The Eurozone politicians saved their face yesterday by preventing
Greece having to default completely. But, as Kenneth Rogoff said
yesterday: " . . . they've figured out how to buy a couple of
months". If anything, the 50% debt let-off will only reward the
daily demonstrators outside their Parliament and the repeated
national strikes by their public service unions. Also, what will
Portugal, Spain and Ireland say about this preferential treatment of
Greece? What is this 'firewall' that was being talked about? Sooner
or later -- probably sooner -- they're going to want similar handouts.
But it's the hoped-for $1.4 trillion 'bazooka' fund that's a greater
farce. For one thing, it's going to be nowhere near sufficient when
Italy follows Greece and the others down the default road. Italy
already has a government debt of 120% of GDP. For another, who's
going to chip into this fund? Germany says it won't, the other
Eurozone governments can't and the banks are hardly likely to because
they've already decided to reduce their outgoings in order to build
up their reserves to 9% as enjoined by Basel II. (In 19th century
England, the typical major banks had reserves of about 15% to 20% and
the Bank of England between about 35% and 70% at various times.)
The lie to the prospect of a bazooka fund was already given during
the summit when Sarkozy announced that he was sending an emissary to
China to ask for help. How shameful! China has already 'invested' a
quarter of its foreign exchange funds in the Eurozone. China has said
it would help the Eurozone further only if it can discipline the
budgets of its component governments. But the idea of a unitary
fiscal authority never peeped during the summit. Why? Because
Sarkozy, Merkel and other top politicians with any experience at
handling their legislatures already know that this will never be
possible. The differences between the cultures are far too great.
It should be pointed out to Eurozoners that even cultures that have
been 'united' for a century or more, and even speaking the same
language, can re-establish themselves. Belgium, Italy and Spain are
each steadily teasing themselves into two parts. The 'United' Kingdom
(as our politicians like to call it) into four! Anyway, that's what
this English culturalist (but not nationalist) thinks.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/10/
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