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On my last night in Athens, a hedge fund manager living in Greece said one sentence that really struck me. It was in regards to Spain:”So they built too many houses… don’t destroy the entire economy over it.”
This really gets at the tragedy of European economic policy.
From time to time, countries have bubbles and make big economic mistakes, and then the bubbles collapse and the country has to pay the price. But Europe is now operating with a basically a one-strike-and-your-out death penalty approach to economic justice.
So Spain had a housing bubble, and its banks made a lot of bad loans. Is that any reason for the country — which has all kinds of real, functioning businesses — to fall on its sword and for its government to go bankrupt? Is that any reason to pursue more austerity with unemployment as high as it is?
And even if you think that having had a housing bubble is worth paying such a huge price today, what exactly is Italy’s huge crime? Having had a not that transparent, higher-than-average corrupt government? That’s a good enough reason for it to be teetering on needing a bailout?
The whole thing really is total madness.
SEE ALSO: What the collapse in Greece looks like >
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