Interesting analysis. Thanks Keith
REH From: [email protected] [mailto:[email protected]] On Behalf Of Keith Hudson Sent: Sunday, September 11, 2011 10:02 PM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION Subject: [Futurework] The inevitability that was Greece 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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