France, Germany, and much of Western Europe may not want to bail out their eastern neighbors – those prodigal, America-lionizing, Russophobic upstarts. It would be far more gratifying to harrumph about the ills of capitalism, the ineluctable pratfalls of deregulation. Besides, how could the leaping profits of the frothy years not be fraudulent?
But to tut-tut too much, however justified it might be, to quarantine Hungary and Poland, Latvia and Estonia, to smugly deny them much-needed funding and blackball them from EU discussions in order to safeguard the Euro, would all be a mistake. If governments in Lithuania and Bulgaria tumble, populist rulers, noisy, grouchy, emboldened, with even less ability to manage a deep recession, may well come to power.
Stiff-armed by the West, they could cozy up to Russia with energy deals and other sly bilateral agreements, spitefully inked not so much to please the powers that be in Moscow as to stick it to the stingy, hectoring western Europeans.
Not only bad geopolitics, ostracizing Eastern Europe would also be bad for the Eurozone economy. Many western banks – BNP Paribas and Commerzbank come to mind – have major (and once wildly wealthy) subsidiaries in the east. If they go belly-up, their capital bases gutted by dumb loans made in local tender, their parents in Paris and Frankfurt will suffer accordingly.
As these big western European banks then try to cover the losses, they’ll hungrily haul in lending in their home markets, even more than they already have, a febrile tightening that will likely force them back, yet again, to their national governments. In the end, it seems, Western Europe will have to bankroll its eastern comrades one way or another. Better to hop to it now, gamely, than to do it desperately and cack-handedly later.