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Eurocrash: money back guarantee
Then we ended the day with the bulk of the media cribbing off Süddeutsche Zeitung, all about plucky Samaras … this time giving his personal guarantee that the Huns would get their euros back. The "money-back guarantee" was Spiegel's choice of phrase.
I did warn you yesterday that you weren't going to get anything more than theatre, and you really do wonder what yesterday was all about. Right from the beginning, it was already obvious that the nothing was going to happen until the troika report was ready in September, so neither Merkel nor Samaras were going to have anything substantive to offer.
Then, lo and behold! After all the action, the Gruaniad closed the day with a report telling us that Greece's hopes of being granted more time "have received a setback when EU leaders refused to make a decision until next month".
Merkel and Juncker, we were gravely advised, "both warned that Greece's future depends on the verdict of its troika of lenders, who will announce in September whether Athens is meeting the terms of its existing bailout programme". This is from a newspaper that has just shed 16 percent of its circulation in a year, and lost £76.6 million doing it. You can see why.
And now we move on to the Merkel and Hollande show - or should we call it the Merlande show? That's going to be more theatre - Le Monde describes it as at the "centre of a diplomatic ballet" - so stand by to be entertained. You will certainly struggle to be better informed.
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Richard North 23/08/2012 Eurocrash: economic twaddle from Posen
But that is the state of play, with Stephen Sackur interviewing in the Hardtalk programme, Dr Adam Posen – a man with huge economic experience and, quite obviously, next to no knowledge or understanding of European politics.
Thus, the Posen style is to frame his assertions in the context of Germany's commercial and economic interests, then telling us that it is in Germany's interest to keep the eurozone going. He claims that if Germany were to allow a break-up of the eurozone it would be "political pandering", and "a self-inflicted wound of huge proportions".
Instead, Germany should restructure the debt it is owed by other European countries, with Merkel telling the truth to her people rather than just pandering to them.
What he neglects, of course are the inherent flaws in the structure of the EU's economic and monetary union. Thus, even if Posen's nostrums were to work in the short-term, he suggests nothing that would correct the structural imbalances and prevent the debt cycle starting all over again.
It is this problem that has been confronted by politicians throughout Europe, and especially those in Germany. Unlike Posen and his magic wand, most of these have come to the conclusion that solving the short-term problems of the euro is not politically practicable - or even desirable - without also addressing the long-term structural issues.
Dealing with those issues, they have further concluded (and as was known all along) requires economic governance, which in turn requires the final stage of political union, all of which needs a major new EU treaty. Achieving that is not at all easy.
Ignore that reality and any fool can prattle on about "restructuring" debt. And that is precisely what Posen was doing … prattling. The big political issues are not this man's bag. He sidesteps the debate that is bogging everyone else down, all to show how clever he is.
Fortunately, the man leaves his post at the end of August. Maybe then he will find the time to have a shave and lose a bit of weight.
Meanwhile, in the real world, outside the BBC studios and the executive dining rooms of the Bank of England, there are German politicians who do not have the luxury of resorting to Janet & John nostrums. And the complexities of this real world, according to Handelsblatt are splitting the coalition.
With opinion split, one strident voice is CDU MP and budget expert Klaus-Peter Willsch. He dismisses the idea that rejecting concessions to Greece is too strict. "We should freeze all payments until all conditions are met," he says.
Sooner or later, he believes, Greece will leave the eurozone and every euro given to Athens makes the exit more expensive and painful. He holds that the Greek state is not reformable. If we embark again on renegotiations, we simply shift the problem once again – but only for a few months or even weeks, he says.
And therein lies the shallowness of the Posen nostrum. Debt rescheduling kicks the can down the road. It is a palliative, not a solution.
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Richard North 22/08/2012 Eurocrash: Franco-German split looms
The centre-right le Figaro writes of "impatience" with Hollande, and expects the president to define a "common position" with Chancellor Merkel over the euro-crisis and, in particular, the Greek situation.
The French media have been relatively quiet about the euro drama – certainly by comparison with the German press, although the left-wing Libération did note on 6 August the discord amongst German politicians, offering a headline: "Crisis: Berlin does not play as a team".
Nevertheless, as the other half of the "motor of integration", Hollande and Merkel will be expected to work as a team, although the evidence is that they are far apart on the fundamentals. The French president favours intervention by the ECB on easier terms than Merkel is prepared to accept .
Thus, the French journal La Tribune is not optimistic, predicting a split over plans to deliver more aid to Greece.
Libération, however, conveys the warning that we should not expect the forthcoming meetings to make any key decisions. Everything depends on the report of the troika. That may enable any fracture in the "motor" to be concealed, but it won't help Hollande, who has to recover lost ground with his own people, and must shine.
Thus, we might expect some more than usual theatricals tomorrow although, in the nature of Franco-German meetings, it is unlikely that anything like a full account of the proceedings will be disclosed. But, for public consumption, it will all be sweetness and light.
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Richard North 22/08/2012 Eurocrash: financial repression
The paper has stolen a march on the competition with an exclusive interview of Samaras. In this he makes very clear his belief that leaving the euro would be "a disaster".
It would mean, says the Greek prime minister, at least another five years of recession and unemployment in excess of 40 percent, a nightmare of economic collapse, social unrest and an unprecedented crisis of democracy.
Greek living standards have declined over the last three years by approximately 35 percent, he says. A return to the drachma would immediately lower it by at least another 70 percent. Samaras asks: what democracy could survive that? In the end, it would be like the Weimar Republic.
Greece is, of course, after more time to repay its debts, and will argue that it has an escape clause in its bailout agreement, which allows it to vary the repayment schedule if the recession is deeper than expected. And the recession has been deeper than expected. This, incidentally, is spelt out in detail in Süddeutsche Zeitung. A single sentence could be the way out, it says.
But anyone expecting any more than theatre is going to be disappointed. The hard men representing the troika of the EU commission, the ECB and IMF are currently examining the Greek austerity measures. Their full report is not going to be ready until September, and no decisions are going to be made until copies comes off the printers and the text has been digested.
Unsurprisingly, therefore, Die Welt is bypassing the Greek drama and picking up a WSJ article which is focusing on the politicians of the eurozone. These are accused of appropriating finances at the expense of savers. Low interest rates and no compensation for inflation amount to "financial repression".
And this could very well be the way the Greeks are feeling. Bild has taken soundings on the streets of Athens. "The crisis is eating slowly into our souls", says Mikaela Tsibragou, a 25-year-old clerk. He was not referring to the politicians. It is doubtful whether they have them ... souls, that is.
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Richard North 22/08/2012 Eurocrash: volume of comment continues
Even then, they tend to show little understanding of their own specialities, evidenced by the frequent over-interpretation of short-term market movements, commentators often suggesting that they have deeper meanings than is actually the case.
Such has been the reporting of the rise in global stocks, and the rise in the value of the euro against the dollar yesterday – widely interpreted by the media as a response to the expectation that the ECB will soon start buying Spanish and Italian bonds.
There may, perhaps, be some traders who actually believe this, but it should be borne in mind that the bulk of trades are now computer processed, without direct human intervention. In light summer trading, they can drive the market, making any attempt to analyse sentiment meaningless.
The market is, of course, a machine for making profit, so it is fruitless trying to use these short-term fluctuations as a source of political intelligence. Only a certain gullibility and a propensity to encourage delusional behaviour can draw conclusions from much of the data.
For a more considered view of the longer term prospects for the euro, one might refer to an analysiscarried out by Commerzbank, which has concluded that the euro is set to weaken.
A recent article in Der Spiegel also had investors preparing for a euro-collapse, and a good indication of market sentiment is can be found in the lead item in Die Welt. It is telling us that speculators are betting on a comeback of the Deutschmark.
This is the interpretation of the willingness of investors buy German bonds, even though for some time there has been virtually no yield, and most recently some bonds have negative yields: you have to pay the German government to lend it money.
The explanation for this is that investors expect to be compensated by massive foreign exchange gains when the euro falls apart. With the value of holdings in Deutschmarks appreciating, other denominations can be bought for a song – and of course, assets valued in those currencies. Difficulties in exporting could thus be offset by the ability to acquire cheap foreign assets.
Perhaps this is why, yet again, we are hearing talk of a "Marshall Plan" for Greece, the like of which was being discussed in February last. Essentially, what we will be seeing is Germany buying out Greece's interest in the euro. A figure of €90 billion has been mentioned – a small amount compared with the potential €1 trillion that Germany might otherwise have to bear, and the potential for profit.
All the German government has to do, says Handelsblatt, is communicate very clearly that they will refuse of further aid to Greece - which would in fact lead to the resignation of Athens from the euro zone - not to pursue a strategy of renationalisation of Europe but to save the euro and again make Europe credible.
With this, and after the relative silence of the international media, we are almost reaching saturation point for analytical pieces. Even le Figaro is doing the honours, and discussing the prospects for the euro. Throughout Europe, and also in Germany, it says, there is: "An implicit confirmation that Europe is preparing a backup plan in case of a Greek exit from the euro".
The Italians are also pitching in, with comment, the Corriere della Sera rejoicing in the news that the ratings agency Moody's thinks that the crisis will be over in Italy by 2013.
Countries such as Greece and Ireland may take until 2016 to complete their program of fiscal consolidation, says the agency. But Italy, Spain and Portugal may be able to get out of the state of affairs by 2013 if they are able to apply fully the reforms adopted so far.
The Italian press is specially interesting, as both la Republica and la Stampa contradict Ambrose's assertion that Germany has bought the ECB's bond purchase package. La Stampa actually says that both "Berlin and the Bundesbank" oppose the ECB.
Incidentally, we learn that the Failygraph offered two version of the headlines for Ambrose's piece. On the web, it was: "Germany backs Draghi bond plan against Bundesbank", but in the print edition it became: "Germany's man at the ECB backs bond plan". If it is any help, Faz headlined: "ECB and Bundesbank drift apart".
However, Lüder Gerken, chairman of the Freiburg Centre for European Policy, is perhaps the most forthright about the ECB. The plan is no way out of the debt crisis, he says. It can't solve the problems that led to the euro-crisis, or solve the balance of payments crisis. The ECB is now trapped in a dead end, he adds.
It is getting to the state now, where all the positions have been stated, and although the volume of comment is not abating, additional commentators such as Martin Walser – who sees the break-up of the euro as a "nightmare scenario" – have very little new to offer.
Effectively, we are back where we were with the Booker piece, with Handelsblatt telling us: "Greece is at the mercy of German politics", then writing of the "hot autumn" of the euro-rescuer.
What we really need says Frank Schäffler are rules for withdrawal and expulsion. A lot of people would agree with him. Had they been in place by now, Greece would be selling package holidays in drachmas.
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Richard North 22/08/2012 Investment: go for the CRAP
BRICs are out and we are supposed to get excited about Mexico, Indonesia, South Korea and Turkey, producing the acronym MIST. In German, however, this means "manure", or more loosely, "crap". At least then, unlike the euro, it has the merit of being (relatively) honest.
But then, one could take the view that, where there's muck, there's brass, in which case, the BRIC country India should be one of the richest in the world.
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Richard North 21/08/2012 Eurocrash: dishonesty from the Sun
When he was defence editor, Newton Dunn was a dishonest reporter, and now that he is political editor for this Murdoch rag, his old habits carry through to his current job.
Despite that, there is a particular value to this article. This rag has a circulation of 2.5 million, so one knows how badly those of the readership who bothered to read Newton Dunn's garbage will be ill-informed. If the Sun persists in calling itself a newspaper, though, it should be referred to trading standards.
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Richard North 21/08/2012
Thursday, 23 August 2012
"Merkel wants to do the right thing, but just doesn't know how", is a little gem I missed from my review last night. It was buried in one of the many pieces in Handeslblatt. While the British papers might do one grudging article on the euro, this paper is doing four or five a day, plus comment and feature articles.
Ambrose Evans-Pritchard's stunt on Finland appeared in the Failygraph on Friday last. However, now lifting (and distorting even further) the words of Finnish foreign minister Erkki Tuomioja from that story,Sun political editor Tom Newton Dunn moves the timeline to "yesterday".
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