I have been looking for a metaphor that usefully and accurately describes the European crisis, and I think I finally have it. The moment of enlightenment came last night when I was talking with an advisor at Commonwealth’s Retirement Symposium (which looks to be fantastic for the second year running) about our kids. This advisor has teenagers, and as we were talking, I found my metaphor. I hasten to add that this is based on my experience—not that of the advisor and her kids.
When I was in college, through some colossal mistake, I was issued a credit card by Citibank, who must have held the theory that my parents would make good on my debt if (when) I overspent. To make a long story short, I learned an expensive lesson: my parents declined the opportunity to bail me out, default was not an option, and it required personal austerity on my part to pay off the credit card.
I am sure you can see the metaphor coming. When the euro was created in 2002, one of the results was that the peripheral European economies had access to credit at much lower rates than they had had previously. It was assumed that Greece, for example, free of the risk of devaluation and subject to strict budget and inflation criteria, would be almost as safe a credit risk as Germany. For these governments and their populations, it was as if they had been issued a card with their parents’ credit limits and interest rates. They went nuts.
Flash forward 10 years—the bill has come due. Mom (Germany, via Angela Merkel) opened the payment envelope and went nuts herself. The teenagers (Greece and others) are displaying the sullen resentment and sense of entitlement that I am sure I also displayed. Some are more mature than others (Ireland), but all have the same problem that I did: they spent money they didn’t have, borrowed at interest rates they can’t support, and now need Mom to bail them out.
Mom, in this case, is actually willing to bail them out, but she insists that they cut up their credit cards first so she does not have to keep bailing them out. Faced with the prospect of having to cut up their credit cards and limit their spending in the future, the teenagers are asserting not only that they are now adults (sovereign nations) who can run their own lives but also that they want to move out (leave the Eurozone).
This is where the metaphor ends and the soap opera begins, as this is where we are right now. The meeting of European leaders going on right now is widely expected to move forward on the problem, but I have my doubts. The question of who is going to cut up the teenagers’ credit cards keeps bouncing back and forth from the European level to the national level, with France, for instance, having already said “non.” The European leaders cannot make these decisions as an entity; the countries, themselves, must do so.
Now is the time we find out whether the teenagers will grow up and take responsibility, or whether Mom will have to choose either to cut them loose or to relent and take them back. Let’s see if this family drama has a happy ending.