Desperate times call for desperate measures…after the holidays
The Eurozone has now reached that stage you get to in the last half-hour of most sci-fi disaster epics. That’s where the asteroid is still headed straight for Washington, and so it’s time for Bruce Willis to strap a 2000 megaton bomb to his scalp, and get up there to nut the damn thing onto another course. It’s suicidal, but by Jiminy it’s bold. Suicidal nuclear options are now on tables from Frankfurt to Athens via Paris in a final attempt to stop a gigantic defaultoid from wiping Brussels off the map. But in the meantime, we’re all going on a Summer Holiday.
Slog sources in Paris are suggesting this evening BST that French President Francois Hollande is renewing the pressure (begun two years ago by Nicolas Sarkozy) to give the ESM – that’s the bailout fund thought by many Germans to be illegal – banking status. That would mean it could begin 24/7 debt-swapping and loans with and from the ezone’s Central Bank (the ECB). This is not very well hidden code for “provide wobbly French banks with tons of taxpayer cash before Greece finally defaults some time around late August”.
Unsurprisingly, this idea is not playing well to Berlin audiences, and has been poo-poohed by Mario Draghi – who would, of course, be on the receiving end of all those infinite rescue-requests. However, the ECB’s Austrian Council member Ewald Nowotny says the plan only needs a Bruce Willis kamikaze superhero to make it viable. So far, he is in a minority of one, and there is still no sign of a pilot from the banzai school of asteroid redirection. For me, it’s just standard-issue French self-interest: it would be like giving a skid-row meths drinker the keys to the brewery.
Meanwhile, my usual Brussels source has been on the line to say that there is a growing body of opinion at the heart of the Unholy Belgian Empire in favour of letting the euro drop like a stone….and thus allow the ClubMeds to export more easily. That this would make Germany’s exports even cheaper (and thus continue to exacerbate the bond spread problem) seems not to have occurred to this tendency; but like I say, these are the nuclear options we’re into now. Draghi is even less keen on this idea than the French ‘free money’ strategy. A sovereign credit source in Frankfurt tells me he is “pouring ice-cold water on it like a frantic Alaskan fireman”.
Bizarrely, the original US strategy of Greek amputation is yet another approach being dragged out of retirement. The hypothesis on this one runs as follows: Greece is the real problem, so if we nudge Athens into default (which everyone is expecting anyway) and the sky doesn’t fall in, confidence in our ability to solve the Spanish problem will rise.
It’s twisted logic Jim, but very much as we know it from the Eurocrats. There is also ample evidence suggesting the Troika knows perfectly well that Athens’ money runs out on August 20th, but the next bailout (still to be agreed) won’t materialise until mid September. Equally, Berlin signalled yesterday that it was offering Spain a €300bn bailout, no strings attached. But when the MSM caught onto it, Angela Merkel did her usual “No, you misunderstood what I was saying” shtick. A German finance ministry spokesman refuted the idea that Spain was seeking a new bailout at all, saying: “This is wrong, it is not on the agenda.” Here we go again, on another amble down Denial Lane.
Denial of general reality is in fact becoming indistinguishable from denial of specific actuality. Spain sparked anger yesterday by issuing a statement on behalf of Madrid, Paris and Rome expressing impatience at a delay in major Eurozone financial reforms. But once the journos started ringing them, France and Italy immediately denied they had joined in the call, which was a thinly disguised challenge to Germany. What did the Nixon White House call it – credible deniability? Welcome to the wacky world of incredible Eurozone deniability.
Anyway, here’s the bottom line: truth in the Eurozone is now more inaccessible than Mitt Romney’s tax returns. But in the light of that pesky defaultoid heading straight for the unelected Brussels Commission, The Plan is to create a bank that can plunder the ECB at will, get the euro down to par with the Yuan, and push Greece back towards the Drachma. All those who think this won’t be inflationary, say “Aye!” now.
Inflationary is yet to come. For the time being, Europe’s economy is stationary. And in six days time, the entire continent will be vacationary.