Eurocrash: the Draghi "plan" bites the dust Saturday 25 August 2012  Thus, anyone assessing Merkel's statements has to bear this in mind. She is a politician and what she says holds true only at the moment she says it. Tomorrow, as they say, is another day. By next week, the situation could have changed beyond recognition. To then assess the state of play by measuring market reaction is not the brightest of ploys. Traders are not political analysts and are prey to the herd mentality, acting more often like sheep than sentient beings. And, as we have observed before, there is a tendency to over-interpret short-term market movements in the belief that they represent market sentiment. One factor which also militates against this is trading volume, as we have noted before. And, it appears, this is a very significant factor. Currently, international markets are trading at extremely low levels and there is copious reporting which suggests that this is distorting market signals. In reality, traders are biding their time. They have no better knowledge than the rest of us and, until the politicians make their move, they are taking their money elsewhere. The politics are driving the economics, not the other way round. The traders will not predict events – they will, over time, simply keep the score. Despite this, we get the Failygraph typifying so much of the media in placing undue emphasis on the market, as if its "signals" meant anything, at the same time trapped in a haze of ignorance brought on by their lack of understanding of the political issues. Thus, we get "Chief Business Correspondent", Louise Armitstead, (how they do love their Ruritanian titles) today writing of a "sense of vacuum", which has been compounded by "revelations" that the ECB "is planning to delay the progress of its bond buying programme" until after the Karlsruhe ruling on the ESM on 12 September. Yet, since 2 August, when the consummate politician Mario Draghi announced his famous "plan", it was been obvious that it lacked substance and that the president of the ECB was indulging in theatricals. In fact, the intention was almost certainly an attempt to kick that famous can down the road, to avoid a major crisis during the holiday period. Even though, the day after, we recorded Die Welt dismissing the plan as "not much more than rhetoric", and Reuters was talking of an "action gap", the English press has been prattling on about this chimera, without the slightest perception that it lacked substance. Now we get the Lord High Chief Business Correspondent tell us that "investors and economists had hoped ECB Draghi would use a press conference on September 6 to announce a radical intervention plan". But, Armitstead writes, "the timetable is now sliding towards the next deadline for a Greek default". Was it really going to be any different?, one muses as Armitstead then cites Robert Halver, at Baader Bank in Frankfurt, who grandly declares: "We need clear decisions. There is a possibility that Greece will leave the euro zone in October. Preparations for a Greece exit, and a subsequent domino effect are running. Markets need to know what the face of the new eurozone and policy will be". Well, Mr Halver is going to have to wait like everybody else. The politicians will make their decisions when they are good and ready, and in the meantime will play the market commentators for the gullible fools that they are. It is, after all, so easy to do – did anyone say Facebook? All they need is another "plan" from a prestigious persona, and the scribes will be as happy as larry, until yet another deadline passes and the grand aspirations drain into the sand. It really is that easy. COMMENT THREAD Richard North 25/08/2012 |
Eurocrash: French silence on the euro-debate Saturday 25 August 2012  What actually goes on in these meetings is anyone's guess, but it is a fair assumption that, even if anything drastic was planned, it would not be revealed publicly during this round of meetings. But what has emerged, of considerable interest, is the remarkable contrast between France and German in their attitudes to the crisis. For several weeks now, we have been charting the explosion of media coverage in Germany, with real debate amongst politicians, economists and commentators. Yet, as Die Ziet now observes, in France, the Greek drama has hardly registered as an issue. The day after the discussions between Merkel and Hollande, the paper says, the lead in the capital newspaper Le Parisien was that that one in four French people had getting back into the groove after their holidays. Libération dealt with the search for the identity of the Socialist Party almost four months after the election. Le Monde failed to carry anything significant and the business newspaper Les Echos reported on expected tax increases. Only the conservative Le Figaro did a halfway decent story on the Merkel-Hollande meeting. This, in fact, is nothing particularly new. One finds of the French – and particularly their politicians – an extraordinary ignorance of the ways of the EU and, in a tightly controlled media, coverage of EU affairs has always been slight. And certainly, there is nothing in the way of eurosceptic comment that we occasionally see in the UK. Pointedly, Die Zeit cites Claire Demesmay at the German Council on Foreign Relations in Berlin, who specialises in the relationship between Germany and France. "The French are only concerned with themselves, with their national problems", she says. But there is another factor here – one that the paper has missed. Back in June, we picked up a piece from Le Monde which noted that, in France, devolution of public administration had refocused public investment, giving local authorities real power. This contrasted with the national parliament where, through a combination of EU law and a powerful executive, individual MPs had very little real power or influence. For an ambitious MP, therefore, local politics was the place to be. Thus, in effect, the EU has been partially responsible for driving its own agenda off the news pages. Politicians feel that have no power or influence over the EU so they simply do not talk about it. And, in the absence of political input, the media too is silent – until, of course, it starts to have a direct impact, as in Greece. To an extent, that is what is happening is this country, although not to quite the same degree. But it is certainly the case that UK media coverage, even of late, has only been a fraction of that seen in Germany. And the difference probably proves the point. In a country where the Bundersbank is still perceived to be a powerful institution, and the only one in the eurozone capable of challenging the ECB, and where chancellor Merkel is considered to be a major player in the EU, a debate over policy issues is worth having – and worth reporting. But if proximity to power, and the degree of engagement drives the debate, that bodes ill for the "colleagues" in Brussels. Much as they have sought to encourage a "European" debate – and spent a huge amount of our money on so doing - they very fact that the power centre is so detached from mainstream politics in most countries condemns EU politics to obscurity. When politics is local, there is a degree of vibrancy to it. When issues are shoehorned into a transnational forum, they disappear. COMMENT THREAD Richard North 25/08/2012 |
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