As economic turmoil has gripped Europe in the last few years, one characteristic of the political commentary is the need to find someone to blame. In fact, to be more precise, it is the need to find someone else to blame. The bankers are a favourite target, although a rather obvious and now stale one. Property developers feature in the chatter in both Madrid and Dublin where a property bubble has been a cause of wealth destruction. In Lisbon and Athens, the focus has been on elites who have spirited all the wealth away. Germans and Finns talk a lot about fiscal incontinence in the south of Europe, or the periphery as it is now known. Perhaps that was a carefully chosen term! Throw into the mix the rating agencies who have downgraded sovereign debt and you have a failry representative view of which ways the fingers are pointing.
However, the last example is a little different, as it is an example of shooting the truthful messenger. They are merely reflecting the facts as they see them and while politicians have been slow to accept those facts, the markets are perfectly in tune with the sentiments of the rating agencies.
I was slightly amused by the comments following the meeting of Frau Merkel and the Pope this weekend. The views relayed by the press were along the lines that it was shameful that markets were deciding the economic futures of people and not elected politicians. Now these are an illustrious pair – both intelligent and at the top of their callings – but I am not sure which one knows less about economics and business. The Martians would probably put money on Frau Merkel, but I am not so sure. Apart from the lack of leadership that she has shown at home during this crisis, she has always done too little, too late in response to crisis events. At the heart of the problem with the view that they expressed is a lack of understanding of waht constitutes a market. In this case, people who have money are being asked to lend it. They see that such loans are at risk because the European banking system has some bad banks in many countries and that a Greek default is becoming a probability. Politicians deny that this is the case and don’t take action, but they don’t have the funds to support their opinions, so money votes with its feet.
The idea that banks and sovereign wealth funds would ignore the facts and their instincts because politicians or religious leaders tell them to is a rather quaint notion. It says more about the people who express it than about those who are its target. At the end of the day it does not inspire a lot of hope that solution to the problem will be found any time soon.
