States were complicit but did not cause the European debt crisis

Evidence

So, is the state complicit? Yes. Did the state cause these problems? No. Not unless we are willing to say that in Italy the level of family fertility is a fiscal responsibility and thus the state’s problem. In the Portuguese case, while demographics and low productivity play their parts, Portuguese net debt to GDP in 2000 was 52 percent and in 2007, 66 percent, which is hardly evidence of a spending splurge. Rather, in both cases, what was once seen as sustainable suddenly became seen as unsustainable once the possibility of a contagion-led fire sale through the European bond markets was factored into a slow-moving growth crisis. As usual, it’s the perception of risk that matters. And again, just as we saw in the US case, there was no orgy of government spending behind all this. Why, then, keep up the fiction that the bond market crisis is a crisis of spendthrift governments? — Mark Blyth, Austerity, 199

Categorization

• XREF: Connects to the US chapter’s finding that no spending orgy caused that crisis — both are the ‘perception of risk’ argument that anchors Blyth’s whole critique. — connects to: The European debt crisis resulted from banking losses, not sovereign overspending — Mark Blyth, Austerity: The History of a Dangerous…, 40; Europe’s rising debt ratios resulted from private financial crisis, not government profligacy — Mark Blyth, Austerity: The History of a Dangerous…, 149; Ireland and Spain’s crises stemmed from bank real-estate lending, not fiscal profligacy — Mark Blyth, Austerity: The History of a Dangerous…, 181 (+6 more)
• QUESTION: Worth chasing: how exactly does a contagion-led fire sale convert a slow growth crisis into a solvency panic? Mechanism deserves deeper tracing.

Broader Connections

• European fiscal crises were consequences of private banking crises, not their cause #corroborates (0.92) — Mark Blyth, Austerity, 205
• The Eurozone crisis was wrongly blamed on sovereign fiscal profligacy #corroborates (0.90) — Mark Blyth, Austerity, 152
• Pro-austerity economists refused to analyze the financial-crisis origins of state debt #corroborates (0.80) — Mark Blyth, Austerity, 470