The deep roots of the government debt crisis

The current differences between euro countries in terms of government debt, deficit and restructuring efforts have much deeper roots than many acknowledge. Behind them are apparently long-term differences in tax mentality and in attitudes toward one’s government and its borrowing policies. A cautious effort in 1974 to build a “pyramid of tax mentalities” turns out to be a good predictor for the same differences between the north and south, which can be observed in an international study of tax mentalities in the 1960s, a 1651 description of European countries and in the forecast of the euro countries’ performance right up to 2017. The results do not imply that the Eurozone has to fail because of its fiscal problems. A clear message from these results is that the structural adjustments in the southern countries might take much longer than is acknowledged at present. Should at the end of the day the euro area be considered as a case for realignment, then the proponents of what may be called the northern euro or a “euro of the strong ones” could draw on these results.