Greece – EU Leaders Walking Blind Alley Backwards!

Demanding that Greece cuts its budget deficit is one thing – whether the Greek government could or would do anything to acquiesce quite another. Meanwhile it would surely have been well and good for ECB leader Jean-Claude Trichet, German Chancellor Angela Merkel and maybe even the French President, Nicolas Sarkozy to tell the world that they stand four square behind the Greek government and under a single banner say that the EU will take determined and co-ordinated action to safeguard financial stability if we could have seen anything other in this ‘accord’ but empty words. But the reality is that there was nothing but empty words in this ‘accord’ and words that further damaged the credibility of both the EU and probably also the Euro. I say ‘accord’ solely because that is what the EU chooses to calls it but the reality is that as this so-called ‘accord’ appeared from seemingly nowhere just an hour or was it two after the 27 EU leaders first took up their summit seats to discuss the matter of Greece along with many other pressing matters I am left to conclude that what we have in front of us now is little more than wishful thinking on the part of a handful of albeit powerful EU leaders – in other words a neat piece of spin aimed at pushing markets off the Greek crisis scent. If so it will fail.

There is nothing worse in my and probably most others view than empty promises particularly if they happen to come from politicians. By attempting to pull the wool over the eyes of global markets with empty promises that contain absolutely neither detail, substance or credibility it is quite possible that the EU may have, albeit inadvertently, done significantly more damage to market confidence. One notes that this afternoon banks have been falling back even if the Euro has stood its ground. This is undoubtedly a bad day for the EU and given that this is a pathetic attempt to stand behind a troubled EU member a bad day for the perception of the Euro too.

Far from taking hold of an already fast worsening debt and deficit situation in one EU member state putting in place a full agreed framework that might conceivably have led to simmering down of concern it seems that a handful of arrogant EU leaders have succeeded in making an already bad situation worse. Make no mistake, the problems of Greece are very serious and they risk creating unacceptable and seriously damaging financial instability if allowed to get completely out of hand. Right now the Greek government has it seems lost any remaining credibility just as too many it has lost complete control of the economy. Let alone failing to accept that as a political body it is ill placed to calm market nerves by failing to act in a concise manner and by failing to have any real substance in this ‘accord’ that might pacify troubled markets it seems to me that the EU has put even the future of the Euro at risk. Let me make this clear. Unlike some that would love to see the European currency fail I am not anti Euro camp and I do not wish to see any break up of the European currency or to listen to a handful of yesterdays’ men potentially saying I told you so if some might soon begin to walk away from the Euro. For now let those old men go on with their wishful thinking of the Euro currency demise but please also let them fail. However, even I have to admit now that this weak riposte from EU leaders on the situation in Greece today and that contained little more than empty promises really has added fuel to fan the flames of those that deep down would love to see the Euro collapse.

My overall view on the Greek situation remains as it has all the way through – that the EU as an organisation is ill placed to attempt to sort this problem out. It can of course make rules on budget deficits and much else besides and along with the ECB it can talk the talk attempting to ensure financial stability. But just because the EU is a powerful political unit that makes the rules does not mean it is the right organisation to either provide the pain and recovery medicine or indeed, police the Greek government into meeting its obligations. Yesterday I made a strong view that the EU has no place attempting to take on the mantle of sorting what ails the Greek economy and that the only way out now for Greece and indeed, the Euro is to fully involve the IMF. Just as the UK was forced to do all those years ago and Argentina did more recently in 1998 it seems to me that the only acceptable solution to this problem and one that would provide markets with the confidence they desire is that the EU should go back to base and leave the Greek government to call in the IMF. With no political jurisdiction and with absolutely no emotional involvement only the IMF has sufficient level of experience and the mechanism and muscle to match than the IMF.

I have no idea whether Greece will default on its debt or not or indeed, whether it might have already. What I do know though is that misplaced political interference from a handful of those in the EU however well meaning and that for whom a total collapse of the Greek financial system would have the greatest consequences will not only do lasting damage to the Euro but will send all the wrong signals to markets concerned about sovereign debt and deficit issues of other EU member states. If that occurs or should I say, is allowed to occur, the Euro really could be in very serious trouble. Greece of course is now in the unenviable situation of being yet another socialist state that has somehow yet to come to terms living beyond its means. Spain, Britain and Portugal are of course others of course but don’t let that kid you that there are non socialist states that will also need to quickly adapt bringing budget deficits down. In the meantime for all its many imperfections I must hope that the by misplaced interference the EU does not allow all the hard work that has been done to bring the Euro this far into doubt.