The people locked up are thought of as unsympathetic characters who deserve what they get.
Greece: the cradle of democracy could now be the single currency’s tombstone
The markets are expecting a politically rudderless Greece to exit from the euro within weeks, if not days. An economic storm to make 2008’s bank collapse feel like a mild shower is now increasingly likely.
For four years, European leaders have been staring into the abyss. Co-ordinated European spending cuts triggered rampant unemployment in Portugal, Ireland, Greece and Spain – the so-called PIGS. Growth has failed to materialise so now Europe’s financial nightmare is entering a new darker phase. And the people of southern Europe in particular face hyperinflation and further unemployment.
To think the European Union was created to ease social and economic tension. Suddenly continental peace and stability doesn’t seem a given.
Billions up in smoke
In anticipation of ‘Grexit’, Greek financial institutions are currently suffering a ‘bank jog’ which could soon break into a run. As Greece readies itself to print horrendously devalued drachmas, the spectre of rampant inflation draws near wiping out Greek’s dwindling savings. The worry is if contagion spreads beyond Greece.
Last Friday, redoubtable City commentator David Buik suggested Spanish bank exposure to Greek debt is €37 billion out of a total Eurozone exposure of €290 billion. If Greece leaves the single currency Spanish banks will see those billions go up in smoke. Earlier this week Spanish banks received emergency funds to keep them afloat.
Respected economic commentator, Martin Wolf in Friday’s Financial Times spelt out the implications of a disorderly ‘Grexit’.
In the short term, he suggested, a worst case but not unrealistic scenario would see runs on Portuguese, Irish, Italian and Spanish banks. Last week even the mighty Santander, the Spanish owned bank that in recent times gobbled up Abbey National, Alliance & Leicester and Bradford & Bingley in the UK, was downgraded.
This has worried British Santander savers and sent the twittersphere into overdrive. Though Santander and consumer experts suggest the UK subsidiary of Santander is one of the safest UK institutions in the country.
Wolf also cited research suggesting Eurozone output would fall 2% with international investors faith in the eurozone shattered.
And don’t forget we are entering this phase of the crisis with Greek and Spanish youth unemployment both above 50%.
One minute to midnight
So as the survival of Europe’s single currency reaches one minute to midnight, the questions are stacking up.
Will the fiscally prudent Germans – whose economy in the most recent quarter grew a relatively robust 0.6% – tolerate a relaxation of the bailout terms offered to the austerity battered Greeks?
Has new French president, Francois Hollande sufficient clout, wit and political capital to frame a Europe wide growth plan that brings both his fellow leaders and the public onside?
And will David Cameron contribute in any meaningful way to a resolution of this crisis?
The answer to all three questions appears: ‘No.’ Almost inevitably, Hollande”s plan to ease Europe’s debt crisis by introducing a Financial Transactions Tax has been blocked by the British prime minister at last weekend’s meeting of the Group of Eight leading industrial countries.
The G8 consists of the ‘richest’ European nations plus the US and Canada. Until 10 years ago, it was the most significant geopolitical axis on earth.
Not any more. Today it is Brazil, India and China through the G20 who hold the power.
So much so that last year, European officials went cap in hand to the Chinese begging Beijing to underwrite European debt. It was a humiliating gesture and one the Chinese wisely sidestepped.
But Europe combined is the world’s second largest trading bloc. And the deepening euro crisis could have a debilitating effect on China.Earlier this year, the International Monetary Fund warned it could even halve China’s growth.
It seems the Euro crisis won’t be solved by Europe, and the silence from China is deafening. The abyss beckons.