The two major players in a high stakes game of credit and economy have been characterized as untrustworthy (Greece) or vengeful (Germany) in the press. Angela Merkel has said about Greece: “The most important currency has been lost and that is trust.” Greece has been painted as a “live for today” southern European country with a dysfunctional government and tax system. Germany on the other hand has been described as a “prepare for tomorrow,” responsibility obsessed nation that wants to punish the Greeks by demanding austerity measures while conveniently forgetting the growth enabling debt relief that was extended to it after WWII.

The words trust and trustworthy have been thrown around rather loosely in all of this. Scholars have defined trust as something we offer to a trustee in whom we have positive expectations concerning their likely behavior in a risky situation.  For example, I trust my son with my car because he has shown me that he is responsible and so I am willing to accept the risk of allowing him to take it for the weekend. In the world of finance, I lend country money because their track record tells me that there is a reasonable likelihood that they will be responsible and pay me back. In both cases, we are making a judgment of the degree of trustworthiness (i.e., are they responsible, fair, competent, transparent, have integrity, etc.). If we judge someone to be trustworthy, we form an orientation toward them (intention to trust) that makes it ok to go forward with a trusting act  (give them the loan or the car). When we have conditioned others to distrust us, loans and valuable assets are not made available to us because the owners are seeking to reduce their risk.

Given this understanding of trust, is it true that creditors should not trust Greece because they are in fact untrustworthy? First of all, like all countries, there are many trustworthy and untrustworthy people in Greece. But in this case, we are not assessing the trustworthiness of people; we are assessing the trustworthiness of the country. In evaluating the trustworthiness of the country our primary focus is gauging the integrity, fairness, competence and reliability of the government as agent for the people.

Lets examine the facts concerning the Greek government and ask if they have signaled any elements of trustworthiness? Well they adopted the Euro in 2001 but met the debt ratio criteria only by misrepresenting their numbers (lying – lack of transparency). Greece has spent half the years since 1800 in default on its external debt (lack of reliability). According to Transparency International surveys, for the last 10 years the perceived rate of government corruption in Greece has been about double that of Germany (lack of benevolence and competence). Finally, the government, while it has cut spending, has yet to fix a dysfunctional tax system that has one of the highest rates of unreported income and failure to pay taxes among industrialized nations according to the Organization for Economic Cooperation and Development (lack of competence). I just returned from a week in Greece and found the country and its people lovely. Having said that, based on the facts and what we know about how to assess trustworthiness, a strong case can be made that creditors are right to not fully trust the country of Greece in this new bailout scheme. Perhaps with reform Greece can be trusted, but this is not yet earned or proven.

But is Germany also been untrustworthy? As far as competence based trust goes, Germany has an efficient economy and a solid tax system to finance its economy. But what about benevolence and fairness based trust?  Some have argued that Germany has benefited tremendously from the Eurozone and that moral standards require it to share some of this excess with the less fortunate within the Eurozone. A 2013 quote by Merkel, when she was running for re-election, reveals that her call for solidarity in the Eurozone is an act of self-interest not benevolence toward others: “That (a unified euro area) is such a treasure, such a boon, that we can’t place it in doubt. That’s why the euro is more than a currency. For this reason we’ve shown solidarity, but solidarity always linked to responsibility for reforms in those countries that experience our solidarity.” It seems that Greece can make a subtler, and perhaps weaker, case questioning Germany’s trustworthiness.

Greece and Germany are in a union that has benefitted one party more than the other. In fairness, Germany has some obligation to help, which they have done to some extent with prior bailouts. But the German government and its people cannot be held responsible for the irresponsibility or incompetence of other European Union members. Here lies the problem with the Eurozone. No currency or economic union is sustainable without a social fabric that has the right balance of trust (goodwill) and controls (governance and enforcement mechanisms). The Greece crisis is not just about differences in culture and lifestyles in Europe. It is about where the boundaries of trust and economic partnership will be drawn and whether they will hold together when things get challenging. What we may be seeing is the beginning of a re-drawing of the Eurozone boundaries in a way were financial capital is supported by the social capital of trust and cooperation which has apparently been damaged between Greece and Germany. Stay tuned for more changes in an unstable Eurozone.