Real freedom for all turtles in Sugarscape? - Presses universitaires ...

188A r g u i n g a b o u t j u s t i c etrue that bankers took excessive risks. But not because in the back of theirmind they had this idea that governments would rescue them. Topmanagement of the banks could not possibly have hoped that governmentswould bail them out, as such a bailout operation could have cost them theirheads. As argued earlier, they took excessive risk because for several reasonsthey massively underestimated it.What about Greece? No doubt, there was a lot of irresponsible behavior ofsuccessive Greek governments. But to think that these governments werespending excessively because they expected Germany to bail them out is farfetched. It had everything to do with a weak political system that fell prey topressures of domestic interest groups trying to obtain part of governmentlargesse. In this process, politicians like bankers and many others, wereswept by euphoria produced by (unsustainable) growth rates. The lattercreated the perception that the sky was the limit.Surely there was misbehavior of many actors in this drama. Wheninterpreted in the light of moral hazard it leads to the conclusion thatpunishment is necessary because it has the salutary effect of changingincentives. It teaches a lesson that should prevent those who have sinnedfrom sinning again. And it teaches a lesson to the others who have notsinned that bad behavior will be sanctioned.This punishment approach to the crisis, however, is counterproductive.Too many actors would have to be punished, and not only the badgovernments at the periphery of the Eurozone.The need for forgivenessThe solution of the debt crisis must be sought not in systematicpunishments of governments and private market participants. Moreemphasis should be put on a willingness to be forgiving. Note that I am notarguing that there should not be conditionality in lending programs. Theseremain important so as to give enough incentives to the debtors to avoidfuture profligacy. Thus, there is a need for a stick. At the same time, there isa need for a carrot, in the form of a concessionary interest rate. The mainreason is that this is in the interest not only of the debtor but also of thecreditor nations. Let me develop this point further. The best way to do thisis to start from the following table. I show the primary surplus that isneeded to stabilize the government debt ratios in different problematiceurozone countries. Let us assume that the debt level these countries aim atstabilizing is the likely level that will be reached at the end of 2011. Theinterest rate that is applied in this calculation matters a great deal. I use twoopposite scenarios. In one scenario I apply the present punitive interest rate