Is the 'Kaiserin' about to bomb Athens out?

As so often I am obliged to my e-pal, Richard North of EU Referendum, who must, I think, spend every minute of every waking hour reading every newspaper in the world - and who then, presumably, writes his many detailed posts in his sleep!  Whatever, he has been quick to catch the change of mood in Europe generally and Germany in particular.  Mrs. Merkel continues to protest her support for Greece in its current travails but, according to Der Spiegel, the mood in German political circles has now changed with more and more German politicians giving up on the intractable problem that Greece has become.  Hitherto, as I have frequently pointed out, no weight can be attached to anything a Greek politician promises (lest I be accused of 'Greece-ism' let me stress that this is an international political characteristic!) but now the problem has altered.  It has slowly dawned on the whole European apparat that even if the Greeks could deliver on the crushing austerity needed it would not solve the problem.  Not the least of the causes of the sudden fears and doubts is that irritating concept despised by everyone in Brussels  - democracy!  The Greeks have been promised an election in April and who thinks that any politician in favour of foreign diktat is going to get a single vote?

The only solution, if that is quite the right word, is bankruptcy.  This will be hellish for the Greeks with civil servants unpaid and pensions severed.  However, the re-introduction of the drachma at a record low against other currencies, especially the euro, would make Greece the holiday centre of the world once again - and leave the Spanish, Portuguese and Italians with something to think about!  Needless to say, Brussels/Berlin will do almost anything to avoid such a repugnant slur on their beloved euro and so the idea is now being mooted that Greece be allowed to go bankrupt within the euro system.  This would mean all the others taking huge hits, particularly amongst their banking sector, but at least a figleaf of respectability would remain to cover the blushes of the euro currency.  However, as I see it, apart from lifting the debt burden from Greece, it would not assist in allowing natural growth to begin again.

The folly of politicians wedded to great political constructions is the stuff of every history book ever written.  As we have watched this particular European opéra buffe it has provided great entertainment even as we dread the tragedy that is to ensue.  That is has taken supposedly educated, clever and even intelligent men and women so long to face reality is, or would be, quite extraordinary were it not for the fact that it has all happened before 'many a time and oft'.

Comments

[dearieme]

Suppose they do default within the euro: what if the Greek government passed a law stating that every contract in Greece was now rewritten with half-a-euro replacing a euro. So rents, wages, pensions etc would all be halved. It would be traumatic but it might at least shorten the agony.

(P.S. FDR enforced a comparable default in the US, overriding contracts namely changing the terms of bond,s including Treasuries.)

[David Duff]

It's an idea, I suppose, in effect, a semi-default. On the other hand, I don't quite see how they could get away with what would be a devaluation of the euro whilst being a member of the euro system.