Alan Greenspan Thinks Cultural Divide Is the Cause Of European Crisis

October 11 00:00 2011

NEW YORK, October 10 ( – Former head of the US Federal Reserve, Alan Greenspan believes that the European crisis is not merely monetary in nature. The turbulence faced by the Euro is because they tried to club different fiscal cultures and disciplines into one single currency. This system was inherently compatible and that some countries in Europe like Spain and Italy need to learn from the likes of Germany if the Euro currency as well as the European economy has to be salvaged.

Alan Greenspan pointed towards an interesting observation. He stated that the credit risk was higher in European countries where the labor wages were higher. He believes that this may be because of the spendthrift nature of the workers there. A worker in a country like Germany may require less income to survive because of the prevailing monetary culture as compared to countries like Spain and Italy where the expenditure levels are high.

Greenspan said that on one hand there was a culture of parsimony and savings. Some European governments were characterized by balanced budgets and high savings rate. On the other hand there was prodigality as many European nations were borrowing huge sums and spending way beyond their limits.