The Head-Master" hahahaha- Herman Van Rompuy, "via Twitter", lets us know that the eurozone leaders have agreed a statement on jobs and growth. Hopefully they'll be on to the small matter of fiscal compact now...The statement talks a lot about unemployment - pointing out that 23m people across Europe are now out of work. Here are some of the measures put forward to tackle that huge figure:• Increasing "substantially" apprenticeships/traineeships to tackle unemployment.
• Redirection of EU funds to states with high unemployment.
• Using ESF to support apprenticeship schemes and support entrepreneurs.
• Enhancing cross-border labour mobility, mutual recognition of professional qualifications.
Now, about Greece - Is Greece insolvent? -- Yes....Can Greece get back to solvency in the Euro -- No ...Will Greece in years to come still require additional funds in bailouts -- YesSo what will happen, my guess is that todays meeting behind closed doors will be 'how can the EU stitch up the taxpayer yet again to find ways of transfering their money via Greece to the zombie German and French banks without them getting too angry about it'. So Greece will not be allowed to go bankrupt, even though in truth it is. What will come out of this summit for public consumption. A load of old bollox about fiscal compact, moving together and various other rubbish which doesn't address the core of the problem. Telegraph this morning, explained it very clearly to those who don't follow economics of why the Euro is such a bad idea. In the old days recessions were deeper and shorter. People that had taken on too much debt went bankrupt and people that had made too many bad loans went to the wall. The system, cleansed of excessive debt, could then move forwards and grow again. The weaker and more foolish players had been removed and the capitalist, evolutionary system saw the survival of the fittest. In 2008, the greedy and foolish Wall Street investment banks should have been consigned to the dustbin of history. When one institution (Lehman Brothers) went under, the cascading, domino effect nearly took the whole system down. It was quickly realised that no one else could go under and everyone else had to be bailed out. Greece is a small country, but it is still a lot bigger than Lehman brothers and a disorderly default will be catastrophic. Some European banks will go down and the domino effect will start. Unbelievably, one of the FED’s functions was to ensure banks don’t get too interconnected as they were prior to the Thirties depression. Unfortunately, Alan Greenspan and Robert Rubin (Goldman Sachs’ alumni) persuaded the FED that they shouldn’t regulate derivative trading and the FED agreed. The banks set up an un-regulated market in derivatives of ten times global GDP that inter-connected the banks and now no one can fail. The Euro-zone is “too big to fail”; Greece is “too big to fail” and any bank of any reasonable size is “too big to fail”. As no one can fail, there is no way of ridding the system of excessive debts. I think we are in for a very long, rough and bumpy ride. P.S. The shadow banking system, after an initial contraction after 2008, is now larger than it was before the 2008 crisis. The shadow banking system is where the banks keep all their un-regulated and off balance sheet trades, such as derivatives, and this is how they set up a spiders web of global inter-connection out of the view of any regulators. The banks are now even more inter-connected than they were in 2008.God help us all, the lunatics have taken over the asylum. Let's just put that stupid myth to bed that Greece "broke" any rules. All the rules were broken by almost every Eurozone member since its founding. This is all about the politics & has almost nothing to do with the economics. If it was about the economics it would have been over a while ago..
5 comments:
There's an interesting tale on the front page of the Financial Times this morning, predicting that the European Central Bank may pump another trillion euros of cheap loans into the banking sector next month.
According to the FT, the €489bn of three-year loans made in December (which are credited with restoring market confidence and pushing down most bond yields), is just the start. Another auction is scheduled for February 29, and euro banks could ask for twice as much.
"They could do another €1tn easily in February," said one senior banker. "It could be way more than that if things get worse in the markets."
€1tn in extra loans would certainly be a worrying sign, suggesting that the European financial system has hit a very sticky patch. A Reuters poll yesterday predicted that the ECB would lend around €325bn.
The British media have trouble comprehending anything east of a line you can draw from Brussels to Geneva. I doubt they could point to Hungary on a map and as for going there -- forget it. They have enough problems if forced to travel to Berlin.
I am interested in when the Euro is going to collapse. These guys kept telling us before Christmas that it would do so before March. So Guardianistas how about an update on this prediction?
I reckon the ECJ will be the last resort. The real battle will be within the regular finance ministers meeting where they will try to head off any trouble at the pass.
This meeting will become the actual forum where Germany imposes its will. And a good thing too. Let's hope the Germans are prepared to take the EU by the scruff of the neck and knock it into shape and stop sixty years of fudge, rule breaking and empty words.
Merkel has followed Kohl in being only the second German chancellor since the war who has not had to bother with placating either the UK or the Americans. A chancellor who realises that to be the Good German is to be a strong European
Regarding the "irrelevance" of the Fiscal Compact. In the short-term, its relevance is merely to make EZ creditor-nations more likely to open their budgets to actual solutions.
But that is the pointer to its long-term relevance. Cuts in public spending are a difficult sell in any democracy, as they cut into a sense of entitlement.
Quite how difficult a sell varies, as political cultures differ. A left-of-centre german SPD finance minister appears to have as much or more fiscal conservatism than a typical right-of-centre italian finance minister, for example. That's not down to personal opinion, but to voter reaction.
In the long-term, the Euro needs to keep those countries with a more fiscally conservative culture in the fold. Almost all of them already have right-of-centre populist parties who would just love to bash the free-spending eurozone members.
That's the danger (in germany, as elsewhere) that Merkel is combating with the Fiscal Compact. It seems to escape most economists, for some reason.
Greece could decide to suddenly end all its discussions with its creditors (private and non). It could come out of the eurozone, and most likely having to come out of the EU given the sharp unilateralism of such opt-outs, and then....,then, what? Has not this scenario been discussed and considered from each every angle repeatedly? How do you realistically propose that eleven million people are going to make ends meet, other than romantic returns to agrarianism?
Finally, it is not "the Germans" or "Germany" who dictate. Don't forget, the aid Greece has had twice arranged (spring 2010, summer 2011) is assistance from all e/zone countries. Moreover, and objectively speaking, I wonder whether it is such a bad idea that that there is a law-sanctioned ceiling to what EU/eurozone countries are allowed to spend. I come from a country, the UK, which literally from the 1960s to right now (2012) has had countless booms and busts, with successive UK gove/ments playing fast and loose with budgetary discipline. You come from a country, Greece, which has had even bigger economic problems over that last thirty-five years. Is it really that bad that we try to put above politics, respective political party leaders and heads of elected government some fundamentals on which a country's economy should run? People do complain about "the German" idea, but equally the same people complain when a country's finances go completely pear shaped and financial market speculators start circling like sharks around such a vulnerable country. Then they start going on about how evil and unaccountable the markets are. Which is about as interesting as regretting that lions and sharks are not vegetarians!
How about first taking measures and actions in relation to how the world really is out there, rather than engaging in wishful thinking and complaining? And then attempting to change the world for the better...
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