Monday, May 21, 2012

Well, it seems almost every analyst accepts that Greece right now is truly "on the edge" and that anything could happen, as it has before. Many people in Greece appear to be concerned about SYRIZA because it isn't actually one democratic political party but rather a coalition of SYN, AKOA, DEA, KEDA, "Active Citizens", and a number of other assorted independent left-wing groups and activists. Most of these groups have had no political experience and a history of squabbling amongst each other and voters in Greece are concerned that if SYRIZA is given power it will then enter into extremely treacherous and difficult times as the leading force in the government and it may not have the strength and unity required to simply stay together. In other words, if any party is likely to fall apart under the pressure and stress it's SYRIZA. For all the bold things that Tsipras did and said last week, he also demonstrated some political naivety. I also note that quite a lot of ordinary people in Greece are now saying that it's time to stop punishing ND & PASOK, that they've been given a good shock, but that it's now time to put together a government that actually has some experience of successful business and government. Personally, I would like to think that SYRIZA will win the election and will successfully guide Greece through the turbulence, saying "No!" to all of the transnationals that have previously been allowed to plunder the country and addict the Greek people to excessive consumerism. But like most Greeks all I can have is hope. I see that the other parties are now fighting very hard to win on June 17. Samaras made me snort yesterday when he declared, trying to take the ground from under SYRIZA, rather like an angry schoolboy, that he was the first person to object to the memorandum. And Venizelos has been doing a lot of angry shouting of late. The other possibility of course is that if Greeks in Greece keep draining the banks of cash as they have been, then the banks may run dry well before June 17. It's May 18 today and a month is a long time in Greece these days. If the money does run out at the banks, some people will survive on the money they have stashed under the mattress, but a lot of others simply won't have any money at all and that could spell trouble on the streets. And the tanks COULD roll in. It's an extraordinary situation. 80% of Greeks want to stay in the Eurozone but between 30 and 40% currently support the party that has said it could quite easily tell Brussels that the bailout agreements are "null and void"....I think the most dangerous outcome of all this is in fact Greece NOT leaving. Although departure will be hard for Greece, the massive over-valuation of the economy does in one way or another have to happen. If Greece is bankrolled to stay in, the danger is that countries like Spain and Italy will then believe that they too can be bailed out. The problem is that the EU (i.e. Germany) can afford to bail out Greece but it cannot afford to do this for either Spain or Italy. Also, the price of Greek exit is manageable, perhaps more so than the price of a full bailout.  If Greece is forced out and restructures, this should hopefully focus minds in Madrid and Rome. They will realise that they MUST take serious and painful steps to correct their own failures and mispricing.... It of course comes down to Germany, and really Angela Merkel's electoral calculation. Germany can save the Euro, but only by cutting Greece loose. If it insists on bailing Greece out, the Euro is doomed to failure and with it, probably, the EU as we know it.

6 comments:

jiji said...

Germany is not just ahead of the game here they are actively moving the goalposts.
Posted about a week ago that Germany must get real and inflate their wages, this has started a lot sooner than I expected with the government actively encouraging wage rises of over 6%.
The other side of this I stated was Euro devaluation, lowers European debt value wrt the dollar.
Be prepared for a Euro devaluation of 5% or greater very shortly, hence the new banks.

victorP said...

Innocent questions from an ignorant man.
What are industrial companies getting banking licences for?
Why?
What are the implications for taxpayers?
Do they now work with moral hazard.
Can I get an account with them.
Why have no uk companies done this? Or have they?

Anonymous said...

Why is it "perverse" for the Greeks to wish to stay with the Euro?
It's a far better currency that the Drachma ever was. And indeed they know full well that if they go back to the Drachma the Greek government will just print billions of them, as required, making the currency totally worthless on the exchange markets.

Anonymous said...

The unit labour cost dilemma for the Eurozone.

During the first decade after the introduction of the euro, 2000 to 2010, unit labour costs increased in:

Greece 36%
Spain 28%
Italy 30%
Portugal 25%.

Germany less 5%.

This deal is certainly a step in the right direction. However still a long way to go yet Philip. Maybe after 3 years of similar German pay rises?

Tourism is 16% of Greek GDP. Notice German bookings to
Greece are nearly 30% down this year, 50% since the election. Understandable. Few will go on holiday to a country if outright hostility is the best you can expect.

Perhaps Portugal, Spain and Italy will benefit?

Anonymous said...

You don't include the actual reasons - which is something of a pity .......

A) A common currency cannot work without a fiscal union, which cannot work without a political union.

B) The people who launched the euro knew this because even their own economists told them.

C) They didn't care but pressed on with their own reckless and unmandated project anyway.

D) ERGO, the ONLY guilty people are the EU and European political elite, guilty of LIES and massive undemocratic arrogance and incompetence.

OH - and of course reckless folly in the mismanagement of OUR MONEY.

Anonymous said...

Barack Obama left the German chancellor in no doubt that he would like to see her adopt a less confrontational stance towards the Greek government, during a heated two-hour discussion at the G8 summit at Camp David, outside Washington.

Obama, facing a presidential election in November, cannot afford US jobless numbers to rise this autumn, a serious possibility if there is no return of confidence in Europe. He is said to understand the necessity for the Greeks to undertake spending cuts, but stressed the same austerity approach across Europe would simply lead to recession.

Following the discussion on Saturday, the G8 issued a communique that tried to reference all positions, including the right of the G8 to discuss the state of the European economy.