All Fools Day - But who are the eurozone April fools?
Pass the parcel; pin the tail on the donkey, or just a big fat April fool? On April 1st Greece - eurozone creditor discussions have all the making of a tall tale, albeit one which is terrifyingly true.
We have entered the end game for Greece’s eurozone membership. Having achieved power with a clear electoral mandate, Syriza’s suave Marxists have stalled when facing the Troika and their EU ‘partners.’ True, they managed the odd Pyrrhic victory. The Troika was renamed “the institutions” but Greece remains supplicant. Thus European reality is often laced with politically correct linguistic revisionism amid unchanging realpolitik. Athenian requests for Nazi reparations have been greeted with the diplomatic response normally reserved for cups of cold sick. Meanwhile Greek non-compliance with previous creditor agreements has been gradually reversed. Finance Minister Yanis Varoufakis looks less like a telegenic 1970’s polytechnic lecturer but rather a somewhat isolated figure being ground down by the blob. Another Marxist experiment is failing - even faster than Venezuela.
Alexis Tsipras faces a binary option:
1) Capitulate: thus mean reverting previous government rhetoric and alienating desperate Greeks who fulsomely endorsed Syriza’s economic fantasy manifesto;
2) Default: abandoning the euro means immediate sovereign default (the sixth since 1824) and further economic dislocation.
Option two sounds ugliest but given the straitjacket of euro membership, meaningful short-term Greek recovery looks fanciful. With default, the “New Drachma” will find a level where Greeks can export and hopefully rekindle growth after a devastating depression. Neither option is pretty. But the talisman of the euro is proving a noose for Greek recovery, even at current weak levels.
While excluding those uber-leftie frat boys from future single currency conferences may relieve other eurozone members their problems will only increase whether Greece capitulates to the Troika, or abandons the euro.
Contagion risk will be immediate. Ignore Brussels propaganda. True, Greece is only a 2 percent eurozone bit part player but abandoning membership it was impossible to revoke will generate shock waves. A eurozone schism will scar the EU itself. Having long blocked the exits, the political classes ignored the necessary reforms to make the bloc a cohesive agent of economic growth as opposed to a busted flush built on political hubris unimpinged by simple economic logic. Everybody has cheated at the euro game, Germany included. Piper payment paralysis leads to disaster.
Now crumbling Mediterranean economies are leaving Berlin holding the baby while simultaneously plugging fingers into the bath to prevent the water escaping. Meanwhile the dialogue remains one straight from the kindergarten where Germany and Greece are increasingly talking over each other, addressing their domestic audiences, having long since lost sight of how both have demonstrated remarkable economic illiteracy amidst their own, dim destructive dogmatism.
Whatever Greece decides, the resulting fissure will crisscross the Mediterranean. Italy, dealt the dead hand of Socialism over generations is one likely casualty, its latest installment of Alice in Wonderland economics applying an increasingly bitter taste to what was once the dolce vita. The greatest festering risk is France. With the ‘mainstream’ choice between Psycho-Sarko eying a return to the Elysee Palace where Monsieur ‘Flanby’ is the current ‘custodian,’ the specter of the National Front delivering a ‘third way’ is worrying but barely more economically illiterate than the, ahem, ‘proven’ policies of the established duopoly of losers. In future polls, I am minded to wonder if “none of the above” might be a viable option for French electoral success?
Nevertheless, even as it tumbles to dollar parity, the Euro still looks expensive representing a continent without coherent growth prospects, or leadership, where even the ECB cannot project manage (their new HQ building came in a shade over double the original budget after all manner of delays - as always with a Euroshambles, nobody took responsibility). Meanwhile the deranged central banker panacea of QE makes the rich richer and ignores the needs of those under financial duress. A politically unstable continent dissuades investors and the rise of the looney left/National Front only encourages capital flight from within, thus worsening the job prospects of the massed ranks of unemployed.
Athens faces an ugly option - roll over and die, or walk out and risk the toxic shock of debt default. We have entered the end game. The (ugly) conclusion is just a matter of time.
Amidst this Greek tragedy, all euro citizens are the unfortunate butt of this year’s April fool’s joke.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.