“In some ways, the European debt crisis is heaven-sent for both the Anglo-Saxon bad boys. While it rages, investors are too busy with the exigencies of the moment to notice the broad acres of debt out there not denominated in euros.” David Cottle has acknowledged just this in the Wall Street Journal.
It may well be a matter of classic correlation, but Sonja Juko, who works as an analyst at the Financial Stability Department of Deutsche Bundesbank or Germany’s central bank, believes that up to a certain degree the US and UK financial news industries purposely devote enough resources to keep this fire burning in the euro zone. The reactions of the Anglo-Saxon financial press to her conclusions are now still coming to the surface.
It was last November when Sonja Juko imposed on herself the duty to find the otherwise imaginary connection between the behaviour of the business journalism industry and the dramatic spiral into a tailspin in which credit flows have fallen in their way towards the European Union. Juko is a professor of economic and social policy and is currently finishing her doctorate in the department of political science at the University of Frankfurt. In addition, her past apprenticeships have led her from the European Central Bank to Deutsche Börse Group, which aren’t exactly the sort of academic positions isolated from the process of capital market globalisation.
Her thesis affirms that some “media outlets magnified the budgetary constraints of Greece” while “generating powerful news flows, capable of tilting the government bond markets one way or the other.” In fact, her research provides a visually stunning graphic, in which the curve of costs of Greek borrowing from the markets ─and its ripple effect─ closely follows the intensity of production in the news media associated with the City in London, Frankfort, and Wall Street.
The response from the Financial Times to these allegations (in spite of not being quoted in Juko’s documentation) has somehow been less subtle than the Wall Street Journal’s ─Financial Times Alphaville journalist Tracy Alloway has nick-named Sonja Juko as “sociologist-boffin” apart from rejecting the complaint. Firstly, Alloway retorted, what prompted the Greek storm and heavy rains all over the European periphery was risk agency Fitch’s warning almost two years ago about the difficulties that Greece would go through to make repayments to international investors. And secondly, the European Central Bank itself ignited panic amidst foreign capital when it promised ─but not fulfilled─ abandoning its “emergency mechanism” by which it accepted low quality government bonds as collateral to inject money into the Greek banking system and public finances.
The Financial Times doubts about the quality of Juko’s paper, which it describes as “simply inadequate.” The Economist magazine, however, has selected it among its weekly list of worth-reading economic articles because “the case of Greece suggests that the key facts on public finances alone do not explain either the timing or the dynamics of recent events.”
Of course, EU members’ troubling public spending is at least one of the many reasons that have lit the fuse of the sputtering headlines about the financial earthquake moving along entire sections of the world economy. But, despite that incontrovertible reality, the suspicion grows: Sonjia Juko’s argument may have touched some nerve. For instance, the German analyst points out that Reuters and Bloomberg use “tendentious” language when referring to Greece and the euro area in general. According to media consultancy firm Burton Taylor, Thomson Reuters and Bloomberg are in control of 67 per cent of all financial news circulation. It is obvious that, even if unintended, this is a situation that has allowed yet another terrifying, allegedly destructive bubble form.