Astonishing story over the weekend about how Goldman Sachs may have helped Greek politicians take on reckless levels of debt and deceive their Eurozone partners — and how, more broadly, Wall Street bankers may have colluded on deals that now threaten to destabilize the entire EU economy. Simon Johnson is rightly appalled, and says what must happen next. Excerpt:

And the US government, at the highest levels, has to ask a fundamental question: For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action? What is the priority here – a sustainable recovery and a viable financial system, or one particular set of investment bankers?
To preserve Goldman, on incredibly generous terms, in the name of saving the financial system was and is hard to defend – but that is where we are. To allow the current government-backed (massive) Goldman to behave recklessly and with complete disregard to the basic tenets of international financial stability is utterly indefensible.
The credibility of the Federal Reserve, already at an all-time low, has just suffered another crippling blow; the ECB is also now in the line of fire. Goldman Sachs has a lot to answer for.

Once again, we see the potential cost of allowing a morally unaccountable and politically connected elite operate in the shadows. What they did was perfectly legal — and it might bring down the world financial system. You cannot have successful capitalism without transparency and a shared commitment to moral integrity. On the EU question, how would you feel as a German taxpayer, knowing that you were being asked to bail out corrupt and profligate Greek politicians, who got away with misdeeds thanks to the help of American bankers? And that you were told that if you didn’t bite the bullet and do this, your economy could collapse? Which is what US taxpayers were told in 2008.
But we American taxpayers were at least helping out our own countrymen. It’s going to be interesting, and not in a pleasant way, to see how nationalist resentments are going to shape political integration in the EU going forward. Paul Krugman says the Greek turmoil actually means European integration should continue even faster (ironically enough):

A breakup of the euro is very nearly unthinkable, as a sheer matter of practicality. As Berkeley’s Barry Eichengreen puts it, an attempt to reintroduce a national currency would trigger “the mother of all financial crises.” So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states.

Good luck with that now, folks. Britain is in a world of financial trouble itself, but I bet they’re thanking their lucky stars that they didn’t accept the Euro.