ANALYSIS: THE EUROZONE SAME OLD SONG CONTEST

The EU cannot win a war on seven Fronts

More myths were being recycled yet again for public consumption by the Maily Torynaff yesterday. First, Roger Bootle peddled ‘the Greek economy has slipped back into recession line – as if under Nia Demokritia it had been storming ahead. It never left recession, because it was destroyed by the euro-surivalist in the wheelchair, with the lead pipe. But if you want to blame Syriza for that, feel free – the ECB has been vomitting the same drivel for over a month, so why not join in? Second, Mr Bootle blithely concluded that ‘Greece should default and then exit the euro’.

Right then, Rog: sorted mate. Er, just one question: how? There is no way to leave the euro: Grexit is impossible without treaty change. Even then, Greece must give the EU two years notice. I’ve pointed this out so many times now, I’m on the point of floating a Hindenburg replica over London and then New York, emblazoned in ten-foot dayglo with the words, ‘GREXIT IS A MEDIA INVENTION’.

One day (perhaps) when the world regains its sanity and newspapers print the facts once more, the real story of how Greece was bombarded with loans – and then used to save a worthless, dysfunctional and stupidly designed currency – will come out.

But not if Boris Johnson has his way: the Mayor of London and informal Cabinet Seat Mr Jobdone has jetted into Athens and met lots of “representative” Greeks who represent largely ND and PASOK….and who of course told him that Syriza has ruined everything which had been going so well until the January elections. In doing so, and then reaching a firm conclusion, Doris thus left out around 3 in 5 Greeks who want an end to austerity. But this is the Mayor’s way: the opposing view merely confuses people, and he prefers to avoid it where possible.

To summarise, the two innocent groups in the saga, the two lots that did nothing whatsoever to create the situation – Syriza and the ordinary Greek citizen – are being handed the bill, and the blame. You couldn’t make it up. Unless you were a neoliberal, of course.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I’ve started with a bit of Nazi airship symbolism, so I’ll continue. The Greek ‘negotiations’ involve nothing more than two diametrically opposed philosophies itching for a fight. But unlike little Dolfi in 1939, the Troikanauts have invaded Greece without signing any pacts to avoid a war on two fronts. In fact, they seem hell-bent on a war on seven fronts.

Where Hitler began on September 2nd 1939, more trouble is brewing. Poles are fed up of the same old same old politics. And that probably explains why 43-year-old Andrzej Duda – an MEP from the socially conservative but economically left-wing Law and Justice Party – last Sunday defeated a sitting President who, just two months ago, looked like he was cruising to victory

Younger Poles – especially those from the depressed agrarian Eastern part of the country – see the Polish elite as out of touch. Duda had the antennae to perceive that dissatisfaction…and won against the odds.

He did so with the usual mix of hopeful promises: he has pledged to raise salaries and revoke an unpopular law that increases the retirement age to 67 – plus more support for farmers. And he took a swipe at the obvious corruption of Poland’s political elites.

However, his politics are complicated: he is a conservative Catholic who also supports the country’s NATO membership bigtime: but he also believes Poland should protect its national interests – and on that basis, he is firmly against adopting the euro.

This puts him on a collision course with fellow Pole Donald Tusk, the newly appointed President 0f the European Council. Tusk has strongly supported greater political and economic integration within the European Union, strongly backing the implementation of the Lisbon Treaty, and has repeatedly stated his government’s intention to bring Poland into the Eurozone.

So the bottom line is, it’s yet another defeat for the EU euro expansionists. Or as they would put it, “a mistake”….rather like the Hungarians voting twice to keep Viktor Orban in power, on the basis of his refusal to swallow the poison euro pill in Hungary. Duda and Orban have different agendas, but they have one big thing in common: they’d rather eat nails than join the euro.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Over in Spain meanwhile, important local elections have suggested that another EC stooge Mariano Rajoy is heading for the exit next time the People vote nationally. This is going to represent a serious and present Fourth Front for the Eunatics. Rajoy’s risibly titled People’s Party (PP) suffered its worst result in more than 20 years, as the more bourgeois Ciudadanos (‘Citizens’) and anti-austerity Leftost Podemos (‘We Can’) made huge gains: they now control between them the two key cities of Madrid and Barcelona.

Bubbling away in the magma reservoir below this volcanic eruption are the separatist movements who are, naturally, about as opposed to a federalist EU as its possible to be. And the fact that at least two very large Spanish banks are over-leveraged and could not possibly survive any new credit events, sorry, mistakes.

Senor Rajoy (and the Troikanauts) have just five months to sort this one out: for in November comes the national poll. It looks set to be another Greece – albeit it with very different players. But again, firmly anti-austerity.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The biggest potential explosion of the lot – Italy – has been either remarkably lucky or very clever (with Brussels help?) at keeping itself off the toxicity radar. But I remain certain that it is the accident, sorry mistake, waiting to happen. There are, briefly, two reasons for this: it’s by far the biggest ClubMed economy, and the lies told about its fiscal and economic situation are by far the biggest.

Italy recorded a Government Debt to GDP ratio of 132% in 2014. While this has stopped growing, it also has no way of falling….and Italians increasingly realise this. Last November, the FT opined, ‘Put bluntly, Italy’s economic position is unsustainable and will result in eventual debt default unless there is a sudden and durable change in economic growth. At that point, Italy’s future in the eurozone would also be in doubt – and indeed the future of the euro itself.’

There’s no sign of that happening. As in, none whatsoever. Ten days ago, the Wall Street Journal had a crack at hyping Italian growth while handing Mario Draghi the credit for producing that result from just six weeks of QE. Not really likely, but any straw will do. The reality is that a tumbling euro has boosted exports (it’d be a miracle and a disaster if it hadn’t) but the eurozone is still having growth forecasts for this year pared back from 1.8% to 1.5%. Balance all the windfall plus seasonal factors, and Italy is exactly where it was a year ago: forecasting 132% debt to gdp, and nowhere near the sort of growth figures likely to reduce that debt.

That year has seen Prime Minister Matteo Renzi offer little or no hope of change. Restructuring the economy, he insists, will take time. But time is what Signor Renzi doesn’t have.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Those allegedly in command of the eurozone have become reconciled over time to the United Kingdom staying out of the common currency, but they are adamant that David Cameron will not be able to deliver the core reforms he needs to persuade Brits to stay in the EU, let alone consider adopting the euro.

This could end up being an unstoppable force/immovable object thing, but the way things look at the moment, the issue might be near-academic by the time any UK in-out referendum takes place anyway. If the Troikanaut banking wing gets its way on a headlong rush to the cash-free Union, then France’s economic standstill will crash into serious contraction….as will most of the ClubMed economies.

In short,  the war on seven fronts (I’m counting Ukraine and its oil supplies as another) will I think have turned into something more immediately dramatic – perhaps at last making the British Establishment wonder what on earth it stands to get out of an EU riddled with rebellion, and saddled with a bathroom tissue currency.

But don’t assume all is fine and dandy in Blighty itself. George Osborne got very thin-skinned yesterday and pointed out that Britain’s “stumbling growth” was not quite as bad as at first thought. He’s obviously expecting more of the same, and is going to run out of road by next Spring at the very latest….because he too has an economy making absolutely zero impression on the national debt.

In fact, when even Goldman Sachs says the world is “drowning in debt”, then we know there’s a problem.Andrew Wilson, head of Goldman asset management for Europe, the Middle East and Africa said growing debt piles around the world pose “one of the biggest threats to the global economy”.

“There is too much debt and this represents a risk to economies. Consequently, there is a clear need to generate growth to work that debt off,” said the man who works for the bank that sold one helluva lot of it.

We all see the clear need, Andrew. But nobody has cracked the “how” as such. And therein lies the eurozone’s problem: having wasted their time on interbank trading and lent money foolishly, the banks no longer have the money to give as credit to consumers, and investment to entrepreneurs.

So there ain’t gonna be no growth, guys. It really is that simple. In fact – despite all the myriad ways another crash could come – a drying up of liquidity is still the favourite. QE has never solved that problem throughout 16 attempts around the World. So why should it now?

Yesterday at The Slog: Burning money – how the bankers could make things even worse.

34 thoughts on “ANALYSIS: THE EUROZONE SAME OLD SONG CONTEST

  1. In the new world order inflating the economy is the only game in down through DIRECT central bank divine intervention.

    Do you accept the ECB forced inflation rate with NO LOCAL modification of rate to suit a population so what is good for the Germans is not necessarily the best for you or vice versa.

    That is what this is coming down to with an equivalence to the debt in Greece or Germany as this is how they are manipulating it.

    Like

  2. Reblogged this on Machholz's Blog and commented:
    Until we get an awakening of the Irish ,Spanish,Italian and Portuguese peoples to the Corporate dictatorship these countries are now in the ECB will continue to dream out their unsustainable economic terrorism in these countries ! This madness must be brought to an end !
    A Great article and thanks for posting! :)

    Like

  3. And France and Germany have announced that they are to forge ahead with further EU integration dashing Cameron’s plans for re-negotiation, not that there was ever going to be any re-negotiation, not like there is ever going to be a ‘Brexit’, if the ‘Out’ vote was 90% in favour they will just re-run the vote or ignore it.
    We have now to wait to see what the next scheme they dream up is, to ensure we contribute even more.
    Bailins are soooo last year now.
    Has anybody thought how the millions of folk without bank accounts will manage in a cashless society?
    Will further integration mean effectively the removal of national governments? No need for voting then surely? You can see it coming, can’t you? This nightmare isn’t about to end just yet, although I can see that the core components that will see the end of the Euro and EU are now gathering momentum, doesn’t mean to say that they won’t contain them though for as the stakes rise. so do the losses if it does go pear shaped, then, we will see just how far they are prepared to go to save The Dream.

    Like

  4. David Stockman’s contra corner has a good post on “Pray for Graccident: it will trigger the demise of the ECB and the world’s toxic regime of Keynesian Central Banking”.

    Like

  5. I cannot but wonder if Scotland gained independence and stayed in the Euro, and the remainder of the UK voted to leave, what the scenario would be. UK manufacturing moving to Scotland?

    Like

  6. There is no doubt Greece is being used as a distraction and convenient whipping boy by much of the media.
    Nevertheless, the buck stops with the Greek government. They can’t on the one hand say they’re committed to being in the euro while on the other refusing to follow the rules. I have no doubt the country could fairly easily leave the euro if they wanted to but they don’t want to because they know the handouts would stop and they would have to start paying their way as a nation.
    Equally, the abysmal, and worsening, state of the Greek economy is largely down to the utter incompetence of this Syriza government and previous Greek governments.
    The hard decisions will have to be taken at some point but sadly things will continue to deteriorate while Syriza are in charge.

    Like

  7. That’s an unbelievably simplistic analysis of the Greek predicament. You don’t even begin to consider the murky origins of much of the ‘debt’ which has been foisted on Greece or the fraudulent nature of their entry into the Euro. Handouts? In the current context of ruinous austerity and payback, that’s almost funny.

    Like

  8. Hiya dude.
    Agree with most of your drift . Not totally about Italy vs UK. if public AND private debt are included both countries run to circa 270 percent debt/gdp excluding unfunded liabilities, pensions , welfare etc. Also Italy has most public debt in domestic hands so national support of Italians in their Govt. possibly greater than the fickle underpinning of the UK debt by overseas hot money.

    Plus Italy is in the euro whilst UK lives or dies as a single nation/ Union via sterling s market oerformance .

    Yes I give you euro is a toilet currency but if doodoo hits fan I woukd rather be in bed with Germany /Holland than with Wales/Northern Ireland …. and possibky Scotland . Stay safe . Don t go over the 55 mph
    limit or you ll have me to deal with . Tenfour.

    Like

  9. Well spotted KFC. This just adds weight to what JW is saying, the EU is not without clever strategists who know damn well that there is trouble brewing in the ranks. This enhanced integration that France and Germany are cooking up is yet another rearguard action to fight the incoming tide of economic meltdown.

    When faced with opposition the EU simply cooks up more integration, more red tape, more layers of bureaucracy and like JW says, unless you go fully gunboat you have to spend years wrangling to get out of these arrangements.

    There will be tears before bedtime.

    Like

  10. He who controls the Money supply controls the country. Any Nation that opts to enter the Eurozone, immediately surrenders its Sovereignty and its freedom. It no longer has the tools or freedom to control its economy. It is a trap.
    The UK has been fortunate to have remained outside the Eurozone. Whether this policy was pursued by Gordon Brown or was most likely influenced by the money men of the City is irrelevant. The UK is one of the most indebted countries in Europe and would be in a situation like Greece were it in the Euro system
    Scotlands quest for Independence is a complete farce if they continue with their intention to remain or apply to enter the EU and the straitjacket of the Euro.
    The Scots Nats are in dire need of an economic adviser who understands how the Money system works.
    To repay a debt, a surplus must be created. To create a surplus , requires investment in productive Industries. Unfortunately there is a serious lack of investment, in Industry in the UK and many skills and industrial infrastructure, hard earned over hundreds of years, have been cast on the scrapheap.
    It is estimated that UK banks only invest 8% of their capital in Industry. Banks do not like risk. Much easier to invest in the low risk , quick returns of the FIRE sectors. (Financial, Insurance , Real Estate).
    The FIRE sectors are not wealth creators or mass employment sectors. They create fiat money in the carousel of the markets and its bastard child ,Inflation.

    Like

  11. +1 Salford – the question remains if people like us can see this truth, why is nothing being done to change course??

    Like

  12. I think they all understand exactly how the money system works, and by that I mean the way it is works for them and not us, and that’s the way it’s going to stay all the time we are stuck with the present incumbents. They enrich themselves, we get poorer and they don’t give a hoot.

    Like

  13. “To repay a debt, a surplus must be created.”

    Yes – and that surplus must then be used to pay off the debt, not used for other purposes. Simply by noting that overall world debt has never DECREASED one can see that no debt has ever been truly repaid, it has just been rolled over to the future.

    To get a true picture of world GDP one must SUBTRACT the debt and its associated costs – by this measure the world has been in recession since about the 1970s.

    The alleged “quick returns” in the FIRE sector are a lie, based on ignored externalities and suspect accounting (e.g. ignoring the debt).

    The blunt truth is that all the promises that have been made – to pay people in retirement, to have a social safety net, to maintain infrastructure for example – all depend on a rate of growth that cannot be met due to ever-faster-declining raw resources coupled with ever-faster-increasing pollution and debt costs. Austerity is coming to us all, like it or not, simply because the promises we have made ourselves are not realistic.

    Like

  14. Tom So Goldman Sachs understating the Greek debt the Troika overstating the Greek debt the debt based on manipulated Labor & Forex data & remember these are all estimates of what someone thinks will happen with no relevance to their actions on the actual economic mess flat earth economics creates because it is just guess work not hard values! this disconnect between wishful thinking & reality is A) what needs fixing (everything needs re-evaluating) B) taxes need collecting & re-evaluating to bring a steady re-balance ,it is quite easy really those that gained most by false values need to pay it back,this will reprice values higher because of the money printed against nothing of value on money in the system then money needs to be destroyed (?)or exchanged for true values of imported goods,distributing value abroad.

    Like

  15. People rarely mention how much France has lost being in the Euro : car production down from 3.5 mn units a year in 2000 to 1.8 mn units a year in 2013 ! Its a stunning decline and is repllicated throughout their industries ; The State here is selling off real-estate to China and Qatar as they are short of cash . And yet there is zero debate here on this subject , everyone talks about the german success story ( which admittedly is has other factors) but no-one cares to look at just about any economic data chart which shows the French and German economies diverging since 2000 . Italy has the same scenario but worse …. Iran now produces more cars than Italy . Greece is the perfect smokescreen : French imcompetents Sapin and Muscovici lecturing the Greeks …

    Like

  16. The assumption that the world economy can somehow support a workforce of seven billion people is the source of the problem. Governments must supply the idle bees with honey from the worker bees. The worker bees are competing with other worker bees in this over supply of labor world wide thus driving wages down. The winners in this world economy try to keep everyone else distracted from this downward spiral. If a revolution comes from this impoverished bottom of the world pecking order, the end result with be worse than that caused by the banksters running the show currently.

    As a stop gap measure I propose free smart phones and internet for everyone on the planet. This system must run on my software and all content shall run through my filter, otherwise you are free to be distracted as you wish……have a nice day…

    Like

  17. ‘Andrew Wilson, head of Goldman asset management for Europe, the Middle East and Africa said growing debt piles around the world pose “one of the biggest threats to the global economy”.’

    He sees the problem as demographic. Too many OAP’s and not enough young people working and paying taxes.
    His solution? Workforce expansion by immigration.
    FFS think it through Andrew. What happens when the expanded workforce become OAP’s?
    Why do bankers always think that you can cure one Ponzi situation by creating another?

    Like

  18. The world can support 7 billion people, just that some people’s standard of living has to drop.
    The 1% are trying to make sure it isn’t their standard of living that will drop.
    The western middle classes and their children are going to be the big victims.
    The vehicle they used to ensure that is just a tad too crude and overwhelming, and will hopefully lead to their comeuppance.

    I don’t get how France thinks more unity with Germany will help the French; the Germans are not going to bail out French pensions. I suspect France prints its own Euros.

    Italy should not be in as bad a position as France. Italy has a stunning manufacturing sector, a great agribusiness, culture, tourism, innovation, and thex and thunshine too. Italians seem to work hard enough as far as I can see in my visits to their factories. They absolutely shame UK industry into a cocked hat.

    Re. Salford Lad’s banks only investing 8% of their (not really) capital -sounds like the Dept of Trade and Industry should carve off a slice of RBS and set up an Industrial Bank. The Main St. Banks will never support industry and innovation on their own, they haven’t a clue what industry does.

    Like

  19. @ Foucalt Tudoux Wimay.
    Vince Cable, who is an Economist attempted to set up RBS as an Industrial Development Bank, while he was Business Minister. He was rapidly slapped down and was the subject of vilification in the press.
    No one gets in the way of bankers and their ill gotten gains.
    Germany has a close relationship between its banks and Industry,a reason for their Vorsprung und Technik…

    Like

  20. Dear John,

    I always read your articles with interest; full of a lot of good points.

    1. Take it that the “two years” below refers to Article 50 TEU on leaving the EU.

    Like

  21. Ehrlich lost an economics bet, on commodity prices to Julian Simon. An interesting Forbes article:

    http://www.forbes.com/sites/timworstall/2013/01/13/but-why-did-julian-simon-win-the-paul-ehrlich-bet/

    these control freak coward types who claim the Worlds’ resources are running out & we need to cut the population & establish a draconian world Govt, always fail to factor in human ingenuity & scientific progress.
    In fact, the One Worlders hate both, & intend to return us to a post-industrial feudal nightmare world.

    Like

  22. ghost, please see my replies to the mass murder enthusiast Rowan above.
    John Doran.
    I’ve been reading this “We’re all doomed” crap since I was 19, in 1972, when I read the “Blueprint for survival”.
    Published in the Ecologist magazine & inspired by the eugenicist Club of Rome, oil was suppsed to run out by the year 2000, to cite just one foolishness.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s