Its funny how the G20 were meeting in Cannes. It was sort of like a horror film plot, just when you thought it was safe to go into the equity markets, out comes that Greek sea monster Papandreou! >:-[ Beware of Greeks bearing…democracy! Personally I dont see what the issue was. Its normal for European countries to have referendums over controversial issues and this latest bailout would have led to a loss of some sovereignty and a long period of economic austerity for Greece. It would also have resulted in yet further opportunities for the spivs and speculators in the markets to profit from Greeks losses.
Of course the markets saw things differently. One can imagine the reaction of the MotU (and their underlings, the leaders of the G8) to the news that the great unwashed of Greece were going to get a say in everything 88|. The people? What have they got to do with any of this? Indeed I recall a line in Judge Dredd (apocalypse war series) when East Meg One attacks Mega City one, the East meg judges realise that many millions of their citizens were about to be killed, one of them saws that this is alarming news and they should go on telly to explain to the citizens why this attack is necessary. But the other East Meg Judges, say no, the people (who are about to be on the receiving end of nukes) have nothing to do with this! Life intimidating art I think!
There is also an element of a clash of cultures here. As anyone who has ever been to Greece will know, the Greeks thrive on chaos. Nothing ever goes according to plan, theres a lot of running around in a panic, frantic phone calls, but they always seem to muddle through in the end (look at the 2004 Olympics, that turned out great in the end, even thought they missed many construction deadlines). Of course the Germans are the complete polar opposite. They always do everything according to a strict schedule and plan. The Russians during WW2 claimed that you could set youre watch by the Germans (at exactly 6am every morning the artillery started firing, 7am on the dot, the Luftwaffe showed up .). Tell a German friend to meet you somewhere at 18:05 and they will be there at exactly that time (to the second!)…of course youre Greek buddy will come running in at sometime past seven, but thats okay because the concert was late starting anyway so he only misses the opening act. So you can imagine the reaction of Merkel to the possibility that the deal struck a few weeks ago mightnt be the final solution to the crisis (okay that was cruel of me! :no:).
Of course the terrible thing about this Greek Tragedy is that it is so easily solved, as I point out in prior post and the Beeb discusses here (comparing the Eurozone to a boat at risk of capsizing) this crisis could be easily solved if the eurozone countries chose to do so, by the ECB simply buying European debt, a moderate level of Quantitative Easing (read print more money) or the issuing of Euro bonds. But all of these issues have been ruled out due to the sensitivities of German taxpayers. Unfortunately those German taxpayers need to realise that they are in the same boat as the Greeks and will go down with the ship if the eurozone implodes. Already growth is slowing in Germany as a consequence of this crisis.
I should note that Im not exactly happy with the idea of any of the options I mentioned above either (I believe I described QE in a prior post as effectively a Default on ones debts by the back door). They would erode some of my savings (in a euro bank account), but its important to get this crisis solved. Given the choice between two scenarios (collapse of the euro and a deep recession with the spivs profiting yet again at the expensive of governments or savers winding loosing a tiny portion of their savings) I know which of these two Id prefer to see happening. The Beeb has a summary of the likely outcomes of a default, or Greek Eurozone exit here. If theres one thing this crisis has proven it is that the Austrian/Underpants Gnomes school of economics is wrong. Cut public spending at a time of recession and, as weve seen in Greece and Ireland, youll wind up with an even deeper recession and a bigger deficit due to reduced tax receipts. While some austerity (Greek public sector workers retiring later for example) will inevitably be necessary, the key to solving this crisis is pushing money back into the economy to drive up growth (by governments increasing spending funded by higher taxes on the wealthy). Of course that doesnt bode well for the UK as its likely that the Tory cuts will force Britain back into recession, although the Torys will now inevitably blame the Greeks for that of course!
If the euro fails, it will be a failure of leadership on the part of European governments, rather than anything fundamentally wrong with the economics, deficits or the European style welfare state. And speaking of that leadership, lets be clear about why Italy is in trouble; one word starts with B, is over sexed, stuffed with brown envelopes, and goes bunga, bunga! One can understand the market scepticism of Italy with someone like that in charge of the country :**:. Berlusconi needs to go now. And if he refuses to go, maybe it might be necessary to do what they did to Caesar. But rather than senators with daggers, just get all his ex-wives and girlfriends to ambush him in parliament and batter him to death with their handbags (et tu Ruby :>> ), that should sort out this crisis!