As Greece struggles to get funding for its deficit, the FT today writes Germany has taken a particularly hard line against rewarding past Greek profligacy. “The German government does not intend to give a cent,” said Rainer Bruderle, economics minister.
Merkel might want to bail out Greece for political reasons but Germany has a banking crisis of her own with Deutsche Bank notably, and a fiscal gap to fill. Her two coalition partners are also unwilling to countenance a bail out, with 71% of Germans dead against any financial help for Greece or others. Without any mechanism or funds, the eurozone is losing all credibility. If the EU cannot fix its own economic troubles, it is well on the road to a collapse. And it is only a matter of time, before that reality impacts.
The Greeks know that the EU offers nothing at all bar words of encouragement, and are now realising that the eurozone was a mirage, which has fooled them into a nightmare financial scenario. The FT writes Greek officials warned ahead of the meeting that they could turn to the International Monetary Fund for help if Ms Merkel failed to offer financial backing. IMF involvement has been opposed by eurozone leaders and the European Central Bank, largely because of the disastrous signal it would send about Europe’s ability to deal with its own problems.
Yet with Germany offering not one cent, it is clear that Greece will have to turn to the IMF. Whether that be this week or in a few months time is the only question. The Euro is turning into the funniest currency of all time. The first crisis it encounters and the game’s all over in weeks. The Euro’s a financial Eurovision Song Contest, which danced into existence as stock prices accelerated to all-time highs across Europe in the late 1990s, creating an atmosphere of ludicrous optimism. It was all based on froth, and by that I mean debt, which now is coming home to roost across the continent.
The world still prefers to be in denial with the FTSE today at an 18 month high, celebrating the sales of 5 billion Euros of Greek government debt in the bond market. The only problem is Greece needs 70 billion this year already, and its finances are still running away as government income collapses, spending is out of control and now interest rates are surging. It is a black hole, which a mere 5 Billion Euros isn’t even going to tickle. 500 Billion Euros might turn the tide, but not even the IMF can spare that amount.
This is no cosmetic crisis.
Markets have chosen not to notice today. As with US unemployment figures, the real underlying unemployment continues to deteriorate, and yet the false good news of a smaller decline in the Non-Farm Payroll than expected (yet to be confirmed) sent shares on a cheerful climb. At some point soon, not just Greece, Ireland and Iceland, but the world might start to take in the grim financial realities that have been created by a generation of debt, and barmy optimism. And nowhere was the stupidity and arrogance of the boom more clearly evident than in Europe with the creation of the Euro.
But don’t expect Greece to hurry for the exit. This from the WSJ –
In his research, Mr. Buiter returned to a theme that this column raised a week ago. The country most likely to leave the euro zone is not Greece, Spain or Portugal—but Germany.
He says German politics has changed. The “umbilical attachment” to the European Union and its institutions characteristic of the German political class for nearly five decades “is a thing of the past and unlikely to return,” he argues.
French President Nicolas Sarkozy said on Saturday.
“If we created the euro, we cannot let a country fall that is in the euro zone. Otherwise, there was no point in creating the euro,” Mr Sarkozy said during a meeting with farmers.
“We (must) support Greece because they are making an effort, or else there will be no more euro,” he added.
I can’t see France giving Greece any money!!! So Euro’s over. Sarkozy said.