Doing the French Mistake

I think the aspect of this I find the most amusing in this article is the suggestion from President Hollande that the penalty would “…[introduce] a risk, doubts, suspicions about the soundness of Europe’s financial system…” This seems to suggest that we do not already have doubts and suspicions about the risks and soundness of the European financial system. You broke the rules, and you pay the price. The move to make companies admit guilt is a new approach, and a welcome one. This forces banks to really address what their policies are and face the consequences.

For all the wailing and gnashing of teeth in the U.S. about what the Federal Reserve and the Treasury did during and in the aftermath of the financial crisis, at least we are not Europe. European authorities, and individual countries, still seem to be unable to agree on what playbook they are using, let alone what play to call. The crisis laid bare how weakly integrated the economies of the EU really are, and that a monetary union was premature at best.

However, they are now stuck in it and need to determine the best way to work their way out of it. Again, that actually implies they can agree on the playbook. At least in the U.S. a policy choice was made, and they followed through to the end. This implies that at some point we can unwind the policy and return to normal. It is something of a privilege to be in that position at this point in time when we look at the level of dysfunction in other economies around the globe.

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