Sunday, June 19, 2011

Well the doomed euro has been saved yet again. In the words of the current favoured phrase, by "kicking the can even further along the road". Or, if you like, by typically British muddling through. Along with a Canute-like ordering of the tide to halt. Canute, of course, knew this was impossible and wanted his sycophantic nobles to face up to reality. We don't know what the European leaders really think about the expedients they regularly have recourse to. In a word, how long can this go on before Greece defaults and/or is persuaded to leave the EU so it can devalue its currency and pay for its financial crimes itself? And will the whole pathetic saga end with 'more Europe' but for a (much?) smaller EU?

Meanwhile, one of the advantages of
France24's low spend on global news is that it's forced to have (cheap) studio discussions. One of these last week was on what Greece was doing to get itself out of its hole. Or not doing, to be more accurate. The panel members were scathing about the Greek government's total failure to implement commitments on privatisation made over a year ago. Again I ask, How long can this go on? Mrs Merkel may be willing, at the last moment, to back off her tough demands but how long will the German taxpayer be prepared to finance a dysfunctional Greece? Or Ireland, Portugal and/or even Spain? And how long will it be before the social picture is the same in the latter three countries as it currently is in Greece? And what will the politicians say and do if and when it is?

This is an article by Will Hutton which asks the same How Long? question as me but comes up with an answer. Or at least a proposal - "The alternative [to Armageddon] is to cut a grand bargain and to do so fast. Global finance has to accept it has responsibilities, not usurious claims that must always be met in full whatever the pain. Greece's creditors must accept write-downs and write-offs of their loans. In return, they should be allowed to swap their lending into new financial assets that they can freely buy and sell. The same deal needs to be extended to Portugal, Ireland and Spain. The funding would be financed by the EU, IMF and Germany – along with Britain, the US and even the Bric countries. The Greek government would rescind the worst of its spending cuts, but stay in the euro while its rules, too, were reformed. The risk of disaster would be averted." Maybe but can anyone see the politicians putting this deal together?

If you want an example of how duplicitous politicians can be, you need look no further than the issue of a national health service in the UK. I've been meaning to write for a while about how amazing it is for a Brit to read an editorial in a left-of-centre paper (
El País) which not only accepts as a reality differential levels of care around the country but also calls for co-payments by patients. Embracing these in the UK would cost all MPs their seats. And yet, as a columnist writes in today's Daily Telegraph about the UK's NHS- "Yes, it's true: everybody knows – and has known for quite a long time – what needs to be done. And almost nobody is prepared to tell it straight. Even though many voters know it, too, and would almost certainly be ready to accept that their own instincts were sound if a political leader enunciated them with the kind of unblinking conviction that inspires confidence. It is not just passion or demagoguery that is called for here, but fearless, trenchant argument. Why cave in the face of vested interests who caricature your health policies as an 'American-style market free-for-all' when you could make it clear that there is an alternative European model of mixed public and private provision that delivers better outcomes than the NHS? Why not make the case that our rationed state-monopoly health care is out of step with more competitive and patient-centred systems in countries such as Sweden, Germany and Denmark? Why not talk to the country in the honest way that you talk to each other and to your trusted confidantes?" If you are intrigued as to what the answer to this might be, click here.

Back down on the micro scale here in Spain, an editorial in today's
El País's Business Section says there'll continue to be fear about Spanish debt until such times as the regions come clean and show what they've got. Which sounds about right. Presumably the silence means transparency's not going to be in everybody's interest. Either that or they've got no accounts.

Anyway, that's quite enough serious stuff. Tomorrow is another day.

Postscript: Since I wrote all this, I've read an article with an alternative solution - "A 
single European currency encourages trade and investment across frontiers, and thus growth. But countries with inflexible, badly run economies should never have been allowed to join the euro. The sooner the eurozone shrinks, the sooner it will stabilise." See here for more on this "right-of centre" view. Which endorses my own comment that the politicians are never going to get a rescue act together - "There are two reasons for pessimism about the eurozone. One is the bickering and dilatoriness of Europe’s leaders. The euro is like a patient on a sick-bed, surrounded by doctors who do not agree on the nature of the malady or the medicine required to cure it. Leaders have failed to convince markets that they know what they are doing. The second is the growth of eurosceptic sentiment across the EU. In 'peripheral' countries there is increasing opposition to further spending cuts, given the meagre prospects of a return to growth. In core countries such as Finland, Germany and the Netherlands, there is growing hostility to further bailouts. So even if the doctors find the remedy, parliaments in northern and southern Europe may spurn it."

So, better a sub-optimal option than one which exists only in theory.

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