Home | Clash of economic interests

LIKELY SCENARIO: Greek crisis — euro crisis — German political crisis — collapse of the EU

LIKELY SCENARIO: Greek crisis — euro crisis — German political crisis — collapse of the EU

Today few people doubt that the Greek crisis will turn into the euro crisis. The wish to write off Greek debts in order to avoid the future increase of debts and depreciation of loans seems to gain popularity in business and political circles. Yet the resistance of German voters, discontent with the realization of host plans will keep building up with each passing day, which means the only thing — crisis of euro may easily transform into a pan-European political crisis, which will question the very existence of the EU.

The EU situation came to a point when it has to be under constant 24/7 control without paying attention to weekends and holidays. The Brussels sitting the European Council, consisting of the governments of 27 EU countries started last Sunday, on 23 Oct. This pace surprised everyone, as long as the essential decision-making was scheduled for Wednesday, 26 Oct. Yet, the acting Belgian Prime Minister Yves Leterme claimed: "It’s important that by the Monday market opening the sufficient progress of maintaining trust for euro is achieved".

The subject of a sudden Sunday sitting was expectedly topical — dealing with the debt crisis, maintaining the trust to euro and other procedures, intended to save the EU states. Despite the semi-official status of the sitting, quite curious statements, characteristic of both the most apparent trends and the general state of minds, were voiced there.

First and foremost, we have to mark out the validity of our earlier assumptions that the European Union will save Europe regardless of outcome of Greek economy-stabilization efforts. On 21 Oct the EU Ministers of Finances agreed on allotting €8 billion financial aid to Greece, vitally important for Athens to complete the essential financial operations.

In order to get this tranche Greece had to tighten its belly up once again. New stage of the parliament-approved anti-crisis plan stipulates an additional real estate tax, privatization pace acceleration and switching 10 thousand state employees to the part-time pay. We may claim with a certain confidence that the limit for shrinking the Greek domestic spending has almost been reached. On the eve of parliamentary vote on the anti-crisis plan, a general two-day-long strike took place in Greece, paralyzing the entire country. State employees and teachers, taxi and public transportation drivers, labor union members, air traffic controllers and even prison guards participated in it. Normal economic recovery will hardly be able if the strikes remain that regular and large-scaled. In future (and a quite near at that) an unsteady balance mark is to be found — the one separating the minimum level of Greek national welfare (at which they agree to keep restoring the economy with their own labor), financial resources of the EU institutions and the ambitions of the Greek leadership, which is unwilling to silently fulfill everything that the EU financiers recommend.

So the Greek Prime Minister George Papandreou has started his speech from saying that Greece is not the main culprit and that the reasons that had driven Greek economy to a deep coma are global. "Everyone is aware that this is not a Greek crisis but a European one. And it is past time we, Europeans, have taken the effective and efficient actions" — Papandreou said. Commenting on the Greek situation Prime Minister claimed that "Greece has proven that it will do anything necessary in order to make its economy more viable and fair. We’re proud nation and we demand to respect what we do".

It is unclear what kind of laurels does the Greek Prime Minister expect from his European partners. After all, the EU countries have already credited Greece with approximately €110 billion and this is not even the final sum. Rare nation in the EU history has ever been honored by the same marks of respect and care.

Yet, if we discuss the balance of achievements and respect that picture is quite gloomy. Despite all the new budget-optimization tricks Greece, remains on the verge of financial collapse. According to the EU financial experts, by the end of this year its national debt is to reach 168% of GDP. At that, €160 billion more are planned to be transfused to Greece (apart from the already sent €110 billion). Mind that the European governments backed by the IMF are ready reportedly ready to allot only 109 billion, while the remaining 51 billion are to be gathered through restricting the current Greek debt to commercial banks.

Given that background, the number of skeptics is increasing — they believe that even the hundreds billion euros are spent efficiently and Greek economy is stabilized it’s impossible to predict how much time it takes for Greece to pay the new 15- and 30-year-long bonds debts off. They believe the "surgical" interference seems to be much more reasonable and that a part of Greek debts — probability of repairing which is frankly very low — are to be simply written off.

According to the resumes of a summer euro-zone summit, after the lengthy negotiations Greek bank-lenders agreed to the losses in the amount of 21% from the current value of bonds. Belgian Minister of Finance Didier Reynders stated that now the forecast of Greek lenders’ losses "is to be doubled at the very least". This opinion may hardly be dubbed too pessimistic. According to the analytical estimates, as far back as in the end of October, lenders were unable to lose less than 39% of this bonds net worth.

As long as Greece will receive the substantial part of the means from European banks, which already suffer losses because of the lost loan, the European Union countries are going to allot approximately €108 billion to recapitalize the lossy banks, suffering from helping Greece out themselves. As the IMF spokesmen say, even this amount of money may happen to be not enough.

Also in order not to frighten the population, investors and not hinder the operation of banking industry, the EU offers "to ban the credit ratings temporarily or permanently, if the countries do their best to bring the financial aid programs to life" — Michel Barnier, chief EU spokesman stated.

Other plans exist too. The future euro salvation strategy includes EFSF reinforcement. It is to prevent the spreading of the debt crisis onto other regions. European Parliament chair Jerzy Buzek commented that the measures Merkel and Sarkozy put forth are likely to be brought to life, concentrating the financial and economic policy of the EU within a single center.

"Currency union is not enough. Once all this was dubbed the economic and currency union. This was the beginning of our cooperation in the 90s. Then we’ve gradually forgotten the economic component, throwing it off. We’ve dedicated all of our energy to the currency union" — head of the European Parliament emphasized. Buzek pointed out that European Parliament adheres to the idea of keeping the unity of 27 states this way and considers inappropriate separating 17 states from the rest. Thus, we’re talking about a full-fledged Euro-Parliament-controlled body guiding the entire EU policy, which national governments pass their authorities too.

Simultaneously with that European Parliament chair admitted "currently the positive atmosphere that would’ve allowed carrying a related referendum in the EU member-states is absent. This, however, means that we have to ponder and debate over this, listening to what our citizens tell us".

"Citizens" that Buzek has delicately mentioned are the German citizens first of all. German inclination towards general currency and the EU as an alliance, where some countries constantly pay for the rest is gradually receding.

According to the September polls, slightly more than a half of Germans want to cancel euro and return to the national currency. At that, a year ago the majority has stood up for euro. According to the poll, the European debt crisis and the absence of palpable signs of overcoming it influenced this standpoint change the most. The polls also give the evidence of the direct ties of sympathies and antipathies for the European unity and the domestic political preferences.

Adherents of the liberal Free Democratic Party revealed the greatest passion for the national Deutschemark (70%), followed by Social-Democrats (53%) and the "Lefts" (52%). Voters of the ruling Christian-Democratic Union (55%) and the Greens (61%) stood up for euro. That brings us to a conclusion again — Angela Merkel’s policy of saving the EU may come to a standstill after the next German elections.

Today few people doubt that the Greek crisis will turn into the euro crisis. The wish to write off Greek debts in order to avoid the future increase of debts and depreciation of loans seems to gain popularity in business and political circles.

Yet the resistance of German voters, discontent with the realization of host plans will keep building up with each passing day, which means the only thing — crisis of euro may easily transform into a pan-European political crisis, which will question the very existence of the EU.

By Alexandre Vishnevsky

 

 

 

RSS Twitter Facebook
 
 

Similar entries

  • According to Soros, Germany is to save Greece on the account of its own economy and the wealth of its citizens, which is fraught with tremendous political and economic risks for Germany. That’s an equivocal situation indeed that makes us thinking that European crisis benefits the USA. Mind that if the ratings of European banks are collapsed and the major European states are bled by the donor transfusion of their money in favor of weaker countries, then the investors’ preferences (along with their money) will flow to better place, i. e. the USA.

  • Globalization’s playing an evil joke on the global economics. Troublesome region can hardly be "contained" and put into a financial "quarantine", isolating it from the more or less healthy EU body until the recovery. Such medical analogies are rather popular these days — the former chief economist of the IMF Kenneth Rogoff has recently stated that "euro carry crisis from one country to another like an infection". Besides there already are several patients in Europe and the doctor is in the same ward with them.

  • The U.S. and especially the EU authorities are willing save the operation ability of the current economic system and its institutions, although the stabilization efforts are often late, while their realization is often complicated by internal and external reasons. Interests of supranational alignments, national elites, major corporations, middle class and the poor clash in a Gordian knot of a conflict. There’s a great shortage of the available financial resources and, which is the most important, the time itself. Theoretically the situation still may be fixed, albeit the practical chance of achieving the desired result is dismal.

  • When all the attempts to overcome crisis fail, the witch hunt starts. The only way to give a satisfactory explanation for the obvious discrepancy of the undertaken actions and actually achieved results is to find an enemy without.

  • It will be rather difficult to forge a solid economic blockade of Iran. The geopolitical opponents of the US and Israel see little point in helping them pursue their own interest, while many American allies are scared of sanctions even more than Tehran itself.

In this section

THE BRICS NATIONS CHALLENGE THE WEST?
The fourth BRICS summit getting together Brazil, Russia, India, China and South Africa was held on March 28-29 in New Delhi. No matter it didn’t last long one can say with confidence it has resulted in substantial achievements. In any case it’s obvious the leaders of the member countries had no intention to confine themselves to purely symbolic resolutions, so the outcome of event looks quite telling.

 

AGGRAVATION GAME: WHY US WINS IN CASE IRAN BLOCKADES HORMUZ STRAIT?
The Hormuz Strait closure by Iran will mainly benefit US oil companies and defense industry. The action will spark a crisis that would make easier to find a solution to the US economic woes and even create an opportunity to curtail its huge external debt.

 

US WILL PUNISH ITS NATO ALLIES, NOT IRAN. Will the economies of Greece and Italy finally collapse without Iranian oil?
It will be rather difficult to forge a solid economic blockade of Iran. The geopolitical opponents of the US and Israel see little point in helping them pursue their own interest, while many American allies are scared of sanctions even more than Tehran itself.

 

LIKELY SCENARIO: Greek crisis — euro crisis — German political crisis — collapse of the EU
Today few people doubt that the Greek crisis will turn into the euro crisis. The wish to write off Greek debts in order to avoid the future increase of debts and depreciation of loans seems to gain popularity in business and political circles. Yet the resistance of German voters, discontent with the realization of host plans will keep building up with each passing day, which means the only thing — crisis of euro may easily transform into a pan-European political crisis, which will question the very existence of the EU.

 

YUAN TROUBLES AND THE CHINESE GLOBAL ECONOMIC LEADERSHIP
At first I’d like to point out the main thesis of the material: China has long ago become the first economic of the planet. While reports on the U.S. monetary policy contain the new data on its financial troubles all the more often, the PRC macro-statistic data indicates a fantastic increment of steel, cast iron and cement production.

 

THE EUROPEAN CRISIS AND THE SALVATION OF EURO. Will the USA profiteer on the financial collapse of the EU?
According to Soros, Germany is to save Greece on the account of its own economy and the wealth of its citizens, which is fraught with tremendous political and economic risks for Germany. That’s an equivocal situation indeed that makes us thinking that European crisis benefits the USA. Mind that if the ratings of European banks are collapsed and the major European states are bled by the donor transfusion of their money in favor of weaker countries, then the investors’ preferences (along with their money) will flow to better place, i. e. the USA.

 

CHINA IS TO BE BLAMED FOR THE... GLOBAL CRISIS. Says Barack Obama and the U.S. financial bodies
When all the attempts to overcome crisis fail, the witch hunt starts. The only way to give a satisfactory explanation for the obvious discrepancy of the undertaken actions and actually achieved results is to find an enemy without.

 

"OCCUPY WALL STREET" MOVEMENT: American media looks right through it
Both American government and the state financial system made plenty of common Americans suffer. Still, hotbeds of protest and mass rallies take place just like 40 years ago. They haven’t become particularly crowded as of yet and American media prefer ignoring their very existence. Meet the laws of post-modern information age: several thousand Middle-Eastern protesters make up a heroic national uprising against the tyranny, while the same sort of rally in the USA is merely a bunch of lunatics, threatening public order and national security.

 

REVENGES OF THE EUROPEAN COMMISSION. Searches at Gazprom offices is the European reaction to South Stream and poor prospects of Nabucco
The searches at German and Czech Gazprom subsidiaries that took place in the end of September are seemingly the revenge of the European Commission for South Stream and poor prospects of Nabucco. In reality the EU should have better consolidated partnership with Russia as long as our country has the largest gas deposits in the world — the cleanest kind of fuel.

 

IS EURO BECOMING "CONTAGEOUS"? Possible scenarios for the euro-crisis
Globalization’s playing an evil joke on the global economics. Troublesome region can hardly be "contained" and put into a financial "quarantine", isolating it from the more or less healthy EU body until the recovery. Such medical analogies are rather popular these days — the former chief economist of the IMF Kenneth Rogoff has recently stated that "euro carry crisis from one country to another like an infection". Besides there already are several patients in Europe and the doctor is in the same ward with them.

 

.