For tomorrow, Thursday 21st July, one of Europe’s three presidents, Herman van Rompuy, has announced an emergency summit in Brussels to discuss the eurozone crisis. Angela Merkel’s initial response was to say that if there was to be no agreement (that is to say agreement to the German line) she saw little point in attending. Now she has agreed to attend but says not to expect too much.
Of course the normal procedure for a European summit is for the policy to be agreed in advance by unelected bureaucrats and for the leaders just to turn up and have lunch and say how important it has all been. Going to a summit without knowing in advance what will be said will be a new experience for most of them.
At the same time you can see Mrs Merkel’s point. There really has been a lot of hot air expended to no apparent avail.
So, what is on the table? The first idea is eurobonds. Not the things which were invented in the City in the 1960s to mop up the excess dollars in Europe stemming from the Marshall Plan during the war. No, these would be bonds issued (ie borrowings made) jointly and severally by eurozone countries. With these low risk securities they would mop up the dodgy drachma bonds and... Yes, well that’s the first problem with it. Every country would want its debts replaced by these eurobonds, it’s like having a signature on Germany’s bank account. And what about future debts? Ah, say the Germans, countries in receipt of this largesse will have to abide by fiscal rules we set (ahem! Sorry, which the EU sets). Ah, say the Greeks, there goes our independence, we would become a colony of Brussels.
The other proposal on the table is a bank tax. Unfortunately this would have to fall on all banks, even though they hadn’t invested in Greek bonds. A bit unfair. And will London, New York, Zurich and Singapore be imposing such a tax? No. It’s effect would be to make European banks less competitive.
No one can remember a summit where we got to the date and no one knew what was happening. Now Mr Barroso, another president of Europe (the third is the Prime Minister of Hungary) has warned, perhaps shrilled is a better word, that if no solution is found to the second Greek bailout there will be repercussions all over the world. There’s a couple of things to know about this statement. Firstly, the problem is no longer Greece. Greece is like worrying about your electricity bill when they are repossessing the house.
The second thing to know is that it is a lie. The markets are already expecting a Greek default. It is ‘priced in’ as they say, and outside Greece and a couple of banks there would be no surprise, no crisis. The Brussels elite (Barroso is the head of what was originally described as the civil service but is in fact the unelected body which runs the continent) have cooked this story up. These people cannot bear the thought of the euro breaking up: their political dream will have come to nought. So they don’t mind if the ordinary people (that is to say not the elite) are impoverished in support of their political goals, just as Stalin and Mao didn’t mind if people were starved, imprisoned or murdered in order to achieve their political ideals. So Barroso will say there will be repercussions, he will say that there will be riots and widespread disease if his project doesn’t continue unchanged. But that doesn’t make it true. It’s a lie.
In the meantime Italy and Spain sit there at the mercy of the markets. In Italy at least, everyone goes on holiday for the month of August. So no assault could be made on the currency then, obviously.
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