A finely-balanced tussle about the fate of Greece had the markets on edge today
The forces swirling around Greece’s punch-drunk head remain more difficult to lasso than ether. But an exhaustive check with every source (and reading of every signal) by The Slog over the last two days suggests very strongly that two diverse coalitions – with diametrically opposed opinions and aims – are struggling to gain the upper hand. The goal of one side is to ensure Athens stays in the eurozone; the aim of the other is to effect its exit with all dispatch.
From the day these latter stages of Greek agony began to unfold – around the late Autumn of 2011 – The Slog has maintained a consistent line: that far more is in play here than simply whether Greece can live up to its promises in relation to debt repayment and austerity schedules. As 2012 has progressed, however, both strategic geopolitics and domestic schisms throughout the developed West have contributed to the complexity, facing every serious analyst, as to what is or isn’t going on – and likely to happen.
Along the way, some of the players have changed sides – most notably the White House. Last January the Obama administration was moving Heaven and Earth to ‘amputate’ Greece and create a firewall around it, while at the same time hoping to embracing it and get access to military bases and energy/mineral supplies in return. Now the US ruling Party is pulling out all the diplomatic stops to keep Greece in, and the euro stable – the better to facilitate Obama’s re-election
Joining the Democrats on the ‘in’ side of the fence are France (terrified of its major banks blowing over in the aftermath of a Greek default), Angela Merkel (conscious of the likelihood that Germany will pick up Greece’s internal EU bad debts) and Beijing (worried that an unstable eurozone will tip China over into a dramatic slump).
On the ‘out’ side of the game, it immediately starts to get complicated. Figuring they can only gain from Grexit, Romney supporters within the American banking and bureaucratic system are – there is now no doubt in my mind – conniving with all the muscle and money they can muster at the creation of a major Hellenic crisis . Their main conduit for so doing is the Troika of international bondholders and lenders, many of whom see the election of Romney as being a likely return to business as usual. Despite the oft-employed description of the IMF as ‘Keynesian’ by many financial press opinion leaders, in reality there are more debt hawks there now than doves: while the bondholders left outside of the ECB are, on the whole, firmly of the belief that debts must be seen to be paid….with excommunication if they aren’t.
In the same camp are the private Bankfurters and Weidmann-led Bundesbank, most of whom are now convinced that any attempt to save the entire peripheral ezone axis could only end in financial disaster for Germany. Their ideal solution would be the banishment of Greece, Portugal and Ireland. Mario Monti of Italy is of a similar mind, having long felt that further monies given to Greece in particular are wasted. Mariano Rajoy of Spain is torn, but in private is reputed to believe that a devolved Spain under EU ‘protection’ is inevitable sooner rather than later.
Only two players have a foot in both camps, and neither represent what one could call a surprise. The German Finance Minister Wolfgang Schäuble doesn’t want a crown of thorns when he becomes the financial leader of the Fiskal Union proposed by Berlin-am-Brussels; but equally, he doesn’t want a meaningless bauble either. Herr Schäuble is strongly of the view that Greece should be forced out, and all the available market-convincing firepower focused on Spain and Italy. But as ever, he favours boasting about the money available to support these countries, rather than indiscriminate bond-buying. Whereas the ECB boss Mario Draghi would very probably buy every ClubMed bond unsold at auction – although he too is now four-square behind Greek amputation…but after November 6th. As a technocrat, he does not believe that messy Greek default plus American panic could be controlled.
Even this three-wheeled applecart could be overturned if Antonis Samaras’s Coalition partners persist in their stance of refusing to accept the full package of austerity policies being demanded by the Troika. Nobody in Athens is really sure whether the Venizelos motive is the downfall of New Democracy or calling the Brussels/Berlin bluff, or both. We must simply all hope that the Fat Man knows what he is about.
Based on what I’ve been told, what I’ve read, and the tone of various public pronouncements, my money is still very firmly on Greece sticking with the euro. The forces in favour of it appear to be in the ascendancy. My fear is that, at some time after November, the splits in Germany and ClubMed about the fate of the Greeks will come under intolerable strain. But on balance, continue to think that Berlin will be out of the game before Athens.
The Slog 