The Real Reason the Eurozone Crisis Is Back

A blog about business and economics.
Feb. 4 2013 2:34 PM

The Real Reason the Eurozone Crisis Is Back

The euro symbol in front of the European Central Bank

Photo by Daniel Roland/AFP/Getty Images

The eurozone crisis seems to be back today. Germany's Social Democrats were grousing over the weekend about the need to make Cyprus crack down on tax avoidance before ponying up financial help. Italian bond yields are rising as Silvio Berlusconi attempts a political comeback based on a promise of big tax cuts rather than austerity. The same thing is happening in Spain, where the center-right incumbent prime minister is ensnared in a growing corruption scandal.

But if you want to understand what's really behind the return of the crisis, don't pay too much attention to the specifics of Italian or Spanish or German policy. The underlying issue is that the crisis never really went away. The European Central Bank kicked off the new year by standing pat on monetary policy even though the continent was clearly heading into recession. The premature declaration of victory was based on a myopic view that the sovereign debt crisis was isolated from concerns about growth and banking systems, even though they're all intertwined. On any given day, financial markets are a Keynesian beauty contest, and ECB President Mario Draghi's "whatever it takes" speech seemed to lock things into a helpful equilibrium. But the underlying economic conditions were so frail that any bad news made it very easy to slip back in the other direction.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Two Damn Good, Very Different Movies About Soldiers Returning From War

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

Students Aren’t Going to College Football Games as Much Anymore, and Schools Are Getting Worried

The Good Wife Is Cynical, Thrilling, and Grown-Up. It’s Also TV’s Best Drama.

  News & Politics
Sept. 19 2014 9:15 PM Chris Christie, Better Than Ever
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
Brow Beat
Sept. 19 2014 4:48 PM You Should Be Listening to Sbtrkt
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.