“All of the rescue packages don’t really ensure that we can escape this adverse feedback loop that these countries are being trapped in,” Christoph Rieger, head of fixed-income strategy at Frankfurt-based Commerzbank, told Bloomberg Television on April 19.
The scariest thing about the Credit-Anstalt default is that it occurred in a small, peripheral country, just as today’s worst problems are concentrated so far in Greece, Ireland, and Portugal, which combined make up just 5 percent of the 27-nation European Union’s gross domestic product. “Austria is a tiny, tiny little place, and you wouldn’t imagine it could set off a chain of domino reactions. But it did. I do see exactly that potential now,” says James.
The introduction of Schubert’s book begins with the famous line of George Santayana, the Spanish philosopher, who said, “Those who cannot remember the past are condemned to repeat it.” J. Bradford DeLong, an economist at the University of California at Berkeley, thinks Europe has absorbed Santayana’s message to an extent. “Because we remember the Credit-Anstalt, we will not make that mistake,” DeLong says. “We will make different ones.”
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