England's White Dragon

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Wednesday, 26 October 2011

Humpty Dumpty euro

Humpty Dumpty euro sat on the wall, humpty dumpty euro was doomed to fall
Zero hour for the doomed euro has come
The extraordinary summit held in Brussels is considered crucial by the European press. But whether it's about rescuing Greece or saving the single currency itself, it's a sense of unease that dominates the doomed, The euro was doomed from the first day of its launch because the maths just didn’t add up and could add up.

This October 26 is “€-day for Europe”, headlines De Morgen, which asks “Will European leaders succeed in saving the euro?” An unconvinced Yves Desmet, political editor of the Flemish daily, expects – another crucial day when the countries in the euro-zone – so says president Herman van Rompuy – will take up a bazooka to, yet again, force the markets to toe the line. For now, it seems they're only going to reuse the recipe that has already been served up: a little more debt relief for Greece, a little more capital for the banks, billions more for the rescue fund. So far, this has left the markets unmoved. The bazooka is starting to look more like a water pistol and the little debt relief for Greece won’t really helpb.

For La Vanguardia, “The euro's future is at stake” in complex discussions “at an uncertain summit”. The agreement on the euro is like a matrushka doll, which inside the largest contains many smaller ones. If the smaller dolls do not fit in perfectly, the bigger dolls cannot be snapped shut. The agreement to boost the financial stabilisation funds is tightly related to the 'haircut' of 50 per cent on Greece's sovereign debt, the recapitalisation of banks and the commitments by all the member states to take steps to stimulate the economy. For without growth, neither austerity nor the firepower of the fund will get us out of the crisis.

However, for Manel PĂ©rez, the editor of the Barcelona daily, the seventeen members of the euro zone will have to choose “between what is unjust and what is inexpedient.

If, to calm down the Germans, we choose financial engineering, through insurance or debt mechanisms that will let us boast of having resources without actually putting them on the table, this won't let us protect the debt of countries in difficulties and will increase the size of the debt that cannot be paid off.

For this reason, the obsessive fear of inflation of the Germans, who are restraining the ECB from getting involved in resolving the crisis, is worrying its partners in the euro zone. Keynes said, 'Inflation is unjust and deflation inexpedient', but of the two perhaps deflation is worse, 'because it is worse, in an impoverished world, to provoke unemployment than to disappoint the rentier.'

In fact, notes To Ethnos, the summit opens in a “euro-vertigo over the veto of Merkel.” For the Greek daily –The situation in Brussels is explosive. Everything hangs on the position of Germany and Angela Merkel, who is building a wall between Germany and the other Europeans. To the chagrin of the banks, a haircut of 50 per cent on Greece's debt is in the offing, while the IMF would raise that to 60 per cent and banks are claiming they would be dealt a staggering blow by any write-down beyond 40 per cent. Specifically, the Chancellor would prefer to pay the banks… All this against a tense backdrop of an indifferent Italy and Greece pushed to the brink if this collapse is not sandbagged as it should be.

In Germany, Handelsblatt denounces “the day of broken promises“ In advance. The business daily regrets that the EU leaders' commitments to the voters, investors and banks are about to be disowned:
The summit has not even started, yet the final statement has already been drafted. For it is more important to the heads of state and government to salvage their reputations than to save the single currency. That's why the Seventeen have already praised the achievements that they are about to pull off: 'The agreement reached today represents another significant step forward. The euro still rests on a solid foundation,' reads a draft of the final declaration. In truth, the foundations of the euro have been undermined by a half-dozen broken promises. Debt will be restructured, the rescue funds pumped up to super-size”
In the end, observes Le Figaro, it will a new Europe led by Germany that will emerge from the summit:

If we have to choose between the Germany of Merkel and the Italy of Berlusconi, we won't hesitate. Those who denounce an alleged axis between Paris and Berlin have not grasped the gravity of the crisis. German primacy is a given in the new architecture that is emerging. And that primacy should encourage us to be ambitious in our plans to rebuild Europe, but hand in hand with Germany.

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