Did the Euro die at 5.13pm on Saturday 27 June, when Greek finance minister Yanis Varoufakis walked out of the Eurogroup meeting of finance ministers? We still don’t know, but it is important to understand that Varoufakis didn’t ‘walk’, he was pushed.
At that point chairman Jeroen Dijsselbloem had announced there would be “a meeting of the 18” – that is the Eurozone group without Greece. Varoufakis demanded an opinion of the EU legal counsel, sitting in the room. To no avail, so he got up and left.
Varoufakis had just made a passionate speech, asking for time to conduct a referendum. No dice.
Paul Mason says that what triggered the stalemate was democracy. An agreement would need to be passed by the constituent parliaments. The compromise worked on for weeks was too harsh for the Greeks and too soft for the rest.
There was a further proposal and a teleconference on June 30, but to no avail. Technically Greece defaulted.
Satyajit Das told the ABC (can’t find the link) that if Greece defaults then technically the IMF can’t deal with Greece and the ECB will have to close off support for the Greek banking system. Germany’s participation is conditional on IMF involvement. Somehow, the IMF are now talking about Greece being “in arrears” and the ECB keeps funding the Greek banks, which, I understand, are part owned by other European banks, especially in Germany and Austria.
Are the rules being bent? If so, who will complain, and to whom?
Das said that in the end the Eurozone taxpayers will pay. Had they done so six years ago it would have cost a whole lot less.
In this article Das goes into the gruesome detail. In the end he quotes French philosopher Jean Paul Sartre:
- “Once you hear the details of victory, it is hard to distinguish it from a defeat.” Whatever happens it will destroy the lives, hopes and futures of many Europeans, in Greece and elsewhere.
- The creditors and taxpayers in eurozone member countries now face large losses on their commitments. There are deep divisions within Germany and within the eurozone. Europe’s handling of the Greek crisis has revealed its inability to face up to inconsistency between a single currency and monetary policy, national fiscal policies and the lack of political integration. It has also exposed a ponderous decision-making process.
Immanuel Wallerstein points to division at the top in Germany.
- There are many actors (and notably Germany’s Finance Minister, Wolfgang Schaüble) who insist that a Grexit would be quite tolerable for the eurozone. These people are concerned primarily with one thing – that the principle of repayment of debts be an imperative priority for Greece and for everyone else in the world. Then there are actors who give priority to the survival of the eurozone and worry about a Grexit. In fact, the most notable person in this group is Germany’s Chancellor Angela Merkel. She fears that a Grexit will not only lead to a disintegration of the eurozone but that in turn a collapse of the eurozone will lead to a collapse of the European Union. She is therefore willing to consider some kinds of accommodation to Syriza’s offer of a compromise.
Greece’s GDP is only 2% of the Eurozone, but Merkel and co worry that others (Portugal, Spain, Italy) might follow.
Joseph Stiglitz sees the crisis as being about power and democracy. The austerity policies favoured by Greece’s paymasters are the cause of the problem and will make matters worse.
Greece has suffered a decline of 25% in terms of per capita GDP. It used to rank with the other main economies of Western Europe. Now it ranks with the emerging economies of the former Soviet block, except that it’s going the other way. Stiglitz says it may eventually qualify for World Bank assistance.
Meanwhile a referendum has been called in Greece for Sunday, but it is not clear what the people will be voting for. The offer is no longer on the table. Those urging “yes” appear to be saying they are voting to stay within the Eurozone, and the EU.
Wallerstein’s bottom line:
- The third view – the view of total uncertainty – is however the correct one. It is the only view that takes account of the fact that the world is in a chaotic bifurcation, in which there is no way of predicting how the “market” or any other institution will react. Since most investors are consumed with uncertainty, their reactions lead to wild oscillations and frequent freezes.
Talk is still happening, officially and through back channels, so the expectation is that Europe will, as usual, muddle through. The share markets have taken a hit, but the currency has been remarkably stable.
The man from Commsec, talking on local radio, said that Europe, for us, is a matter of sentiment. China is substance.
Alan Kohler’s latest begins:
- For Australia Greece is a distant thriller, but China is a nearby horror show.
If you paste that sentence and Kohler’s name into Google you can sneak past the paywall and read all about it!