A few words about the "moral hazard" in the eurozone discussion, which has resurfaced as part of the #Eurobonds debate...
Talk of "symmetric" threat to €zone & that "2020 isn't 2010" is understandable as it stresses unique nature of Covid-19 crisis & sense we're all in same boat, but it may inadvertently give “moral hazard" argument of early € crisis days greater legitimacy than it deserves 1/7
In terms of shaping policy in the 2010+ crisis, the moral argument was a bit of a cop out. It was partly based on some myths, including that a select few member states had benefited from the euro & the crisis was caused solely by endogenous factors in the same countries 2/7
The moral element was exploited as a curtain behind which some EU politicians could hide to avoid being honest about weaknesses of euro & their economies. This fed nasty stereotypes on all sides & fuelled nationalism rather than pacifying domestic audiences as they’d hoped 3/7
Discussion about moral hazard also ignored/concealed the painful conditionality that came with bailouts & - along with the economic downturns - the poisonous impact the whole process had on each country's politics, economy & society 4/7
Moral hazard ceased to have any relevance once the crisis took hold: Who would willingly choose to be like Greece & see 25% of GDP wiped out, unemployment at 27 pct & neoNazis in Parlt just because they could have the "comfort" of a bailout? 5/7
Sadly, given that every economy in eurozone will tank this year, we'll all get a taste of how devastating an experience this is & why moral hazard might be fine for a philosophical discussion, but should not guide serious policy making in a crisis, especially the current one 6/7
touched on some of these issues in a piece published in a recent edition of the @BritishAcademy_ journal thebritishacademy.ac.uk/publications/j… 7/7
