Athens and the risk of ‘moral hazard’

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Series Details January 2015
Publication Date 23/01/2015
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Viewed from the United States – or, maybe better, from an American perspective – the Greek elections highlight the problem of moral hazard in Europe. This is not a normal problem you would expect to arise from a democratic contest.

‘Moral hazard’ describes a condition where one party takes on excessive risks because they believe, whether rightly or wrongly, that any negative consequences can be shrugged off onto someone else. The classic example is a borrower (or a banker) who takes on too much debt and then walks away when it proves unsustainable. When we talk about elections, it is hard to see how this situation might arise. Voters can vote irresponsibly, but they are likely to bear the consequences of their own foolishness.

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ISPI: Commentary: Athens and the risk of 'moral hazard' [PDF]

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