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.
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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.
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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.
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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.
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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.
The Slog 