-to-bail bank rescues — Mark Blyth, Austerity: The History of a Dangerous…, 617; European banks are too big for any single government to bail out — Mark Blyth, Austerity: The History of a Dangerous…, 37; European banks were too large for any national sovereign to rescue — Mark Blyth, Austerity: The History of a Dangerous…, 231 (+4 more)
• DEFINE: Defines ‘too big to bail’ as a distinct condition from ‘too big to fail’: the sovereign lacks a printing press for its own currency.

Broader Connections

• European banks were too large for any national sovereign to rescue #corroborates (0.98) — Mark Blyth, Austerity, 231
• Eurozone banking integration outpaced national resolution, producing too-big-to-bail systemic risk #expands (0.92) — Mark Blyth, Austerity, 227
• European austerity is a bait-and-switch to save banks from themselves without admitting it #corroborates (0.90) — Mark Blyth, Austerity, 208
• Bailing out bankers while imposing austerity damaged faith in politicians #expands (0.78) — Yanis Varoufakis, Technofeudalism, 392
• Banks deliberately bought mispriced periphery debt because size guaranteed bailout #qualifies (0.75) — Mark Blyth, Austerity, 226