Britannia Radio

Eurocrash: German people take hard line on Greece   Friday 31 August 2012 An opinion poll commissioned by Handelsblatt in Germany has 85 percent of respondents opposing any softening of the line towards Greece. They want Merkel to keep the pressure on the Greek government to carry out reforms and to keep to its austerity programme. Furthermore, 52 percent of those polled do not believe that Greece can meet its savings target of €11.5 billion, which leaves a strong expectation that this country will eventually leave the eurozone. On the other hand, a report yesterday had the five "wise men" - economists whose views help shape the public debate in Germany but often have little direct impact on policy – suggest that a Greek exit could carve between 7-10 percent off the German GDP. This, according to spokesman and government advisor, Lars Feld, does not include any additional costs which might arise through the contagion effect, as investors pull out of the eurosystem. Now we even have the United Nations, in the form of the International Labour Organisation, pitching in. ILO economist Ekkehard Ernst tells us that, from over ten percent (11.3 percent in July), the average unemployment rate in the 17 eurozone states would rise to 13 percent, mostly affecting young workers. Thus, public sentiment, the potential economic costs, and the social disruption are factors that Merkel and her German and European colleagues must take into account when deciding what to do about Greece. On top of the troika report expected next month, and the Karlruhe judgement, this makes for a complicated mix, even before the market dynamics and political aspirations are taken into account. On this basis, one can hazard a guess that the final decision on Greece – if there is one to be made – has not yet been made. The calculus is so complicated, and the ramifications so uncertain, that no one wants their fingerprints on the button when it is pressed. Everyone seems to be expecting someone else to do the deed. In the end though, it has to be a political decision – albeit heavily influenced by market pressure. And in the final analysis, an 85 percent figure in a poll is not something that Merkel can ignore – not if she wants to be re-elected. The people thus could have the final say. COMMENT THREAD Richard North 31/08/2012  Eurocrash: tunnel vision   Friday 31 August 2012 In what has been one of the most remarkable periods of European politics, the EU has exploded into the German media, launching a torrent of coverage and political debate on an unprecedented scale. Meawhile, the markets have been relatively quite – in part because the money is going elsewhere and partly because traders are holding their collective breath, waiting for the explosion. But it is the relative calm in the markets that strikes the WSJ, which has quite obviously failed to recognise the political drama for what it is. It is so narrowly focused that it cannot even see history being made. And that is why commentators continue to get it wrong. They have tunnel vision. It cannot be said enough times – this is fundamentally political, not monetary or financial. It doesn't matter how great your prestige, or how big your paycheque. Get that wrong, and you'll get it all wrong. COMMENT: COMBINED THREAD Richard North 31/08/2012  Eurocrash: it isn't complicated after all   Friday 31 August 2012 Clearly, the euro crisis cannot be that complicated – even The Economist can understand it (click pic to expand). "The euro’s crisis is fundamentally political, not monetary or financial", it says. "The ECB cannot fix the euro; it can only buy time". Well, one can always be thankful for small mercies – they have finally recognised the truth of it. We've been saying it all along, and wondering why they get it wrong, with the likes of the Great Bootle confidently telling us that: "The eurozone's predicament is both financial and economic". Even though the mighty Economist has pronounced, however, does not mean anything is going to change. The hacks are going to stay wedded to their narrative, and the reports are going to continue with their financial and business bias. But recognising that the eurocrisis is political does help you understand what is going on. It helps you understand that there is no economic solution. There has to be a political solution – there can only be a political solution. It helps you understand, therefore, why the ECB can only buy time. It helps you understand why that has been the "colleagues'" strategy all along – buying time. They are waiting until the ground can be prepared for a political solution. It also helps you understand why – against all the odds – Merkel is pushing for a new treaty. That is the political solution, the only one that has a chance of working, even if it is probably doomed to failure, buried under the avalanche of debt. And even if it has taken The Economist so long to recognise that this is a political issue, the politicians were there a long time ago. They have been dealing with it as a political event – confounding their critics who have, in their ignorance, been expecting economic responses. If then the ECB, along with others, does manage to hold the line, buying time hour by hour, day by day, week by week, they might just get to the end of the year with the euro intact. Then we will see the proposal for a convention put to the European Council. Then, the "colleagues" will go for a new treaty. They have to, because that will be the only game in town, and because that was the intention all along. And if they defy gravity and succeed, thebeneficial crisis will have done its work. Simples really.   COMMENT THREAD Richard North 31/08/2012