Monday 27 June 2011

Inglorious Greece

Just imagine if the countries of North and South America joined together in a more perfect union. I give you the American Union, the AU. This borderless combination, allowing for a free exchange of peoples and goods, is based on a unified currency, let’s call it the Americo.

Now if you further imagine that this currency has the same exchange value right across the AU, that it is no different in, say, Guatemala or Bolivia than it is in the USA or Canada. Now imagine a central bank with low interest rates; imagine no detailed auditing of national borrowing and finance; imagine governments living on credit, endlessly beyond their means. Imagine American tax payers working until they are seventy to ensure that Guatemalans can retire at fifty. Do you think this is a nightmare? Well, then look across the Atlantic to see it in reality, look not at my chimera but at the real life European Union.

Greece is on the verge of bankruptcy, on the verge of defaulting on what is called sovereign debt, the liabilities falling to the state. The euro, the currency of a good bit of the European Union (not Britain, thankfully) is on the verge of collapse. President Nicholas Sarkozy of France is in a mood of high anxiety:

Without the euro, there is no Europe, and without Europe there is no possibility of peace and stability.

It’s a wild exaggeration, of course, clearly intended to propel Angela Merkel, the German Chancellor, whom he met in Berlin recently for crisis talks, into a joint-effort to save an impossible dream. The language is clearly intended to hit the Germans at the most vulnerable spot in their national psyche, past unhappy memories, ever present dangers; it’s a form, if you like, of historical blackmail.

The Greek crisis is a superb demonstration of the intellectual absurdity and institutional vanity at the core of the whole European maze. There it sat, right from the outset, a bit like a brooding Minotaur. The important thing here is that we are dealing with a political as much as an economic crisis, perhaps more of a political crisis. We are dealing more specifically with blindness, blindness and hubris caused by a combination of self-delusion and self-interest.

The euro itself, the single European currency zone, was always about prestige, a desire for the grand gesture. Looking at it in hard economic terms who would ever have agreed to allow the Greeks, or the Spanish, or the Portuguese, or the Irish to join the club? All it would take is for these fragile economies to come under sustained pressure for questions to be asked about the operation of a whole euro zone, combining rich and poor and supposedly treating them as equal partners.

The Greeks, the poorest of the European cousins, were effectively given a euro credit card, and they used it, without caution or reservation, almost as if they had won a lottery, which, in a way, they had. The Germans were paying, yes, but they also benefited with a massive trade surplus, another source of imbalance.

The Germans in particular are heading for the perfect storm; they have too much of their economic self-interest invested in the euro-zone to allow it to collapse altogether, but they are horrified of the consequences of countries like Greece riding on the prosperity of the old Deutch-mark, abandoned with considerable reluctance.

We know the Eurocrats are not fond of votes. After all, they have a tendency to go the wrong way. But the Germans are least fond of a particular kind of vote than any other European nation, so much so that referenda are actually banned by law because of the use they were put to by the nasty Nazis. Just as well for the Eurocrats, I suppose, because the Germans would never have abandoned the D-mark if they had been given a choice on the matter twelve years ago.

At the time the opponents of the euro ran a campaign warning of the dangers of being linked up with the ‘spaghetti money’ of southern Europe. So, poor old Angela finds herself in an impossible position. Pressures at home force her to talk tough. Auntie Angela does not come to the Greeks bearing gifts, no, she waves her Aryan finger and talks austerity. Think of tomorrow, she says.

Alas, the Greeks have been spending, as if there was, well, no tomorrow. But tomorrow is here and Europe has been wounded in its Achilles’ heel, the poison now spreading throughout the body. An ancient Greek myth thus becomes a practical reality. How the gods love irony.


  1. It isn't as if things are all that great for the Germans. Their flagship industries may be bringing in good profits from exports, but there are a lot of young Germans who cannot find jobs - plus the welfare drones from the former DDR who WON'T find jobs. German banks are a lot more fragile than they look - and EU financiers are experts at not-looking at unpleasant truths.

    Lucky for Merkel, Germans are accustomed to toil and self-denial Greeks and other ClubMed handout-louts have never conceived in their worst nightmares. Those poor Germans have been indoctrinated into believing saving the euro is the only thing keeping them from a repeat of the great inflation disaster of the 1920s, so those who have jobs will work and save 'til they drop.

    Meanwhile, China - already holding a couple of trillion Eurobonds from their successful prosecution of 'war by trade' doesn't want to see those bonds become worthless, and has offered to buy a couple more rounds to keep the Club Med party going. When the music finally stops, their ride on the gravy train is finished for a generation or more, so EU political leaders are eager to snap up any 'freebies' they can get, knowing it is northern Europe's taxpayers who will be on the hook they swallowed.

    Have any Greeks actually worked in the past 2000 years?

  2. Make the Greeks eat black beans with pigs blood !

  3. This is what happens when left liberal ideology replaces common sense Ana. It happened in America with the sub-prime market collapse. It is happening now in Europe for all the reasons you mention here. Different regions and circumstances but a similar ideological base: left liberalism.

  4. This is a clash of the Titans – the two Titans of corruption – the EU and Greece. They will devour each other. The only question is whether it ends this year or next.

    What should ordinary people do? I see British and PIIGS holidaymakers avoiding North Africa and spending their money in the Canary Islands. I think they would do better by changing their money into Swiss Francs or Norwegian Krone and staying at home.

    This is not a holiday - for ordinary folk, it is a nightmare unfolding...

  5. Irony, it truly is...
    Where the world we see today heads for tomorrow?? History had great tales, we need to learn from, and here power plays a game not knowing whom to crown the winner!
    **sigh...thinking about Europe! Hope all proceeds well..

  6. Ana I remember being in Greece when the Euro was first introduced or should I say imposed there. Pensioners were hungry because food prices had rocketed. It is an economic absurdity. We must resist it at all cost.

  7. Take the facts contained in your story, put them in a beaker with the American dithering over whether or not it's a good idea to raise the debt ceiling. Give it all a great big shake, and let's see what happens. Should be interesting, however it turns out. And what do we think about the timing? Why, it's merely a coincidence. Ana, Ana, so young to be so cynical. :P

  8. Calvin, you make some excellent points. It’s the stupidity of the whole thing that bewilders me. Economics and finance are both well out of my comfort zone. But even I, in my ignorance, find it beyond absurdity that politicians, financiers, bankers, bureaucrats, all sorts of experts sat down and came up with this mess, almost as if they were dealing not with real nations and real economies but a completely abstract model.

    As for your question I think it best if I leave that open. :-)

  9. Anthony, back to the days of Sparta!

  10. Nobby, yes, yes and yes again. So far as I am aware joining the euro is still an objective of the Liberal Democrats, something they don’t talk about very loudly just at the present.

  11. CI., I know, it’s just such a mess, a wholly avoidable one at that.

  12. Fiducia, you are right, if politicians were only farsighted enough to learn from the lessons of history; but they are not. I am Cassandra and my fate is hers.

  13. Richard, yes, and we also have to avoid propping up this fiscal lunacy.

  14. Melody, first and foremost a big welcome to my blog! I’m not cynical; just practical. :-)

  15. Pissed off, I just lost my long comment when I tried to open a flickr page to see how I could link to the 2 books refered to below.

    I am delighted that Cameron did not concede as I (ever the sceptic) thought he would to a bailout. Especially when his own people were facing neccessary drastic cuts. Whatever happened to the first bailout!?

    Thankfully, British universities are now running courses on Islamic finance, a viable and practical alternative which is not interest-based but one based on shared economic values to put it rather broadly. I won't go into the details here but those interested can take a look at The New World Order of Islam and The Economic Structure of Islamic Society.

    This whole financial cock-up we have been facing in recent years was forseen startlingly accurately by Hadhrat Mirza Tahir Ahmad - Khalifatul Masih IV as early as 1990 in a public lecture delivered at the Queen Elizabeth II conference Centre. He also offered solutions but I doubt that any change in this direction will be made until our civilsation has paid a very high price and been hit hard. The Quranic allusion of mountainous people being levelled comes to mind. This lecture has been published as Islam's Response to Contemporary Issues.

    I have also posted the video of the entire lecture on Youtube.

  16. Rehan, I rescued you from my spam box! Honestly Blogger is so bloody erratic at times. Anyway, thanks for those links which I shall follow up. I always do. :-)