A brief respite that buys just a little more time might be a reasonable way of summing up events inside the Athens Parliament yesterday. But while Brussels celebrates Athens burns. I suppose looking at it from Greek government eyes yesterday and today will have seen two more votes done and at the very least will mean that the gates that allow the EU/IMF to pour a final EUR12bn tranche from the originally agreed EUR110bn bail out loan can now go straight into the starving jaws of the failed Greek economy. No, don’t bother saying thank you Greece – we know you too well for that but do please tell us as soon as you can whether there is any likelihood of us ever getting our money back!
In the face of a strikes, riots and increasing political uncertainty one might so easily be tempted to say that we must be absolutely nuts to make any further payment. ‘Haven’t we given Greece enough chances already’ said one person said to me earlier today? For a brief moment I could acquiesce with such a view until you realise that this is about the potential of a default by one country such as those of Argentina and Russia a decade or two ago – this is about avoiding a default about Greece and that most likely when and if it occurs would bring down the complete pack of Eurozone cards and probably also the ground on which those were built – meaning the European Union. Yes, I can see exactly what you are thinking – GREAT – is the word which sprang to your mind wasn’t it? But be careful what you wish for – Britain may be fortunate enough not to be in the single currency club but as the Bank of England well knows make no mistake that collapse of the Euro would bring about significant damage to our economy as well.
For now and as long as an independent minded International Monetary Fund is prepared to have its troops on the ground in Athens managing and monitoring how loans made so far are pored into the great black hole that is Greece we probably don’t have sufficient reason yet to pull the plug. Sure, deep down most of us feel that as a country and an economic system in its present form that Greece is doomed.
Listening to BBC World Service in the very early hours of this morning as I have a habit if doing some rather surprising remarks from a couple of interviewed economists were to be heard. ‘Invasion’ was one solution put forward but it was the suggestion that Greece should merge or be taken over by Turkey that did at least bring a wry smile to my face! That said I suspect in all honesty that Greece probably feels that it has been invaded – by hoards of EU and IMF staff crawling over its books! Nonsense though the idea of invasion and merger might be they highlight growing concern that there is no belief out in the street that any real solution yet exists to bring Greece out of its crisis. It might also suggest that anyone seeing the Greek problem as merely a ten year one needs to get new glasses meaning this is a thirty year problem at absolute best.
In Brussels the message following yesterdays vote was very different and tantamount to dancing in the streets. How ridiculous but listening to some of the comments overnight that is exactly the type of misplaced euphoria that appeared to be all too evident. Day by day we wonder about the future of the Euro and of whether Greece will bring the single currency down. Loathed to the misplaced ideals of the blessed thing as I am if there is to be any change in attitude and approach to the future transition of the single currency I hope to God it is orderly as opposed to placed on demand. As things stand now a collapse of the Euro is unlikely because no mater how much it costs them the authorities will somehow hold it up. Right now against both Dollar and Sterling the Euro defies gravity. Why? Sovereign debt issues aside large parts of the Euro economy are actually doing reasonably well all things considered. Yesterday’s service sector data didn’t help and neither are increasing signs of concern over where the US economy goes from here or with just over four weeks to go before the deadline increasing worries that raising the US debt ceiling above the current $14.3 trillion may not be sanctioned by Congress.
Back to Greece – do we and should we try to hold the remaining pieces together for just a little while longer despite what we see on our TV screens? Do we give the Greek government a final chance to show that they are genuine in their approach to pushing through the proposed EUR28bn austerity package through to its full conclusion? Do we accept the inevitability that a second round of negotiations with regard to another EU120bn requirement should begin between the government and the EU/IMF authorities? Or should we better accept what long experience of watching Greece over the decades tells us – that no matter what there isn’t a cat in hell’s chance despite all the lovely proposals being pushed through Parliament that over the next couple of years’ public sector costs will fall or that tax revenues will begin to rise? Wars have occurred from far less than the Greek problem of today ad I suppose that the answer to the above questions is that we need to accept a combination of all of them. History also tells us that having been spoilt for decades with welfare and pension payments that defy belief, the possibility of public sector workers (the majority of working Greeks) to retire at fifty, a history of low taxes and too little willingness to pay them even then that the majority of the Greek public are hardly likely to make the government plan work.
Meanwhile not content that the Greek tragedy should be the sole thing on their minds our wonderful EU diplomats in Brussels reckon that we should increase our contribution to the EU by maybe 5%. What on earth planet do these guys live on!
