DUNS OURAY - 08 MEI 2010

Angela Merkel has an interesting twist on the Greek debt crisis:

“Because of [bank bail-outs], [the governments] have become indebted and now, [hedge funds] are speculating against these debts -- that is really very treacherous."

Of course, there is some truth in Merkel’s words. Bail-outs have added to national debts. But it is misleading to blame bank bail-outs for the unsustainable debt and deficit of Greece, and other countries.

The Greek deficit is reportedly running above 13% of GDP. Who knows how much it really is? But, not a penny of that deficit goes to bank bail-outs. And this crisis started when an investigation discovered that the Greek government had committed accounting fraud for € 40 billion ... not a single penny of which went to the banks.

Sadly, Angela Merkel has little choice but to mislead. She needs to get re-elected, and the last thing the electorate wants to hear is the truth. Angela is the victim of Juncker’s Law:

“We all know what to do, but we don’t know how to get re-elected once we have done it”

So Merkel does something that will sit well with her electorate: she blames the free market. It is an interesting example of how a society chooses to delude itself.