€conomic warfar€ May 28, 2010
Posted by jasoncondie in Business, News, Thoughts.Tags: bailout, CamClegg, Deutsche Mark, economic warfare, Euro, Eurozone bailout, financial aid, Germany, Gordon Brown, Greece, invasion, Ireland, Italy, Portugal, recession, rescue, Spain, two-tier Euro, UK, UK recession
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These little piiggies could no longer go to market...
Despite the considerable Eurozone bailout (see the Gr€€k trag€dy posting earlier this month) the abattoir approaches for the PIIGS (insultingly catchy market acronym for Portugal, Ireland, Italy, Greece and Spain). The Club-Med countries passionately lived beyond their means, enjoying the sunshine rather than making hay as the saying advises. Having generously contributed €22billion to the initial Greek rescue, German citizens have now stumped up the majority of a secondary, more substantial €750billion effort to save the currency.
Unsurprisingly market speculation suggests Germany may leverage such generosity to establish a two-tier Euro or devolve to the Deutshe Mark. Realisation of the former would likely involve Germany accompanied by parsimonious partners Finland, the Netherlands and Luxembourg breaking out the top to establish a super-€ leaving PIIGS to wallow in their junk-€ squalor. Although the latter option appears farfetched, rumours abound that Germany has started reprinting the currency replaced by the Euro in 2002.
From a superficial, selfish stance a two-tier or devalued Euro sounds ideal. Travelling to desirable, sunny European locations would be as cheap as Africa or Asia. However such degradation or disintegration would inevitably deepen the financial crises facing Europe’s southern fringe and repress intra-union trading. Despite opting out of the accursed currency, the UK could be double-dipped back into recession, heavily reliant on Europe for 50% of trade.
Although apparently consolidating, Germany could be financially retrenching and preparing for a modern-day invasion. One fought through exchange and interest rates, protectionism and crossborder takeovers. For example, imagine how many Germans would purchase holiday homes (complete with toweled sunloungers) in the distressed zone with their new super-currency.
One last point worthy of note. As the UK basks in the post-coital glow of CamClegg’s coalition, Gordon Brown remains a logical scapegoat. But who ruled out Euro membership in 2007, thus preventing our forced involvement in the current fiasco? Exactly.
Gr€€k trag€dy May 6, 2010
Posted by jasoncondie in Business, News, Quotes, Thoughts.Tags: Aristotle, austerity measures, EU bailout, financial crisis, Germany, Greece, Greek financial crisis, hotblooded, passionate, prudence, Spain
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Are Mediterranean countries too hot-blooded and passionate to effectively manage their finances? Although a seemingly racist question, examine the evidence. Following the 2002 abandonment of the Drachma in favour of the €, Greece went on a veritable spending spree. Funded via international debt, the country embarked on numerous over-budget projects such as the shambolic 2004 Olympics. When the credit crunch bit, lending countries downgraded Greece’s risk profile accordingly resulting in higher interest rates.
Revert to the present day. Following unsuccessful global firesales of worthless, junk-rated government bonds, Greece has turned with cupped hands to its northward neighbours – prudent, predictable, unimpassioned, stoic (ironically a stoic was also a member of an ancient Greek school of philosophy). After excessive bureaucracy, the Eurozone and International Monetary Fund finally proposed a €110bn financial aid package. Conflicted Germany offered the lion’s share of €22bn for the good of the currency despite considerable opposition from German citizens. But Greece wasn’t the only Mediterranean nation affected – the debt ratings of Spain and Portugal have also been downgraded.
So you’d expect the Greeks to be appreciative of the bail-out. Nope. Once more displaced passion overwhelms fiscal sense. Thousands of public sector employees staged a 48-hour strike in defiance of planned austerity measures to slash the ballooning Greek deficit. Admittedly nobody appreciates the double-edged sword of spending cuts and tax rises but such political and social unrest merely fuels the self-fulfilling prophecy of collapse, further eroding GDP and undermining Eurozone and international confidence. Less confidence means more risk and more risk results in higher interest rates and reluctance to trade.
Even countryman Aristotle advocated prudence… “first, have a definite, clear practical ideal; a goal, an objective. Second, have the necessary means to achieve your ends; wisdom, money, materials, and methods. Third, adjust all your means to that end.” In contrast, modern-day Greeks must adjust the end to the somewhat limited means.
Greeks... fantastic at fighting, bad at business
