INET Council Member Expresses Shock at Financial “Betrayal” in Europ

Euro Crisis Report

WASHINGTON (September 28, 2012) — Professor Luis Garicano of the London School of Economics, speaking today about the proposals of the Institute for New Economic Thinking (INET) Council on the Euro Zone Crisis (ICEC) at the Peterson Institute for International Economics, expressed his shock at the “betrayal” by Germany, the Netherlands and Finland of the agreements in the June 29 euro summit, and at the recent statements against a banking union and against legacy-cost burden sharing by the Bundesbank´s President Jens Weidman.

“Contrary to what Jens Weidman, and the three leaders, have said this week, it is precisely the legacy costs of the banking bust, as the INET Euro Council report argues, that need to be shared,” Garicano said. “These costs are going to strangle any possible recovery by Spain and Ireland if they fall exclusively on their taxpayers and were the result of mistakes by both creditors and lenders and of the designers of the euro area. It is fair and efficient that they are shared, and it is essential that they are if we want to get out of this rut. And it was explicitly agreed in the June 29th summit ”

In his talk, Garicano also argued that “a deal is a deal” and that the creditor countries, in reneging from this deal, are endangering the trust that is essential for the euro zone.

“How is Spain now going to believe reassurances that ask for a new ‘soft’ rescue will not bring additional conditionality?” Garicano asked.