The secrecy culture within the Eurozone


Another very sound column by Money Morning's John Stepek arrives in my inbox. What with Greece, and now Spain, and even the richer countries like France, Germany and the United Kingdom reining in, banks across Europe have got the jitters. No wonder customers complain they're not lending enough: they are looking to strengthen their balance sheets for the next crunch. We've been told that 'stress testing' will make sure our banks remain robust. But, as Reuters reports, Germany, France and the European Central bank have been curiously reluctant to publish those stress tests, for fear the news would be bad enough to set investors fleeing.

That's typical of the Eurozone elite, says Stepek. They think that as long as they keep everything to themselves, they can do the right thing for the incapable rest of us. That's why the first instinct of Eurozone politicians in the crisis was to blame speculators. They are not used to being held accountable for their actions. Indeed, they are affronted.

But as Stepek observes, a secrecy culture can't survive in the democracy of the markets. If the authorities don't reveal information, investors will simply assume the worst. It just means that strong banks will suffer along with the weak. It's time we knew how many of Europe's banks were zombies, being kept alive only by transfusions from the ECB, and time we knew how much bad business the banks are concealing. Keeping that sort of information within the elite is not only undemocratic, it only makes things worse.