Euro crisis: Come on in, the water’s lovely…

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Croatia got an invite to join the European Union party, as EU leaders cornered the under pressure Greek Prime Minister, George Papandreou, ahead of next week’s crucial Greek parliamentary vote on the latest bail-out.  Arthur Beesley in the Irish Times

FOR THE fourth time this year, EU leaders gathered in Brussels last night to plot the next step in the sovereign debt emergency. They have declared victory many times before. None is inclined to suggest they are winning now.

The mood is bleak. With Greece in the throes of political and financial crisis, French president Nicolas Sarkozy barrelled into the summit room with little enthusiasm for niceties with Taoiseach Enda Kenny.

Sarkozy took a seat alongside German chancellor Angela Merkel, his intense eyes darting around the room as they engaged in a quiet chat. It is the Franco-German duo, after all, that sets the pace and tone of Europe’s halting response to the debacle.

Another dangerous moment has been reached. Huge uncertainty surrounds the fate of a crucial vote next Tuesday in which Greek MPs will be asked to back a €78 billion austerity plan.

Despite confident signals from prime minister George Papandreou that he has an all-important majority in the bag, diplomats say the likely outcome remains too close to call.

“There is an air of desperation in Brussels”, according to the BBC Europe editor, Gavin Hewitt.

The Greek opposition leader, Antonis Samaras, says cuts are not working, that they are slowly strangling the country.

Yesterday saw an unprecedented intervention by the EU into Greek domestic politics. Mr Samaras, who was in Brussels, was put under ferocious pressure to change his views. He was a man rounded on.

Angela Merkel, the German chancellor, told him to do what was necessary to get behind the austerity package. She spoke of the Greek opposition needing to “fulfil its historic responsibilities”. One observer of the European scene said he had never seen anything like it before and it smacked of desperation.

In Greece itself the government is so anxious about the outcome of the vote that it tried to soften some of the measures. But it opened up a 3bn euro black hole in the calculations which, after discussion with EU and IMF officials in Greece, was closed.

As Gavin Hewitt goes on to say

As it stands, most economists and the markets believe Greece will default – the only question is when. Even some people close to George Papandreou believe default is better than years of austerity.

And then?  At the Telegraph blogs, Eurosceptic MEP Daniel Hannan patronises Martin Kettle in the Guardian, and warns against betting that they can’t just keep muddling on.

My best guess is that Greece will default within months, and that the monetary union will limp on – battered and cheapened, but intact. Such an outcome, after all, suits businesses in the contributor countries as well as Euro-integrationist politicians. As I’ve argued since the crisis began, the real threat to the peoples of Europe is not that the euro won’t hold together, but that it will.

And the existential crisis will remain…

For supporters of the “European Project”, the longer-term options are stark.

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  • http://redfellow.blogspot.com Malcolm Redfellow

    There’s irony here.

    Croatia has something to sell. So — hello! Croatia!

  • http://joeharron@yahoo.com joeCanuck

    Are they also being invited to join the Euro club?

  • DC

    Not euro club, but club tropicana – fun and sunshine there’s enough for everyone.

  • Framer

    Now is the perfect time for the FYR of Macedonia to be allowed to drop the FYR.

    They could drop the Greeks a billion for the privilege.

  • Nunoftheabove

    Framer

    Indeed, not least as the naming dispute’s one of the remaining obstacles to (FYR) Mac’s Euro accession and NATO membership. Billion’s a bit steep though, could be a fun bit of negotiation and timing’s everything in business ;-)

  • Greenflag

    Here’s the Economist magazine editor ‘revealing all ‘ not that it needs revealing .

    excerpt

    ‘What you’re telling me is that when German taxpayers, for example, are asked to shovel money to Greece, they’re not really saving Greece, they’re trying to save some German bank that has invested in Greek debt and wants to get paid back. That’s what’s really happening.’

    And ditto for the even more exposed French taxpayers and then there’s the Americans who are in the hole for some 40 billion dollars and the UK and others but I guess Ms Beddoes did’nt want to labour the point.

    the full interview here ,

    http://www.npr.org/2011/06/24/137387949/greeces-debtors-will-have-to-take-a-haircut

    And Monsieur Sarkoczy has 9 months to the French Presidential election and Kanzlerin Merkel has just under 2 years. And neither wants to ‘upset’ their electorates and in particular Mr Sarkoczy.

    So ‘default ‘ by Greece and later by Ireland and Portugal and others is being gradually accepted despite the howls of the ‘moral hazarders’ who have now taken on the ghoulish visage of Dickensian age jailers in their search for moral and financial integrity from a sector which has the least credibility it has enjoyed in it’s history bar the Great Depression of the 1930’s.:(

  • http://nicentreright.wordpress.com/ Seymour Major

    What bank notes are we likely to see in circulation if the Euro collapses?

    I could not resist introducing this howler from the Telegraph

    http://www.telegraph.co.uk/finance/personalfinance/8597369/The-banknotes-that-could-return-if-the-euro-collapses.html?image=7

  • Greenflag

    Nice one Seymour . Now we know it’s not Gerry Adams nor is it Karl Marx nor Parnell so who is the hirsute gent for those of us who are not familiar with northern banknotes?

  • Greenflag

    A second glance at the note provided the answer –the bicycle should have given the clue – None other than the great JD Dunlop himself . I note the great man passed away in 1921 which was around about the time that the concept of eh ‘elasticity’ disappeared in Irish politics on both sides of the border- as both states settled into the long rut of pretending the other did’nt exist .

  • wee buns

    Well then Zagreb had better start thinking now about which historic landmarks they wish to privatise.

  • tuatha

    Greenflag – the amerikans are less exposed to euroid/greek fiscal black holes than EU banks were to their sub prime Ponzi scheme but, as you say, the french are the most exposed and also theirs is the most phantasically fluffed up internal financial house of cards. Unlike most civilised countries they don’t publish accurate, nor comprehensible, Current A/C deficits nor National Debt figures.
    This is from an earlier post on who holds the total Greek debt of 340B euros – respective bank/gov exposure in brackets.
    France 56B (42/14)
    Germany 34B (12/22)
    UK 15B (11/4)
    USA 7B (6/1)