“Anything that can go wrong will go wrong.” This piece of wisdom is known as Murphy’s Law, and I absolutely hate it, but Prof. Gustav A. Horn, the director of the Macroeconomic Policy Institute (IMK) at Germany’s Hans-Böckler Foundation, says it currently applies extraordinarily well to economic policy in the euro zone. He gets angry with “the German government’s submissiveness to the financial markets and its cowardice towards the tabloid press (the mass circulation daily Bild, for example, wrote in a headline: ‘You Greeks Aren’t Getting a Thing from Us’).” A cowardice which could get very expensive for German taxpayers.
On the one side there are the Greeks, who clearly still do not have their financial statistics under control and who produce one false report after another about the country's budget deficit. On the other side are the Germans, who delight in hindering a rapid and unambiguous European response to the Greek crisis -- in the process driving the cost of a solution through the roof.
Both Greece's calculation errors and the diva-like reluctance of the German government to help Athens are nothing more than an invitation to speculators to bet on the demise of the southern European country. This also explains why risk premiums on Greek government bonds have shot up to previously unimagined heights in recent days. The Greek government must now pay such high interest rates to refinance its debts that it can no longer get by without foreign assistance, despite recent tax increases and massive wage cuts.
But Murphy’s Law isn’t the only piece of wisdom here. As Italy’s Finance Minister Giulio Tremonti told reporters in Washington last Friday, “If your neighbor’s house catches fire, it’s not to your advantage to sit back and do nothing.” To put it quite simply, he argued, if you don’t step in, “you cannot fool yourself into thinking that just because your house is bigger and more beautiful, that it won’t be at risk. In case you are wondering, I am speaking about Germany.” Others may think differently, but this is the piece of wisdom I would suggest here.