Greece is still the word ahead of today's eurosummit
Peter Hoskin 9:14am
How about this for a claim by Nicolas Sarkozy, made in a TV appearance yesterday?
‘Europe is no longer at the edge of the cliff.’ It's quite some statement, so let's hear it again: ‘Europe is no longer at the edge of the cliff.’ Of course, Sarkozy has
reasons for saying it beyond mere pre-electoral braggadocio: the rates paid on Italian and Spanish 10-year bonds have generally been falling since the the beginning of the year; the euro has been
making some tentative progress against other currencies; and so on. But it still constrasts heavily with much else that is being said around the eurozone. Only last week, Angela Merkel was talking
of the overall failure to ‘stabilise the situation’ in Greece. And only yesterday,
Greece's Prime Minister issued a grim warning about ‘the spectre of
bankruptcy’.
So who's got it right, the doomsters or the boomsters? Much depends on the answers to a couple of questions circling about Greece. First, will Athens be able to renegotiate its debts with the country's creditors? Second, will it commit to tighter fiscal restraint, and give reassurances that it will actually be achieved? Such are the conditions attached to the €130 billion bailout package being dangled before Greece, designed to prop up the country for a little while longer yet.
It's the first of these questions that has a more certain answer at the moment. After doubts last week, it does look as though Greece is now on the verge of succesfully renegotiating €200 billion of its debt, cutting it down to at least half of that size (and, incidentally, probably confirming that it's in ‘restricted default’ in the process). As for the second question, that's where the political battle is raging as European leaders meet for yet another round of talks today. Greece's coalition has said that it's up for more austerity, but the other European countries — particularly Germany — want to see less saying and more doing. That's why Berlin has proposed imposing an external ‘budget overseer’ on Athens, with the power to veto Greek tax and spending decisions; a plan that has been met with angry resistance by Greece's finance minister. And it's why, in turn, Germany's finance minister is warning this morning that Greece may not get any extra funds after all. Stock markets appear to be quivering as the spat goes on.
All of which is to say, Sarkozy is sounding unduly optimistic. Unless, that is, he had something else in mind, something devious: that the eurozone can pull back from the cliff even if Greece tumbles over the edge. It was, after all, striking that Merkel referred to Greece as a ‘special case’ in her interview last week. So perhaps, just perhaps, Merkozy's attention has now shifted to protecting Spain and Italy, and they see Greece's restricted default as a way of letting its investors, and global markets, down slowly and gently. It sounds wacky, I know. But as one or two financial types have said to me when laying out this theory: don't underestimate the eurozone's capacity for wackiness.
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Andy Leeds
January 30th, 2012 9:33am Report this commentThe Greek economy is contracting so much there might be very little left at the end of all this austerity. What actually needs to happen is for a way to be found for Greece to leave the Euro and reestablish the Drachma at a rate probably 60+% lower. That would enable Greece to begin to rebuild her economy so long as the public sector was reformed. That last bit is where the problem lies. Having met some Greek politicians there is little hope of it I fear.
Vulture
January 30th, 2012 9:36am Report this comment'Europe is no longer on the edge of a cliff'.
Mais Oui, Monsieur P'tit: that's because its already tumbled over. It's just that its yet to hit the bottom - and its a very high cliff.
oldtimer
January 30th, 2012 10:01am Report this commentIn effect the ECB has set up a QE programme,reportedly lending to EZ banks at 1% so that they can on lend to Italy, Spain et al at c6-7%. In short, they have put on another boot to kick the can down the road for a while longer. The problem is not solved, merely deferred.
Framer
January 30th, 2012 10:47am Report this commentIf you were a Greek and had just had your debts virtually cancelled alongside the offer of a further massive loan would you think more or indeed any cuts were wise.
The EU is the gift that keeps on giving once we have a riot or two, and can continue to please BBC journalists with stories of rampant malnutrition.
Rhoda Klapp
January 30th, 2012 10:58am Report this commentEurope ran over the cliff months ago. But as long as it keeps running, and does not look down, it won't fall, in the best Wile E Coyote tradition.
Ian Walker
January 30th, 2012 11:08am Report this commentThe Greek economy is contracting so fast that their only options are to leave the Euro or to default. Everything else is deckchair-shuffling presumably to get Sarko through his election.
Peter From Maidstone
January 30th, 2012 11:13am Report this commentWhy nothing on the site about the news that Cameron is about to capitulate over the new treaty?
AlexW
January 30th, 2012 11:23am Report this commentOoops look at Portugal. Tin helmets all round, ready the printing presses. We must not lend a penny more to these fools.
Maggie
January 30th, 2012 11:30am Report this commentLast week a Greek politician was ranting about foreigners coming in to tell Greeks how to spend their money. Someone should tell him that Greeks haven't got any money. It ALL belongs to foreigners.
Mudplugger
January 30th, 2012 11:31am Report this commentThe sooner the Merkozy double-act stops applying transparent sticking-plaster to the problem, the sooner everything can resettle and we can get on with rebuilding.
It's fooling no-one.
Greece is terminally insolvent, so are Ireland, Portugal and more - it's not about if they default (they've already defaulted - what else is a 'haircut' ?).
Stop trying to push back the tide like a Cnut (or some other spelling) - get real. Only once reality is accepted can the recovery begin.
In2minds
January 30th, 2012 12:13pm Report this comment@PfM - I think you know the answer to that.
Ghengis
January 30th, 2012 12:18pm Report this commentDo I detect an understanding of the basic fact that, you cannot borrow your way out of debt?
Hightrees
January 30th, 2012 12:41pm Report this comment"It's the first of these questions that has a more certain answer at the moment. After doubts last week, it does look as though Greece is now on the verge of succesfully renegotiating 200 billion of its debt"
That's optimistic
dorothy wilson
January 30th, 2012 4:00pm Report this commentHeadlines from two articles on the English language version of Der Spiegel's website:
"German Chancellor Angela Merkel had hoped that Monday's EU summit would focus exclusively on finalizing her plan to impose budget discipline across the 27-member bloc. Problems in Greece, however, may hijack her headlines."
and
"Europe's politicians are losing touch with reality. Greece is broke, and yet Brussels wants to send the country billions in new loans, to which there is growing opposition within the coalition government in Berlin. Rescue efforts are hopelessly bogged down by bickering over who will ultimately step up."
J Wright
January 30th, 2012 5:58pm Report this commentSurely Greece will be supported just sufficiently to stop it finally falling in to obvious default until Sarco learns his fate inthe French election.
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