Would the eurozone be in a crisis without the financial crisis that started in the United States in 2007? Olli Rehn, the European Commissioner for Economic and Monetary Affairs, appears to believe that it would not. In connection with the publication of the latest book by Björn Wahlroos, Rehn said that the systemic mistakes on the US financial market led to a financial crisis that turned into a debt crisis in Europe.
It is human to blame others when things go wrong. The depth and breadth of the problems of the eurozone have nevertheless demonstrated that the crisis is ultimately very much home-made.
Besides, did anyone force the banks of the eurozone to rush into the housing loan business in the United States? It has been said in retrospect that some euro-banks are last resorts for sellers of American securities if nobody else would buy them.
There is no reason for Finns to assume any great responsibility for the problems of the euro.
The system was created by the big euro powers. Finland was merely supposed to decide whether or not to join. Those who were in power in Finland at the time felt that joining in would be better than staying out.
The euro will survive for a long time in some form or another. More energy should have been directed at pondering how Finland should position itself in a system that will inevitably undergo changes. And changes will happen – specifically in the monetary policy led by the European Central Bank (ECB).
The starting point was that nation-states should deal with financial policy through their budgets in the old way. To compensate for this diversity the ECB was supposed to implement a “one size” financial policy with the same rules for everyone.
Now that sacred principle is crumbling. A sign of this is the change in stability practices of central bank financing.
When a commercial bank seeks financing from the central bank it is required to offer collateral in return – usually high-quality securities.
Until the beginning of this year the criteria for collateral were the same for every eurozone country. Now the ECB is accepting different types of collateral in return for money. The decision is made by the national central bank of each respective eurozone country.
The quality of the collateral is a significant controller of financial policy. It guides the supply of money. Loose requirements for guarantees lead to slack financial policies – and the opposite is also true.
The financial policies of the euro countries are diverging. In addition to financial policies of different sizes, we also have different-sized monetary policies.
Helsingin Sanomat / First published in print .2012