Debt situation in Europe examined
Published: Monday, October 31, 2011
Updated: Tuesday, November 1, 2011 01:11
The International and Global Studies department hosted a panel on Wednesday analyzing the current economic crisis, with a focus on European sovereign debt, featuring Kent Lucken, a Citigroup managing director, former diplomat in the Balkans and adviser to Mitt Romney's 2008 presidential campaign.
Two seniors in the IGS department, Craig Elman '12 and Adina Weissman '12, also spoke on the panel, which was held in the Mandel Center for the Humanities.
Just as the audience was arriving for the panel, news of an agreement on the Greek debt crisis began to spread. Shortly after the panel ended, just before 4 a.m. in Brussels, 10 p.m. in Waltham, European leaders officially announced that they had cajoled European banks to accept a 50-percent loss on their Greek debts, according to The New York Times.
Lucken stated that he believed Greece would not be the last European country in this crisis to at least partially default on its loans. "If you saw your neighbor not pay, what would you do?" he asked.
Lucken took a conservative, pro-lender, view of the debt crisis, generally blaming those who took out loans and did not repay them as responsible for a significant portion of the global economic crisis, and said that borrowers who defaulted were morally guilty.
"So what is debt?" he asked. "Debt is really, fundamentally, it's a promise to pay. It's an agreement between two parties where one takes something and promises to repay it at some point in the future."
"Debt is a moral obligation," he continued. "It is not just a financial contract. ... You are making a promise to pay. Your character and reputation depends upon making, taking on a debt, and agreeing to repay it. We forget about that a lot in our society."
Lucken reiterated his belief that the economic crisis was caused by borrowers walking away from loans. "If everyone would've paid back their promise, we wouldn't have a problem," he said. "But they stopped. Some people couldn't, so let's be fair. Some people couldn't, but a lot of people could. And these governments are not going to keep their promises either."
Using a PowerPoint presentation, Lucken diagrammed the growth of America's national debt, and blamed its growth on both democratic and republican presidential administrations, calling the tendency to "borrow today and pay tomorrow" "a disease of democracies."
Lucken argued that there is a strong correlation between China's low level of debt and the growth of its gross domestic product. Conversely, he contended, a significant catalyst of poor European economic growth is heavy national debt. "The pattern … continues to hold," he said. "High debt, low growth. High debt, problems with employment."
Elman spoke about his experience studying abroad in Spain and the high rate of youth unemployment there, and Weissman spoke about studying in England and its government's recent imposition of austerity measures.
In response to a question from an audience member, Elman blamed America's inability to accept a compromise mix of spending cuts and tax increases on American stubbornness. "It's a cultural issue," he said.
Lucken's wife, Kristen Lucken, is a lecturer in the Sociology department at Brandeis.