A worried world leans on eurozone leaders
Athens, Syntagma Square:
“kill the IMF” was the graffiti scrawled onto the pavement in front of the Greek Parliament. Here on a day of total public transport strike, with no taxis, trains, there were students, lecturers, teachers, coastguard and even a troop of policeman marching around the Athens main square the day after ultra-austerity turned to hyper-austerity. The riot police sported gas masks, as did the Black Block protesters.
If you spend time in Greece, you find a country that seems up against reasonable limits. One protesting tax collector, who has just packed off her son to university in London to escape Athens suggested to me that Greece was on the cusp of an Argentina moment. “the mothers and grandmothers are ready to take to the streets with their pots and pans,” she said. Much more on this in the coming days.
But today it became abundantly clear that what started as a containable Greek crisis is now in danger of spilling out of the control of nation states. That’s why we saw the extraordinary letter to President Sarkozy from David Cameron and five other G20 leaders that none-too-subtly sought to bounce a dithering eurozone into decisive action.
So we have US Treasury Secretary Tim Geithner, the IMF, the World Bank and six g20 leaders, all piling the pressure on euroland. And the world’s stock markets are in agreement. Sharp falls of 4 and 5 per cent around the globe as key measures pointed to a eurozone recession, a slowing even in fast growing economies like China. And from America the $400bn Operation Twist an attempt to boost the US economy by lowering long term interest rates… Overshadowed by the dire economic outlook.
The problem is not that markets are presuming Greece will default which they are more or less. It’s not even that other indebted eurozone nations will follow. It’s the knock on impact of that assumption on Europe’s banks that is expanding a small country’s woes into a global crisis of confidence. A crisis that the rest of the world feels requires a massive intervention from leaders of the eurozone.
But it’s Berlin that calls the shots in euroland, and perhaps today’s letter should have been sent to Chancellor Merkel. She discussed the crisis with Pope Benedict today (don’t forget the Vatican is in the eurozone with highly sought pontiff embossed coins). Divine intervention, possibly. And many world leaders will be hoping it results in a more forgiving attitude from Europe’s paymasters to its mediterranean debtors.
There are 7 comments on this post
“And the world’s stock markets are in agreement. Sharp falls of 4 and 5 per cent around the globe…”
That will be because markets were worried that Eurozone leaders might actually listen to Cameron’s (Osborne’s) version of ‘swift action’ – austerity.
It’s all a big talking shop in Europe, but then they have to keep their mouths moving, otherwise their brains start to work.
Watching the economic situation has the same fascination as watching a crash scene – you don’t want to look, but you can’t help it.
I’m completely bemused by what seems to be a crisis fueled mainly by fear from the markets, politicians and all the experts.
Today (Thursday) the stock markets showed their biggest slump for two years, billions wiped of the value of companies. yet nothing really had changed since yesterday. The Greeks were in no more trouble than the day before, they didn’t owe the banks any more than the day before, but the markets slumped.
Tomorrow they will probably pick up at least a little. And someone, somewhere is no doubt making a lot of money out of the volatility.
The politicians don’t have a clue what to do, and anyway the markets don’t believe their solutions. The experts disagree about whether we need to tighten our belts or go for growth.
The answer, we are told is more jobs to get the economy going but the government is sacking workers as fast as they can.
What a crazy system.
I cannot think that the grandstanding by Cameron & his colleagues is aimed at anything other than theitr own self-aggrandizement. Compared to the UK economy, Germany has sailed through this crisis & we are, ine ffect, asking them to take on the burden of all the failing economies in the EU. I see we’re not offering to help. Why should the German taxpayer bail out the Greeks, etc ,who’ve been living the high life on the never never for years & probably publishing largely fictitious economic figures? THIS ISN@T HELPING
My Analysis and crystal ball future is this: The Greeks will certainly default on their leviathan debts which will spread like a contagion to other nations worsening their financial worries. I agreed with my dad on the phone back in 2008 he said the United States will inflate their way out of debt by printing loads of dollars. Even in one of Barak Obama’s books (Audacity of hope) he say’s how you borrow dollars expensively and pay them back cheaply by printing more money. The UK will do the same money creating digitally through the bank of England’s QE policy. Meanwhile can Europe especially Greece and the United States get through this without an Argentinian style year 2000 default?
Basically this is Our Shock and Awe treatment . The Greek problems were caused by the Rich – tax evades and moving their companies abroad – yet the oprdinary people are as usual expected to pay for the virtual criminality of the Rich – and of a failed Economic system – ie Moneytarism / Deregulation . This Economic system is like a car whose engine has fallen out and lies in bits on the ground – no poimnt tinkering with it – It has failed– Totally . The people who have given Greece [ and Ireland [ south ] junk status are thorse thatgave AAA staus to subprime morgage securities – that is the level of their ability .
To pleasse the Neo – con liberals again – well sc##w them . What has IMF ever done except ruin countries – it should be disbanded – and if the markets are unhappy [ not making enough money ] tough.
Might as well bypass IMF anyway – and ask China for a loan – almost ceratinly – would get better terms. Pleasing the Likes of USA finance people , Cameron and Sarkozy – what is the point – they want to destroy Greece anyway .
The Greek situation and its effects have long escaped the control of the inept European leaders involved. The commission seems unable to recognise a few simple facts:
Greece cannot repay its current debts, not because it doesn’t want to do so, but because it can’t, even if their government says they can.
Greece cannot privatise quickly enough as the assets it has are too high risk given that they might, in extremis, end up being valued in Drachma.
If Greece were to remain in the Euro, it would take them many years of austerity and reorganisation and innovation to become competitive, so the same problem would reoccur a few years down the road.
It may be that the best use of the billions the EU is going to spend one way or another would be to prop up the banks post the debt crisis, which is not concluded with Greece.
Do you really mean what’s suggested by the term world here, surely you’re actually only talking about the world’s most potent vested interest group?