Fox (n): carnivore of genus vulpes; crafty person; scavenger; (vb) to confuse; -ed (adj): to be drunk.

Wednesday, 16 May 2012

Poli-tics; Greek, meaning 'many leeches'.

FOR reasons only an idiot savant could fathom, everything depends upon Greece.

Your mortgage. Your chances of being made redundant. Your local school and hospital. The police on your streets and the nurses who will tend you when you're ill.

How is that even possible? Greece is miles away and the single currency has nothing to do with us. Well, here's an idiot to explain...

"The eurozone crisis is very serious and it is having a real impact on economic growth across the continent, including in Britain," said Chancellor Gideon this week.

"It is the uncertainty that is causing the damage. Of course countries have got to make difficult decisions about their public finances, we know that in Britain.

"But it's the open speculation from some members in the eurozone about the future of some countries in the eurozone which I think is doing real damage across the whole European economy."

Any the wiser? No, not really, and nor is Gideon I suspect. Sounds a lot like everyone's having a panic which in turn is causing a panic.

So this is what's really happened.

Back in the 1960s some bright spark came up with the idea that a united Europe wouldn't have another war. We didn't enjoy the last two, it was all very expensive, and let's not do it again.

Over the decades that followed various politicians became more and more certain that having a whole new parliament with more politicians would be a great idea, and Europe would be like the USA, but with better cheese.

In 1992 lots of European governments signed the Maastricht Treaty which set out how some of that union was going to take place, and in 1999 the single currency was set up. Greece joined in 2001 and a year later the first coins and notes were in circulation. It created a single trading market which made it easier - and cheaper - for business to operate.

Today the Euro is the currency of 332million people in 17 countries. It's the second-most traded currency on the planet, after the dollar, and there are 150m people in Africa who use currencies which are pegged to the Euro.

A lot, it must be said, depends upon it.

The problem is that despite having a 50-year run-up the whole idea is massively flawed. Europe is not the USA - it's got lots of governments, not one. It has lots of laws, languages and cultures. And it has many different economic mannerisms as a result.

The main mannerism, if you're Greek or pay any attention to history, is that you spend more money than you make.

The first recorded Greek debt default was in the 4th century BC. Thirteen Greek city states borrowed money from a temple and never paid it back. The temple took an 80 per cent loss, and no-one learned their lesson.

More recently Greek defaulted on its debts in 1826, 1843, 1860, 1894 and 1932. In fact for 50 per cent of the time it's been an independent nation, it's been broke.

At the moment Greece loses around €15bn every year in tax, and while trying to crack down on tax evasion it has shut 130 tax offices and made their staff redundant. It's got only five million people in its work force, and a 40 per cent rate of tax dodging.

So of course, it was a sound idea to bail it out twice in the past two years with a grand total of €320bn.

Again, not our problem right? Except Britain 'owns' about £14.6bn of that debt, thanks to private banks and government lending to the International Monetary Fund. France and Germany own far more, the Americans and Japanese a bit less, but we all have a chunk of it and as has often been remarked we don't have any money left.

That money we don't have has been loaned to Greece which is using it to repay us for the loans it took out earlier and already can't afford to pay.

If we lose the money we've promised to Greece, we have less to spend on nurses. And the chances of our losing that gamble are pretty close to 100 per cent, as every City trader knows. Those guys know how to make money and can make as much of it from a bust as they can from a boom. They're just waiting to pounce.

The best thing in Greece's favour at the moment is that it has no actual government.

The Euro was a politician's idea. Lending money to Greece despite it being a blatantly silly move was a politician's idea. And politicians, generally speaking, can afford to pay for their own nurses.

Which is why they cannot, will not, admit that the Euro is as doomed as a sickly baby gazelle in the middle of the Serengeti surrounded by particularly peckish lions.

The website of the European Union, in the face of all evidence to the contrary, still claims that the Euro "makes very good economic and political sense". It claims the single currency "encourages sound public finances", even though it's made cock-all difference to the Greeks.

This is my favourite bit: "The size and strength of the Euro area also better protect it from external economic shocks, such as unexpected oil price rises or turbulence in the currency markets."

Politicians, eh? Don't you just love 'em? Bless.

They finish by saying we should all be very proud of the Euro because it "gives the EU’s citizens a tangible symbol of their European identity, of which they can be increasingly proud".

It's been more than 10 years and Europe is no more like the USA than it was before.

There was a major war which killed tens of thousands of Europeans after the union was formed, so it's not helped much with that.

And our European identity, just at the moment, is that we're being run by a bunch of idiots who don't read, don't listen, and can't count.

Unfortunately, they still suck.

'A good decision is based on knowledge, not on numbers.'
- Plato


Matt said...

A huge reason the US works (in theory) is that they elect a leader from pot A or pot B.

They have no smaller parties or any one idea merchants (which does give the UK the fun part of penguins being able to beat the Lib Dems) that can end up holding power over the larger parties - which is part of what is happening with Greece at the moment.

This is part of the problem, because no one party is in power in Greece there is the uncertainty fuelling the worry. If one party was in power, for good or bad, they would now be on track to stay in the Euro with the cuts or out and we would at least be able to now start picking up the pieces.

TamsinLisa said...

I think the Euro was a very silly idea

Richard Laming said...

What do you think would have happened in Europe in the wake of the financial crash if each country had had its own currency rather than sharing the euro? It is no good criticising the euro now if you haven't got an answer to that one. Most likely, everyone would have tried to do what the British did, namely devalue their currency to try to gain an advantage in the markets. Of course, you can't have everyone devaluing at once, as they found the last time this was tried, in the 1930s. And that hardly turned out well, did it?

woolfiesmith said...

Excellent post Foxy, totally agree

woolfiesmith said...

Dear Richard Laming,

I do hope you aren't being serious. Do you have any understanding of currencies and economic performance? Here's a hint its called market forces.

TamsinLisa said...

Noone is a mind reader, least of all you or me. You can ask that question, same way as we can ask the question of whether Gordon should've bailed out our banks or not. But he did, the Euro exists and it is pointless pontificating about what might have been. It is now that counts and what happens from here. Old arguments and blame should be left whilst we try to discover a way forward

Anonymous said...

Oh dear the old silly market forces argument. There is no such thing as a free market. Never has been and never will be. Some one has to issue a currency, and some one has to set interest rates. You can either do that with a state central bank, or let private banks set their own rates. Either way you have just taken an axe to your free market. Then you need property laws. Some one has to write these laws, and some one has to interpret them and enforce them. (See Murdoch empire) Your so called free market is now on life support.

The banks should not have lent to Greece and it is the banks that must fail for their stupidity. We are not bailing out Greece we are bailing out the bankers. Which shows once again that the free market is for clowns. Our own idiotic Chancellor, who says we have no money was able to find £7 billion to bail out the Irish banks. Why? To protect his mates in the city.

No such thing as a free market.

Chris McCray said...

The Greek politician to watch seems to be Alexis Tsipras of the Coalition of the Radical Left / "Syriza". In all the guff being reported at the moment, just over a week ago his conditions for joining a coalition government included:

3) The immediate abolition of a law granting MPs immunity from prosecution, reform of the electoral law and a general overhaul of the political system. According to Keep Talking Greece, that would include abolishing the 50-seat bonus for the party which wins the most seats.

- the "+50 seats" rule for the winning party seems a crackpot idea to me, and:

4) An investigation into Greek banks, and the immediate publication of the audit performed on the Greek banking sector by BlackRock.

5) The setting up of an international auditing committee to investigate the causes of Greece's public deficit, with a moratorium on all debt servicing until the findings of the audit are published.

If you're wondering what could be in this audit, it could be frightening: "according to Benford’s Law, Greece’s data were particularly odd in 2000, just before it joined the euro".

However, without carrying out an audit and getting to the bottom of the problem with Greece's original entry into the Eurozone, whether it stays in or leaves, the Euro will remain tainted by the whiff of fraud here.

Post a Comment