Both Germany and Greece are now on political knife edges. In both
cases, things have to give -- in a major way -- before too long.
Superficially it is for the same reason. Neither of them can take any
more austerity. Increasingly, Germans are reacting against having to
subsidize Greece any longer (and Portugal and Spain also for that
matter, but less crucially for the time being). Otherwise, Germans
could already be at a much higher standard of living. Increasingly,
Greeks are reacting against losing the much higher standard of living
they had received as a gift for joining.
Apart from the use of tear gas which, the German government have not
employed against its citizens, there is one immense difference in
their respective controversies which will probably lead to entirely
different outcomes. The basic difference is that the opposition to
the Greek government is almost completely that of public service
workers and not of the professional classes (who, from all accounts
are still doing very well). In Germany, it is both the professional
classes and the workers who are becoming angrier from week to week
because they are all being taxed more than they need to be.
There's only one alternative to Greece defaulting. This is for the 17
countries of Eurozone to agree to a European Treasury which controls
the budgets of all the countries and establishes a uniform taxation
system. This will mean 17 governments (and their electorates) losing
the fundamental basis of their sovereignty and, despite all their
different languages and cultures, somehow becoming the European
equivalent of America with nation-states being reduced to states
only. Even if this were remotely possible for 17 parliaments to agree
to this, it would still take how many years? Two, three,
Four? Greece can't wait that long. It can only be a matter of a few
weeks now. Many people were expecting Greece to default during this
past week-end.
What form will this default take? If past precedence is any guide,
then it will almost certainly take the form of a military
dictatorship, albeit with a civilian carapace for appearance's sake.
If Argentina's default of 2000 is any guide then Greece will have two
years of economic misery, if not close to hell, before getting on its
feet again. Despite the fact that it will default on some or all of
its $485 billion debts (or put them on ice for 20 or 30 years), and
that banks or private investors will give it any credit, Greece still
has $6 billion of gold in its central bank vaults. This is probably
just about enough to give it the working capital for a sufficient
cash flow when paying for necessary import resources (immediate
payment would be required) and waiting for payment for its exports.
If Greece doesn't default within a few weeks then every scrap of news
emanating from Germany tells us that the Angela Merkel will no longer
be able to maintain her present flimsy support for a sufficiently
large bail-out. And, if Greece is still in the frame then the
majority of Germans will be bearing Portugal and Spain very much in
mind. In effect, Germany will find itself standing on the edge of
leaving the Eurozone. This could happen in a year or two if and when
there's a change in the French government making it more amenable,
but, otherwise, this is unthinkable just at the moment.
If Greece is almost at the point of declaring a default,
re-introducing the drachma and leaving the Eurozone there is just one
more Greek fact of life which is not yet mentioned in any of the
present media accounts. This is that China is building major port
facilities in Greece, presumably to give it better trade access to
eastern European countries. Although China has invested a quarter of
its foreign reserves in Eurobonds and is generally supportive of the
Eurozone, it will almost certainly make sure that Greece will not
collapse economically if Greece leaves the Eurozone. I don't suppose
there's any understanding between Greece and China but if Prime
Minister Papandreou has got any sense he'll be bearing this very much
in mind if he gives a nod and wink to an army general to take over.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2012/08/
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