A Greek Tragedy


Part 1

It all started in Athens. When Homo Erectus eventually became Homo Sapiens, the inhabited world of North Africa, the Middle East and finally Europe developed. In the West at least, the first really successful recognizably ‘modern’ attempt of tribes to organize themselves as a cohesive unit resulted in the City state of Athens. This, ultimately, became the indelible Greek civilization whose achievements endure 4,000 years later.

In turn, this spurred rival, successive empires such as Rome while tribes of Celts, Anglos, Saxons, Franks, Nordics and innumerable others divided the post-Moorish invasion map of Europe into a few empires and a few hundred kingdoms, city states and principalities. Many of these gradually formed strategic, trade or military associations and affiliations that, following the European turmoil of the age of democratic enlightenment, Napoleonic conquest and various revolutions spawned the nation states whose inability to recognize each other’s place in the new industrial world resulted in World War I.

The European map was then redrawn by the various European, American and Asian victors (Australasian forces were important in the military victory but shoulder little, if any, responsibility for the settlement) in a way that was never going to be acceptable to the vanquished.

Resentment whipped up during The Great Depression saw a second global conflagration break out in Europe in 1939. Since 1945, these still young and in some cases nascent republics, along with the few remaining kingdoms, have been trying to find ways to live in harmony.

The European Union (EU) project was always about developing common trade interests into a harmonious Euroland where somehow different tribes, histories, traditions, beliefs, languages, cultures and religions would all rally behind the flag (you know – the one with the stars on it) and common interests would outweigh mutual differences and mistrust.

Hence the Euro – a project that really began with the Trojan horse of the ECU (a notional barmy currency unit that was replaced by a real barmy one). Britain had been in the ECU until Britain and Germany’s respective finance ministers had a playground spat about who could have whom in a fight (does everyone remember Norman/Norma Lamont) and soon Britain was excluded in a kind of a:

“you’re fired”

“you can’t fire me, I quit!”

“you can’t quit, you’re fired”

Etc., etc., etc., etc.

The pure fantasy rules that made it too hard for Britain to achieve ECU criteria without having interest rates of 20% obviously had to be ignored to allow the likes of Greece, Spain, Ireland, Italy, Portugal, Belgium, Netherlands, France or even Germany to qualify for this barmy club – shadows of the famous comments by Marx [admittedly it was Groucho not Karl] about not wanting to be a member of any club that would actually “have me”.

The bigger the disparity between economic reality in a country and the nonsensical Euro qualifying rules, the bigger the whoppers that had to be told to be allowed in. Greece’s legendarily dysfunctional economy therefore had to lie the most – a line drawn in the sand today by the French President Nicholas Clouseau, who now thinks that believing those lies, kindly sponsored at the time by Goldman Sachs, was a mistake. Presumably everyone else’s creative accounting of the time is acceptable to ‘le petit President’ who shares at least a couple of echoes of the Napoleonic tradition; he is very short in stature and is the subject of rumours that he also is far too busy with European crises to father his wife’s children.

Anyway, a little over ten years ago, the Euro came into being – it couldn’t be called ECU because in German ‘Ein ECU’ sounds very similar to saying ‘a cow’… rather apt really if you think about it.

It allowed the wealthy core nations to lend ridiculous amounts to the weaker developing nations for those aspiring, weaker nations to spend on branded luxury goods manufactured by the wealthy nations – a vendor finance virtuous circle that made everyone feel good … until it became starkly apparent that the GIPSI (Greece, Italy, Portugal, Spain, Ireland) nations could not actually afford to repay what they had borrowed.

This had never been envisaged. However, optimism (a.k.a. sticking your head in the sand) prevailed. It was decided that any Greek default would be of a manageable size. If the Irish, Portuguese and Spanish also had problems then this could perhaps be contained by raising a trillion Euros. However, if Italy, Belgium, Austria and Netherlands were exposed to the contagion then it would mean that the EU and Switzerland would need to raise an unprecedented amount – McKinsey estimate EUR4-5 trillion of capital – not mere liquidity but permanent capital.

To be continued…

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