There is an essay of writing on the EU wall, but only three words that matter
Normally reliable sources tell me that the EU debt ‘Troika’ – due to assess Greek austerity progress from January 15th – is less than impressed with feedback from its spies on the ground. And although banking slave-driver Greek Prime Minister Lucas Papademos told the media yesterday that Greece may default on its debts in March unless unions accept further cuts in pay, he is (I understand) increasingly of the opinion that the Greek people aren’t up for yet more austerity…even though this is precisely what he has in mind.
There are two insoluble problems with the Greek situation. First, the idea that without close lender haircuts Greece can pull itself out of the vortex is completely bonkers. Papademos, the markets, Paris and Berlin are all fully aware of this. But they are not yet ready to pull the plug. One wonders, therefore, if they ever will be.
Second, many patriotic Greeks in business and the civil service have no intention whatsoever of flogging off sovereign assets in order to save a bunch of steroids-addicted investment bankers. Anyway, some time before the end of the month, the Troika must decide whether to provide further bailout funds to the country.
I would be staggered if the funds are cut off; but if so, I’d say that three things follow: Berlin has given up on the euro, Berlin has decided to let the French go hang, and Berlin will leave the Clubmeds and other assorted peripherals to their respective fates. This would bestow such a depth of pariah identity upon Germany, Sarkozy would be guaranteed to refuse her handshake forever.
In such a scenario, France’s ability to borrow from the markets will be central to its survival as a front-ranking State. But I suspect today’s bonds auction in Paris will be an underwhelming event. My money says that the ECB will have to pick up the slack – rather as it did yesterday following the 10-year German Bunds flop.
In fact, we have now reached the stage where both the sovereigns and the eurobanks are in purdah. Yesterday, Italy’s UniCredit SpA launched a 7.5 billion euro ($9.68 billion) rights issue at a huge discount, reflecting the difficulty some European lenders are facing to raise capital to repair their weakened balance sheet. In turn, Société Générale said it would cut around 1,500 jobs at its corporate and investment bank – roughly one investment banker in ten. And as many as 10,000 bankers at Royal Bank of Scotland face the prospect of a P45 as a consequence of RBS plans to retreat from investment banking.
I regard this as a good start, nothing more: a cost-cutting return to safer, more business-focused banking is a healthy trend, but it’s too little too late. RBS, Bank of America and CreditAg are basket cases, with SocGen not far behind. I’ll be amazed if they survive intact in the medium term.
That said, the immediate-term tests of investor enthusiasm are next week’s bond sales in Spain and Italy. When it comes to the folks still buying this junk, I’m no longer sure what word should be use for their attitudes: confidence? delusion? blind faith? insanity? However, I think you’d have to go a long way and interview a lot of buyers before you’d come across anything remotely approaching enthusiasm. The most common feedback I get is one of irritated boredom, but that may be just the company I keep.
At the risk of appearing simplistic here, one could line up the high brick wall surrounding Wormwood Scrubbs and scribble the writing on it at every level from end to end when it comes to the European Union. The size and immediacy of sovereign debt, the pathetic level of bank preparation for the coming holocaust, the cost and mediocrity of the Brussels machine, the helter-skelter ride into recession, the blind monetarism that ignores both social and economic effects, the gradual impairment of ECB balance sheets, the huge divide between the two leading member States….this is a dead horse being flagellated to the point of being almost unrecognisable as a species.
There is little or no gloating involved in that view, apart from the fact that the Brussels sprouts will get theirs, and Belgium will collapse – hopefully upon Herman van Rompuy. Because successive UK governments have been (and continue to be) so blinkered about broadening Britain’s trade horizons, the effect on us could well be disastrous. And if you think the Squeaky Draper has a plan, then look at how his small business scheme is faring: it does not bode well for any bigger ideas he might have – if indeed he has any at all.
So given that less than joyous outlook, you’d think our Foreign Secretary would be focused fully on surviving the impact, wouldn’t you? But in fact, William Vague is in Myanmar (where?) urging the government there ‘to build on steps toward greater freedom and democracy’ as the FCO handout bollocks had it yesterday. It is, apparently, the first time a British Foreign Secretary has visited the place since 1955.
It used to be called Burma, but like almost everywhere else in Asia it has rebranded since the 1970s. The country has been a vicious military dictatorship since 1989, and is alleged to have more political prisoners per capita than anywhere else out East. So why is Willy out there glad-handing? Well, my theory is he’s in search of ideas. This isn’t as daft an idea as you’d think: as the ever-useful CIA factbook* tells us:
‘The transfer of state assets, especially real estate, to cronies and military families in 2010 under the guise of a privatization policy further widened the gap between the economic elite and the public. The economy suffers from serious macroeconomic imbalances – including unpredictable inflation, fiscal deficits, multiple official exchange rates that overvalue the Burmese kyat, a distorted interest rate regime, unreliable statistics, and an inability to reconcile national accounts.’
Reading that description, you could be forgiven for thinking that the UK and Myanmar were separated at birth. So let’s wish Willy success in his quest for creativity: I’m not proud – I don’t care if the idea comes from bloody Fiji: I’d just like one – and soon.
Meeting of minds in Myanmar
*Those who dismiss the CIA’s site on the grounds of bias are missing a treat. I’ve been using it for eight years now, and it is the very antithesis of a Government mouthpiece. It’s only a matter of time before the Republican Party closes it down for speading Commie propaganda, so you should go there while you still can.
Further bollocks deconstruction can be found at: We do not have a eurozone crisis, we have an EU problem.
How the Met Police have done multiculturalists a massive favour.
The Slog 