European fiscal crises were consequences of private banking crises, not their cause

Evidence

The result of all this opportunistic rebranding was the greatest bait-and-switch operation in modern history. What were essentially private-sector debt problems were rechristened as “the Debt” generated by “out-of-control” public spending. Yet, of all the PIIGS, only Greece was in any meaningful sense profligate. Italy may have been lax, but no one minded them having the third-largest bond market in the world until 2010, when contagion plus demographics gave pause to the holders of Italian debt. Portugal may have spent a fair amount on modernizing its infrastructure and built a few high-speed rail lines of dubious need, but it was hardly spending its way to oblivion. Ireland and Spain were quintessential private-sector-housing-cum-banking crises, governed by states more fiscally prudent than Germany, where the risks were socialized while the profits were privatized. In all cases, private-sector weaknesses ended up creating public-sector liabilities that European publics now have to pay for with austerity programs that make the situation worse rather than better. The fiscal crisis in all these countries was the consequence of the financial crisis washing up on their shores, not its cause. To say that it is the cause is to deliberately, and politically, confuse cause and effect. — Mark Blyth, Austerity, 205

Categorization

• XREF: Directly connects to Mattei and the broader austerity literature on the ideological framing of private debt as public profligacy. — connects to: Sweden’s 1989-1993 collapse came from asset bubbles and currency crisis, not debt fears — Mark Blyth, Austerity: The History of a Dangerous…, 573; The European debt crisis resulted from banking losses, not sovereign overspending — Mark Blyth, Austerity: The History of a Dangerous…, 40; The 2008 crisis originated in private-sector practices, not state spending — Mark Blyth, Austerity: The History of a Dangerous…, 76 (+13 more)
• ADDENDUM: Supports ‘On Sacrifice’ in the sense of risk socialization/privatization of profits — the classic moral-hazard framing — though more directly it extends the austerity critique.
• DEFINE: Clarifies what ‘the Debt’ actually was in the PIIGS crisis versus what it was rhetorically claimed to be.

Broader Connections

• European banking crisis was mostly private-sector exposure, not sovereign over-spending #corroborates (0.95) — Mark Blyth, Austerity, 240
• Austerity framed economic crisis as caused by governments and workers, not capital #corroborates (0.72) — Clara E. Mattei, The Capital Order, 783
• Budget surplus rules ignore that private debt often causes more damage #expands (0.70)
• Crises recurring across eras implies neoliberalism may not cause them #qualifies (0.70) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 1787