And the the cause of the cataclysm - an outbreak of common sense. The Greek Prime Minister is sick of seeing opinion polls saying that the populous are against the Austerity measures, but no much else. His Finance minister sums it up thus:
“I can no longer look at polls where the majority is against the agreement, the majority is against the program, but a majority is also in favor of staying in the euro,”
There is no choice on the list for this, either they follow the European austerity plan (a terrible idea which will leave the country in penury) or they default and leave the Euro (50% GDP loss, all pensions lost, but a clean slate to start - probably worse than the first option). Thus a referendum will be held to decide if they want to pass the austerity budget.
It is very proper that the Greeks of all people should put this to a vote, the huge lack of democracy in Europe Union is its single largest failing as an entity.
This is some ways (not for the markets, they seem braced for a heart attack) a great result. The Greek protesters will be forced into making a grown-up decision. The Socialists willing a Utopian paradise will instead have to choose between the terrible and the disastrous.
Finally, MerKozy can do what they should have done before, prepare the financial firewall to support Italy, Ireland and Spain and speak to Portugal about holding an referendum of their own about Euro membership/austerity. With that a real solution will be found that will allow Bond rates to normalise.
Otherwise, 2012 is going to make 2008 look like a picnic.
Surely if they say no the default will be much more than the 50% (which is 28% in actual fact ex-mfi, ecb) have written down, more like 90%?
ReplyDeleteyes, of course you are right, I wrote 50% GDP loss, not 50% default.
ReplyDeleteIf you are going to default you may as well do it for all your debt and start again.
The thing we seem to forget is that this is equivalent of Devon going under and the rest of the UK carrying on - for those who do not live there, possibly a cheap holiday and it makes going to Cornwall more exciting.
ReplyDeleteWhat we forget is that:
- Ireland seems to be ok at the moment
- We need to be really scared about (Spain+Portugal) / Italy. It seems like we concentrate on Greece because it is nearer and less scary to think about.
(he said having gone short @5443 and bailed out @5421 so my insights are a bit B- right now)
Problem with Greek pensions? I understand they are paid by the state nominally from taxation - i.e. taken as a cut from the real economy. As long as the economy remains functional it shouldn't be a problem, regardless of the currency in use. Where a problem could exist would be if the Greek state ran out of money (quite possible while the existing problems remain unresolved) or if civil war breaks out (quite possible if the government continues to push through austerity measures with no backing from the public).
ReplyDeleteLonger term pensions would be safer with Greece out of the Euro since the real economy would recover and the Greek government would then be in a stronger position to raise the money to pay for pensions via taxation. At the moment the real economy is falling down a chasm and pensions are being paid for with Greek (aka European) debt, until the debt runs out of course.
"this is equivalent of Devon going under and the rest of the UK carrying on": are you competing for Worst Analogy of the Week?
ReplyDeleteCU said: "The Greek protesters will be forced into making a grown-up decision. The Socialists willing a Utopian paradise will instead have to choose between the terrible and the disastrous."
ReplyDeleteExactly so.
It is a pity the same cannot be done with the bone brained yobs at St Paul's.
@dearieme
ReplyDeleteActually, carefully chosen:-
Greek pop (11.2m) / Eu pop (502.4m) = 2.2%
Devon pop (1.4m) / UK pop (61.8m)
= 2.2%
Greek posessions (131.9k) / EU (4324.7)
= 3%
Devon land( 6.7k) / UK land (243.6)
= 2.8%
!
UK debt v Devon County Council debt?
ReplyDeleteYou have carefully chosen a ludicrous analogy? Your privilege.
ReplyDeleteIt seems a good idea to put the choices in the peoples' hands but will they really choose for themselves cuts and austerity ?
ReplyDeleteI doubt it.
What happens then ?
Expect an influx of people from distressed EU states into the UK which will make the 500k pa population growth forecasts look well underestimated.
'Call me Dave' Dave is rapidly reaching the same point Thatcher did in 1981, viz. desperately unpopular due to the austerity measures needed after Labour profligacy.
ReplyDeleteMaggie then had the 'Falklands Factor' at the next election.
Could Dave have the 'Greek Islands factor'? A small task force (that's all we have!) sent to seize Corfu, Lesbos, Kos and Rhodes on behalf of the nationalised banks?
These can then be allocated on a time-share to 'hard working' families.
She wasn't unpopular with me. But then I worked in industry and saw what a shambles it was in the 1970s. And no, she did not "destroy British industry", she revitalised it by rebuilding from a useless state based 1950s style, making products no one was buying, to world class businesses.
ReplyDeleteAfter the Napoleonic Wars, Britain acquired seven Greek islands as part of the British Empire, including Corfu and Ithaca (home of Odysseus). But eventually they voted to join the newly-independent Greek state, which they were allowed to do.
ReplyDeletePerhaps they might like to vote again on that decision ?