The usual preface when I start writing about finance: I am no economist. It is highly likely I’ve misunderstood some painfully dull yet hugely important item of detail in this little bunfight. If that is so, then I apologise.
Anyhow, a couple of interesting articles yesterday and today in the Torygraph.
The first details Greece’s efforts to deal with their profligacy of the last decade, and could easily be held up as a mirror to what is going on here. The second is about an attempt by some German academics to stop a shed load of their money heading east to prop up this land of retirement at 61 with a national pension pegged at 95% of earnings.
The first article raises an interesting conundrum:
One option would be to follow the example of Britain, which managed to erode much of its debt by allowing the pound to fall by a quarter. If the powers-that-be in Frankfurt were persuaded to allow the entire euro to fall enough, thus driving up inflation in Germany, they could avoid both Greek default and the break-up of the currency. This would right the balance between the two countries (in Germany prices are too low, in Greece they are too high, and producers too uncompetitive). The problem, again, is the scale: the euro would have to more than halve in value and Germans would have to accept inflation of around 14 per cent for five years to make the adjustment. Not something politically feasible given the country’s history of hyperinflation.
A point occurs to me, aren’t there about two dozen other countries using the Euro beyond Greece and Germany? What do they think about this idea of allowing the value of the currency to fall by up to 50%?
And here is the problem with the EU in general and the Euro in particular, what might suit urbanised and industrial northern Europe is certainly not what is wanted in rural agrarian southern Europe.
What if these German professors manage to get the plug pulled on the Greeks? What if the Portuguese who also seem to be teetering on the brink finally slip into the abyss? What then? The economic weaknesses of two small peripheral economies could drag down the economies in Italy, France, Netherlands and Germany. Millions upon millions of people with savings and pensions wiped out, because of the inefficiencies, and certainly in the case of the Greeks, corruption of one constituent part of the grand project.
Many would argue that is a good case in support of centralised cross-continental economic policy, but heaven knows it is hard enough to deal with the geo-financial inequalities in the UK, let alone those spread over a whole continent.
I can only imagine what the fallout of the collapse of the Euro would be. One thing is for certain, it would be huge blow to the EU project, for a number of reasons. Firstly, the empire builders are determined to create a single pan-continental nation in their own image, we have a flag, an anthem (of sorts), a parliament (of sorts), a President (supposedly) and a currency. If the currency were to wink out of existence then it would make it very hard to continue to persuade people that a single nation is possible and sustainable.
Secondly, such a collapse would most likely lead to a number of the current member states questioning why they are in the project. The public of France, Germany and Italy are quite rightly going to ask why their financial wellbeing has been wiped out by this country that has brought nothing to the party. Unlike in the UK where we just mumble and write letters to The Mail (and blogs), the French and the Italians especially would be out on the streets, demanding change and bringing their countries to a grinding halt until they get the changes they want. The politicians would have no option but to give in. The smaller, less economically secure nations are likely to look at the big players and wonder what the point is if they don’t come to their aid, rather than looking out for themselves.
Those countries not in the Eurozone are well out of it, as it is possible we could be spared the worst, should the worst happen.
One thing is beyond doubt, empires always fall. They always have, they always will. It is only human arrogance and hubris which declares thousand year reichs and the like. They all fall. Whether it is because the empire crumbles because the military muscle isn’t there to keep the regions in line or defended (Romans, Soviet Union) or because it is politically and/or financially impossible to keep it running (British, Soviet Union), they all fall. The EU will be no different, and in my opinion will come to an end sooner rather than later. One can’t help the feeling that critical mass was reached some time ago and that the chain reaction is now well in motion, the result of that is certain.
I’ll take this opportunity to add my voice to the myriad of those expressing their sadness at the revision of the Devil’s Kitchen. I’m not surprised that Brillo took the tack he did, it’s par for the course when a small party gets shoved into the spotlight, it’s normally little more than a freak show where the worldly wise can roll their eyes at the nutter.
The fact that Chris was attacked over his blog, rather than his policy I think speaks volumes about the latter rather than the former. In an election where no-one knows who they want to win, but everyone wants them all to lose, I feel it is important to take the opportunity now to show you are really, properly, different to everyone else. DK’s blog was a fine outlet for that, and it was reading him and Leg-Iron that motivated me to do this blogging lark for myself.
My advice, for what it is worth, should you ever read this Chris, is dare to be different. Show how angry we are. Show we’re not afraid to use the occasional naughty word. Show that we attack people and policy because it is the right thing to do, not the expected thing to do. Attack without mercy and without fear of reprisal. Show that people can look as long and as hard at us as they wish, for we believe in what we say, we do not say what we think people wish to believe.
Polarise opinion, stand out. If people do not agree with us, then that’s fine. The trick is to persuade more people to agree with us than disagree. If we can’t, well, that’s democracy. I’d hate for us and for you to become conformist.