What are we to make of the tragedy which is unfolding across the beautiful waters of the Aegean? Here in high summer when they should be enjoying the fruits of their glorious holiday season they are locked in a battle for their very survival with the giants of north Europe and their banking systems.
Let’s be clear about one thing: Greece has already paid a terrible price for its profligacy and easy living on the back of a strong currency of which it was never qualified to be part. Their economy has had been bludgeoned by the money men into shrinking by a horrendous 25% and their youth unemployment exceeds 60%.
Right at the beginning, the books appealing for entry into the euro were cooked, helped in no small part by that ‘Great Vampire Squid’, Goldman Sachs. But while the Germans and the rest knew very well how the Greeks went about their business and that they were not a suitable candidate, political Europe had to take precedence over economic Europe and they let them in.
With other weaker economies such those of the Spanish, Portuguese, Irish and Italians allowed to join the party, the Germans ended up with a currency much less strong than their old Deutschmark would have been and that made it much easier for them to flog their BMWs and the like. Borrowing rates for these weaker economies became much lower than ever they would have been had they been using their own currencies so, of course, they were happy to buy north Europe’s products as well as treat themselves to a much higher standard of living than their economic performances warranted.
All was well throughout the goods times that preceded the financial crash of 2008. That ill-conceived monetary union – which lacked the also essential fiscal union – of the euro could bumble along so long as there were no headwinds. But, boy, it wasn’t so much headwinds that arrived but rather a hurricane. The Credit Crunch brought the Western world’s economies to the brink of meltdown.
Today the weakest of the dominoes stands in imminent danger of falling, with the risk that others will follow. And the country that benefited most during the good times, Germany, insists on playing hardball. It needs to show a bit of humility – as well as compassion – and realise that it must take its share of the blame for the plight that Greece finds itself in today.
Despite its own banks, along with French and others, being exposed to a possible Greek default of alarming proportions, it knows that a Greek economy that cannot grow because of acute austerity will never ever be able to pay off its debts. It needs relief and restructuring. Long before this present crisis broke they acknowledged this fact. But what now are the Troika’s proposals? Even deeper austerity. Can we be surprised that a government that was elected on a mandate to end austerity has thrown up its hands and said enough?
If Greece on Sunday, in its touching desire to remain at the heart of the European family – but also out of sheer terror at the thought of the consequences of being cast adrift – votes to accept the Troika’s diktats, it faces never-ending recession. If the Greek people vote no on Sunday, they will stay in the EU and possibly even the single currency, but mayhem could follow with a complete national shutdown. Could Brussels stand by and see this happen?
Actually the majority of economists believe that this seemingly bonkers course would serve it best (Argentina went down a similar road). Economists say there would be six months of hell, or possibly longer, but then a future would open up for Greece. With holiday costs cut to half their present level, we would cast aside that old warning to ‘beware of Greeks bearing gifts’. Greece would become the continent’s playground as never before. Poor, suffering Hellas, the first of all Europe’s civilisations, would start to smile again.
The long awaited rescue of Europe, along with its badly put together single currency, gets under way now that the German chancellor no longer has the distraction of an election to worry about.
Angela Merkel, the pastor’s daughter from the former Communist east, will get down to a lot of serious business. Her mission, no less, is to save the continent from imploding. In doing this she will seek help from her new best friend, David Cameron. Many of us here at home have gone off him, particularly the women, but he makes a good impression abroad. Even neo socialist Barack Obama gets on well with the ‘posh boy’ from Chipping Norton. He is mannerly, brimming with self-confidence and knows how to talk the talk. What else would one expect from an Old Etonian, that breed of Brits who once believed that they were born to rule. Incredibly, it seems that even in 21st century Britain they still have grounds to believe this.
Angela Merkel aspires to a business-minded Europe: caring but frugal; hard working, but at ease with itself. The last thing she wants is a Europe in tatters. Whether or not it was wise to create the euro in the form they did, we have to accept it is a fact of life. It certainly has benefitted German exporters, whose massive sales to the rest of Europe is part of the reason they are in such debt. If Germany were to go back to the deutschmark its exports would be so incredibly expensive that their export dependent economy would be in danger of crashing. So save the euro they must. But they must also save it for another reason: if it collapses, or even fragments, the whole European Project will as likely as not come off the rails and Germany will take the blame. For the third time in a century, people will say Germany has left Europe in ruins.
The simple truth is that the political and financial establishment have too much at stake to allow their dream project to collapse. The consequences would be seismic and coming at this time, when recovery seems underway, it would be unthinkable. Only Germany has the financial clout to save the Euro.
But Fritz does not want to open up his coffers – especially to what he perceives as lazy and corrupt southerners – but neither does he want to become Europe’s baddy all over again. He will drive a hard bargain which will involve some pretty nasty medicine when he takes responsibility for all that toxic debt and he will seek a powerful, respectable ally to share the howls of protest with. France is no longer willing to be that ally. She seems not to understand the scale of the problem. Perhaps that’s because she is herself part of the problem. That leaves only one ally available to Germany and it is not even in the euro. That ally is us.
Germany views Britain as a business-minded country, like herself, and it makes sense, in her view, to get Britain onside in her chancellor’s drive for reform because Cameron wants reform too. But his reform is not just in monetary matters. As it happens, Germany, as well as others, doesn’t much like a lot of what is coming out of Brussels so he could find himself pushing at an open door.
I am convinced Germany will do all that it can, within reason, to give Cameron what he needs from Europe rather than lose a necessary and valued ally. Merkel is said to be ready to discuss anything, so long as Cameron does not ask her to chose between Britain and Europe. She knows that if he cannot repatriate powers then Britain is a goner from the EU. That would be a body blow to the whole European Project and it would set a most unwelcome precedent. It would send shock waves throughout Europe and indeed the world.
Even before her re-election, when she had to be careful, she began her courtship of David Cameron. That weekend soiree to her country home in which Samantha and the kids were invited, was in my view, extraordinary. It spoke volumes. She has never asked any other political leader to visit her at home, never mind bringing the whole family. So even if the women on Dave’s home patch have abandoned him in droves, Angela most certainly has not. She thinks he’s lovely – ‘My naughty nephew’, she calls him, and can’t wait to team up with him in sorting out Europe. In all the photo shoots of recent times she makes a point of standing next to him, and the body language is very telling.
All in all, it causes me to think that we are in the early stages of seeing a new, powerful axis being formed… a resurgent Britain alongside its fellow Teutonic power Germany. That axis will be an outward-looking one keen to harness the enormous potential of half a billion Europeans, but moving to direct their energies to the world beyond Europe. Britain, for its part, is already travelling very successfully down that road and with its vast connections worldwide, its goodwill from its former empire and its universal language, it is peculiarly well placed to profit from it all.
Uncle Sam worries about the threat posed by the emergent Eastern economies – we all do – but he does not worry about Europe. Rather he wants to team up with it in a North Atlantic trade partnership. Such a partnership is a very real prospect; it will hugely benefit all of us and give the whole world a tremendous fillip.
I do not subscribe to the view that this century will necessarily be the Asian century. Yes, it will do well, but all the countries concerned have tremendous structural and political problems which the West overcame long ago. Endemic corruption and a lack of trustworthy institutions will also act as a break. Human Rights issues will plague them because justice, as we know it, does not exist. They have got a lot of work to do and are not in a position to give their undivided attention to coining a buck, as the West is. For a start, they are going to have to take better care of their people and that means creating something of a welfare state – and we know how ruinously expensive that will be.
As for Cameron, he has a great opportunity, but if he does not put forward some female friendly policies and quickly, he won’t be there after the election to take advantage.