Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bailing out the Greeks, The Revolt in the Eurozone

Politics / Euro-Zone Mar 23, 2010 - 04:13 AM GMT

By: Global_Research

Politics

Binoy Kampmark writes: "You made a great mistake when you went back to the gold standard at the wrong parity of exchange in 1925." Charlie Chaplin to Winston Churchill


Financial woes have a habit of spoiling summit parties.  The European Commission is now in an ongoing debate as to whether its meeting should be used to come to an arrangement co-ordinating package loans to assist Greece out of its deepening financial hole.  German Chancellor Angela Merkel will have none of it.  While José Manuel Borroso, the current European Commission president, is insistent on the cooperative measures, the prickly chancellor has a different assessment.  ‘There’s no looming insolvency,’ she suggested to Deutschlandfunk.  ‘I don’t believe that Greece has any acute financial needs from the European community and that’s what the Greek prime minister keeps telling me’ (Guardian, 21 Mar).

Volatility in the European financial system has been exacerbated by speculations of a possible bailout, the elephant in the room that threatens to stampede at any given moment.  Greece has to refinance €8.2 billion euros in debt this April, and another €8.5 billion in May. These figures do not include necessary borrowings to pay ongoing bills.  Scotch such talk now, urges Merkel, before it unnecessarily drives markets down.  The Euro has received a battering as a result, losing its shine to the diplomatic chatter in a manner that Luxembourg Prime Minister Jean-Claude Juncker has deemed unreasonable.  And that chatter has been considerable, revolving around a commitment by eurozone finance ministers to agree to some provision of ‘co-ordinated’ bilateral loans for Greece.

Whatever Merkel might have in mind, the Greek prime minister, George Papandreou, seems to think differently, waiting for a plan to materialise out of the ether.  Even if the issue of a bailout is not discussed at the Brussels summit this Thursday, the beleaguered leader will have to hunt elsewhere, using the threat of going to the IMF as a means of discrediting the eurozone.  The credibility of Europe’s single currency system will then be shredded. 

The nightmare that is currently unfolding must be what the Germans feared most of all in the economic arrangements of the eurozone.  The German commitment to the single currency was based on an undertaking that it would not, as The Wall Street Journal (Mar 22) notes with sympathy, ‘ever have to pay for someone else’s free-spending ways.’  The Germans have been resolutely good Europeans with a spendthrift fetish.  But the façade of unity, the notion of solidarity at all cost, even as the coins are frittered away, is gradually crumbling.  This was evidenced by the remark made by Merkel in the German parliament last week that the EU needed a process of excluding financially profligate members for repeated violations.  ‘A foundation of the common currency which had been contractually and consensually agreed upon,’ noted a disgruntled Frankfurter Allgemeine Zeitung, ‘has been jettisoned.’

Would the IMF be such a negative proposition?  The Journal does not think so. It points out various advantages over a rescue package emanating from Paris, Berlin or Brussels.  For one thing, IMF involvement might actually prevent a possible devaluation.  A firm line would also be discouraging – the IMF would be the avenue to go for a delinquent eurozone member rather than the EU.  Single-currency systems do not require single governments but responsible ones who account for their misjudgements.

The modern financial system, but notably ones with such close ties as those within the eurozone, means that the irresponsible and the lethargic may be left behind, but at considerable cost.  It is also complicated by the fact that such a backer as Germany has an enormous surplus in exports relative to other eurozone countries, a feature that makes other nations, by virtue that fact, incapable of ‘devaluing’.  The single currency becomes a shackling device.  The Greek economy is no exception, haemorrhaging under a financial strain that is gradually inducing panic. It is also ranks rather lowly in competitiveness.  Olli Rehn, Europe’s commissioner in charge of economic and monetary affairs, feels that the commission will just have to be more involved in national budgets in the future.  But that will have to wait for another day.

Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge.  He currently lectures in politics and law at RMIT University, Melbourne. Email: bkampmark@gmail.com

Global Research Articles by Binoy Kampmark

© Copyright Binoy Kampmark , Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in