Slugger O'Toole

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Sarkozy: “Without the euro there is no Europe…”

Sat 18 June 2011, 3:43pm

That was the exaggarated claim of French President Nicolas Sarkozy as Frau Bundeskanzerlin blinked over her demand that private bondholders be made to share the burden of a ‘Greek miracle’ second Greek bail-out.  Although where that leaves the Bundestag is another matter…

And now that the French and German leaders are in agreement it’s down to the Greek Prime Minister George Papandreou to forge a domestic political consensus.  Or not.

A new political contract is essential for Greece to survive the current crisis.

For this contract to emerge, there has to be a degree of self-realisation among Greeks as a whole that responsibility for the last 30 years lies not only with one party or another, or one political class or another.

Greece could absolve itself of responsibility for the crisis, and sever its European commitments, by defaulting on its debt and removing itself from the Eurozone. This is an unrealistic, though not an unlikely option, and immensely unpopular in European circles.

Alternatively, there could emerge a gradual realisation that this crisis can only be met and overcome through broad public consent and co-operation in the wake of some acceptance of responsibility for the causes of the crisis.

The conditions of the bail-out are strict, the austerity measures harsh, and faith in the political system is diminishing, but a better future can only be built on a broad social consensus and co-operation to see the programme through in the long-term.

Can the Greek political leaders see that far ahead and create the conditions for consensus? Current evidence suggests not.

BBC Europe editor, Gavin Hewitt, assesses the bail-out options for Greece, and President Sarkozy’s claim

President Sarkozy yesterday betrayed the tension when he said: “Without the euro there is no Europe and without Europe there is no possible peace and security.”

In raising the stakes to make this a crisis about peace in Europe he is trying to frighten European leaders.

The French president’s fear is almost certainly exaggerated. There is no threat to security.

The euro would survive the exit of Greece – the European Union existed before the euro and no doubt would survive a contraction the euro-zone.

Would there have to be a re-think about where the EU was heading? Certainly, but some would welcome that.

Indeed.  And on the bail-out options?

Almost certainly there will be a fudged deal backed by a Micawberesque hope that something will turn up. It might buy some time but the big questions will not have been answered.

Ultimately, will European tax-payers be prepared to absorb Greece’s debts as the price for saving the euro-zone?

Of course that, in itself, might not save the euro-zone in the longer term - “If fiscal union is not on the cards, the only other option is eurozone breakup”

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Comments (12)

  1. joeCanuck (profile) says:

    Pete, I gave in eventually:
    From Wiki:
    The Chancellor of Germany is the head of government of Germany. The official title in German is Bundeskanzler(-in) (literally, Federal Chancellor), and the office is often referred to as Kanzler(-in) for short.

    In German politics the Chancellor is equivalent to that of a Prime Minister in many other countries. The German term directly equivalent of Prime Minister, Ministerpräsident, is used exclusively for the heads of government of most German states (referred to in German as Bundesländer or Länder for short).

    The current Chancellor is Angela Merkel, who was re-elected in 2009 after her first election in 2005. She is the first female Chancellor. In German she is thus known as Bundeskanzlerin. That particular word was never used officially before Merkel, but it is a grammatically regular formation of a noun denoting a female.

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  2. DC (profile) says:

    I have a German neighbour who is a manager of a car parts factory close to me, the German company has set up in NI making parts for Ford.

    For what it’s worth, he reckons Greece should be shown the door out of the euro.

    Interestingly enough, Merkel suggested the other day that it was time to consider forcing a haircut on private holders of Greek debt, she wanted them to exchange close to maturing bonds for new ones, in essence taking a hit.

    What happened after that? Well Merkel was told that that would in effect be a default and the markets would go nuts. So, that idea was scrapped.

    It’s always worth remembering that this is a private debt crisis, created in a so-called neo-liberal system and brought about as a result of poor lending practises of the banks, never forget that fact. Global finance cocked up, it amplified the amount of credit through a process called credit structuring – which didn’t last – the way financial markets had structured credit wasn’t sound. It all collapsed and the banks couldn’t cover the losses themselves, also the insurance policies taken out by the banks didn’t pay out – such as those issued by the likes of AIG, they weren’t worth a shit. It all fell through.

    Enter the taxpayer.

    Merkel and national governments would be wise to show the financial markets just how much banking debt has been brought over onto the public’s shoulders as sovereign debt – government debt.

    The two need separated out when looking at government debt as a percentage of GDP. Banking debt should be shown separately.

    The only fair way out of this mess is to turn top bankers and financiers upside down and take the profits and wealth accumulated over the years 2002-07 off them.

    This will avert a decade of austerity.

    The reason why EU leaders can’t look the public in the eye is that they know fine well that raping the taxpayer silly and cutting public services to pay for this debt mountain is like any rape for those with a conscience – utterly shameful.

    To fix the problem, go back to where it came from. The credit givers that profitted under the neo-liberal system when it was good but don’t want to have any collective measures of government applied to them personally after it all went sour and so so wrong.

    Structured credit was supposed to be food for the masses, nourishment plus a bit of interest; but it has turned out to be nothing other than a mssive crap on the nation’s dinner table – with the bankers running out the door and off out into pastures new.

    So, what happens now – tax the public and rob the poor and less wealthy and well off?

    What a f**king joke.

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  3. The battle of Waterloo took place exactly 196 years ago to this day

    One German leader that played a crucial part in that victory was Generalfeldmarschall Blücher.

    If the Germans had leaders half as decisive and brave as their historical war heroes, Europe might now be on the mend. The right thing to do is expel Greece from the Euro.

    Strategy and courage are non-existent words in Angela Merkel’s vocabulary. She will not take the decisions if they are too tough. She keeps wriggling towards the most comfortable corner in the room.

    The Greeks: If their elected politicians from all parties came together to form a national unity Government, the bailout would have a “sniff” of a chance of success. As things stand, it has no chance.

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  4. Comrade Stalin (profile) says:

    The only fair way out of this mess is to turn top bankers and financiers upside down and take the profits and wealth accumulated over the years 2002-07 off them.

    You mean “nationalize the banks” ?

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  5. Crubeen (profile) says:

    Comrade,

    I think he means to reverse the phrase “Fred the Shred!”

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  6. DC (profile) says:

    Crubeen – I do indeed.

    Shred Fred’s finances – a proportion of the money earned by the likes of him over the years 2002-07 should be recouped and returned to the banks that were left technically bankrupt.

    People need to realise that these grossly inflated bonuses etc earned by the likes of him were as a result of the way in which credit was structured and released. Releasing credit is like printing money – it causes inflation – except the credit structure created by financial markets and risk models on repayment all collapsed. Yet these people walk out the doors of their banks with their profits intact. All of this a time when the whole banking sector was going through a depression, which was only offset by taking a hell of a lot of money – trillions – off the taxpayers.

    See Spiegel Article below – it focuses on the American political elite where money and power overlap – which should make you wonder what role – if any – democracy has in all of this:

    When Henry Paulson resigned from his job as CEO of the investment bank Goldman Sachs in June 2006 to serve as the US treasury secretary, he received a generous bonus of $18.7 million (€14.4 million). He was also permitted to sell his accumulated Goldman stock, worth $480 million (€369 million), earlier than had originally been stipulated.

    Half a billion dollars, for one person, earned in only a few years — what kind of work could be worth that much money?

    None, not even honest work. But the activities of investment bankers had nothing to do with honest work, because the value that they created was merely an illusion. It was achieved on the basis of risks that would eventually bring down the entire system.

    …But the bankers deny their own culpability and refuse to do anything to atone for their sins. Even though many banks would have gone under without government help, it has only occurred to a very few bankers that they should pay back their bonuses, which are based, after all, on illusionary results.

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  7. DC (profile) says:

    Here’s some more info from the Spiegel article:

    Even in the motherland of unbridled capitalism, the mood has now shifted.

    In the past, Americans had no objections to seven-figure salaries and giant bonuses. Wall Street was always at the core of the American dream, the place where anyone could make a lot of money in a very short time.

    But they have taken it too far this time. Take, for example, former Merrill Lynch CEO John Thain, who had his office redecorated for $1.2 million (€920,000) — $1,400 (€1,070) waste basket included — in the middle of the crisis. And even though his bank could only be saved by an emergency sale, Thain, who was forced to resign in January, refused to go without his $10 million (€7.7 million) bonus.

    Or Richard Fuld, the former CEO of Lehman Brothers, who secretly sold his beachside villa in Florida to his wife for $100 (€77) to shelter some of his assets from pending civil suits. Fuld had originally bought the estate for $14 million (€10.8 million).

    And then there were the executives at insurance giant AIG, rescued from bankruptcy with government funds, who had no qualms about rewarding top-performing employees with a hunting trip to England.

    Then, of course, there was Bernard Madoff. The former head of the Nasdaq Stock Market allegedly cheated investors out of $50 billion (€38 billion) with an illegal pyramid scheme. On the day before Madoff’s arrest, his wife withdrew $15 million (€11.5 million) from an account at a firm co-owned by her husband.

    For many Americans, Wall Street executives now fall into one of two categories: those in the first group are arrogant and greedy, and those in the second are criminals and frauds.

    And while America was going to the wall and being replaced as a super power by China, George Bush holds a talk and laughs amongst the audience saying:

    “Wall Street got drunk”.

    In the video, Mr Bush tells the crowd:

    http://www.youtube.com/watch?v=_3KhvAAHXf8

    “We’ve got a housing issue.

    “Not in Houston, evidently not in Dallas, because Laura’s over there trying to buy a house today,” he says to the crowd’s laughter.

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  8. Comrade Stalin (profile) says:

    The problem is that taking money off Goodwin doesn’t really solve the root problem. And it’s probably illegal to boot.

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  9. DC (profile) says:

    Here’s how it could work.

    The government or a government – a half decent government – simply legislates new enforcement powers over to SOCA – Serious Organised Crime Agency – these new powers enable the police to arrest bankers and financiers like SOCA currently does to terrorists.

    Their accounts and assets are then frozen and a proportionate amount from each of them is paid back either to the government or the banks that are now technically bankrupt.

    These people – bankers and financiers – should be turned upside down and their wealth returned to the nation – well to be fair – all the false wealth and fools gold collected by them over the years 2002-07: this will avert a decade of austerity.

    Trust me.

    All we need is some smart political party to crack the code and get into Westminster with this type of agenda.

    If they can take money off terrorists legally, bankers who have profitted inappropriately using unsound calculations of risk resulting in national bankruptcies should – in my view – suffer the same fate.

    Why should others have collectivist actions forced upon them either through tax or losing their jobs to pay for the mess that the bankers created.

    Legislation is a blunt instrument but so is punishing people not directly involved with the workings and motions of international finance. Privatising profits and socialising the loss is not on.

    At least this way some of these bankers will be forced to pay back some of the money – much of which should never have been paid out to them in the first place because the manner in which they were able to accumulate such wealth was flawed. The credit structuring process etc all collapsed. So, the Goodwins and Paulsons of this world should be made to return some money – it will of course still be a substantial amount.

    Imagine if such a freezing of assets were introduced across the western world on these particular people – using the national tax office to identify and track them down – austerity wouldn’t have to happen. Normality would return.

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  10. Pete Baker (profile) says:

    Don’t worry, DC.

    When the revolution comes they’ll be first against the wall.

    Meanwhile, back in the real world…

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  11. DC (profile) says:

    No they won’t you will!

    One for being a defeatist and two for undermining this targeted approach to tackling the problem of national deficits, run up because of banks.

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  12. [...] prospect of such Greek “national unity” remains uncertain, at best.  And the BBC’s Robert Peston, still everyone’s hero, questions the logic of [...]

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