Gerald Warner: Greek drama moves towards tragic climax – and it’s curtains for all

Published on Sunday 12 February 2012 00:00

BEWARE the Greeks bearing gilts. The gallows humour of the trading floor is becoming more brittle as the demise of the euro enters the endgame of a protracted Russian – or rather Greek – deathbed scene.

Last week was the point at which credibility finally departed from the claim that rumours of the death of the European monetary union were greatly exaggerated.

It was a good week for Athens newsboys: they were never short of headlines to sell, albeit carrying accumulating tidings of fresh disaster. On the economic front, it transpired that Greece’s manufacturing output had contracted by 15.5 per cent and unemployment had reached 20.9 per cent, rising to 48 per cent for youth unemployment. Tax receipts (admittedly not a significant feature in the Greek financial canon) had contrived to tumble by 7 per cent year-on-year.

On the 29 pages of hair-shirt proposals submitted by the government, Eurozone finance ministers had scribbled a curt “Must try harder”. The deputy foreign minister and three colleagues resigned from the government in protest at the austerity plan, the right-of-centre Laos party withdrew its support from the coalition and there was a 48-hour general strike. Although Greece is now only borrowing to service its debt, the budget deficit is almost 9 per cent of GDP; the debt burden itself is above 140 per cent of GDP.

To show willing, the Athens government offered to cut 15,000 more public-sector jobs, lower the minimum wage to ¤600 a month, “liberalise” labour laws (which would incidentally provide a fitting tribute to Charles Dickens’ bicentenary) and generally plunge the land of Socrates into Stygian gloom. Of course, it is all game-playing; just as Greece’s original pretended conformity to the Eurozone admission criteria was a piece of hokum winked at by complicit EU officials; just as its previous pledges of pip-squeaking austerity measures were so much ballyhoo. In mutual gamesmanship the Eurozone finance ministers homed in on a ¤300m budget gap caused by Greece’s refusal to implement further pension cuts.

The euro-hoods are playing hardball in a desperate attempt to keep Angela Merkel’s fiscally puritanical electoral base on side; but they have turned the ratchet on Greece so severely that a new breed of conspiracy theorists is beginning to wonder if they have reversed their previous policy and now want to drive the children of Demosthenes out of the Eurozone. It seems too much to believe their imperialist obsession with retaining every colony could finally have succumbed to reality. Two years ago the obvious solution was to let Greece leave the currency cartel in as orderly a fashion as possible. Two years on, the infatuated bailout regime has made that inevitable outcome much more hazardous – for the other 16 Eurozone members and the wider world.

Germany has direct exposure to Greek debt amounting to ¤84bn; France is exposed to ¤82bn; and that sickly child of monetary union, Italy, has a potentially lethal ¤42bn stake. The ECB holds ¤40bn in Greek bonds. Against that tally, Britain’s ¤10bn direct exposure looks relatively unthreatening; but UK vulnerability to the debts of European banks darkens the outlook considerably. On the other hand, the Greek government claims its citizens have moved ¤16bn to foreign banks in the past two years, about a third of it to Britain. Since no entity is worse informed about its citizens’ private financial transactions than the Greek government, we may confidently multiply that figure several times over.

Although the Greek government is presenting the Eurozone with its usual false prospectus, many people in Greece are hurting. The political backlash is gathering momentum: of the governing coalition parties, New Democracy is down at 18 per cent in the polls, Pasok at 8 per cent. The “hard” left now has 35 per cent support. On 20 March, the next ¤14.4bn tranche of debt repayments falls due; in April a general election will be held. The likely outcome is that a bunch of “hard-left” crazies who think Trotsky was a tool of Yankee capitalism will storm into power and tear up any agreement made with the Eurozone. That is when the dominoes will begin to slither.

A deficit-cutting programme is one thing; abolishing commerce (60,000 Greek small businesses have gone bankrupt since last summer), culling employment, stifling growth and taking over the government by an externally mandated putsch is not capitalism as sane people understand it. The imperial ambition of the European Union, its fatuous currency project and dirigiste distortion of capitalism have fouled its own nest. Alas for Hellas – and the rest of us.

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radge

Sunday, February 12, 2012 at 03:07 PM

Nothing wrong with my blood pressure Mr Toad. How very odd that you should think Gerald Warner replies to posters in disguise. I've often wondered over the years why you spend so much of your time on a SoS journalist who you vehemently disagree with. You must be a very angry man. I suspect it's you who fumes away at the keyboard with you metaphorical green ink. On the other hand I've never thought of you actually being Gordon Brown or any of those NeuLabour goons, merely one of their Lackeys. Geddit?!

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samcoldstream

Sunday, February 12, 2012 at 02:49 PM

Now, now, G.W., you must watch your Eurosceptic blood pressure!

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Marshal Soult

Sunday, February 12, 2012 at 02:26 PM

"liberalise” labour laws (which would incidentally provide a fitting tribute to Charles Dickens’ bicentenary." We've done Charlie proud in this sceptred isle as well - by the time Lord Snooty and the gang are finished selling the NHS to their pals and driving us deep into double recession we'll have something resembling a Tigre economy .... all spelling correct. Anyone fancy halfing in for a nice wee beachside taverna somewhere in the Cyclades? At least the weather's nice.

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radge

Sunday, February 12, 2012 at 02:19 PM

#3 Lackey, your unfaltering dedication to the EU is a wonder to behold. For hard of thinking numb nuts like you let me explain. There will be no winners in this farce, there will be no need to pray for a default. Greece can't continue down the road of penury for the sake of saving German and French banks and the wider euro existence to maintain the German economy at the expense of those nation's economies unaligned with it. Now you can continue to say your (no doubt secular) prayers to the continuing status quo and near 50% youth unemployment in Spain and Greece and worsening economomic conditions for most to keep alive the flame of the glorious socialist EU project if you like. More sober minds will be hoping for an unwinding that causes the least disruption for the smallest time. That's the best that can be hoped for. No question marks this week?

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samcoldstream

Sunday, February 12, 2012 at 12:55 PM

All good Tory Eurosceptics everywhere will be on their knees praying like Holy Willie for a Greek default.

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radge

Sunday, February 12, 2012 at 12:41 PM

#1 Most likely, and Cast Iron Dave will continue with the line that the EZ must 'get its act together' and dish out more of our money (probably through the back door) in an attempt to save it. Is he still telling his euro sceptics to stop 'banging on about Europe'?

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unimpressedone

Sunday, February 12, 2012 at 09:02 AM

Despite all the claims of tragedy and brinkmanship, the EUSSR will fudge the Greek bailout and will teeter on. The euro will continue to exert hardship on the EZ. members. This is a train crash in ultra-slow motion, but a train crrash nvertheless.

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