Europe’s Subprime Quagmire

Back in 2007-2008, when the financial crisis was still called the “subprime” crisis, Europeans felt superior to the US. These days, Europeans have little reason to feel smug, and their leaders could learn a lot from the US experience.

BRUSSELS – Back in 2007-2008, when the financial crisis was still called the “subprime” crisis, Europeans felt superior to the United States. European bankers surely knew better than to hand out so-called “NINJA” (no income, no job, no assets) loans. These days, however, Europeans have little reason to feel smug. Their leaders seem unable to come to grips with the eurozone’s debt crisis.

Banks in Ireland and Spain are discovering that their customers are losing their jobs and income as the construction bust hits the national economies. And one could argue that a loan to the government of Greece or Portugal affords little more security than a NINJA loan. Indeed, lending to governments and banks in the European periphery represents the European equivalent of subprime lending in the US (which was also concentrated in a few sunshine states).

Given the many similarities between the two crises’ basic features, European leaders could learn a lot from the US experience.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/Qp52ay5;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.