There is a certain sort of person who believes that if something is desirable, it must be achieved. They say the magic words ‘it must be achieved’ and sit back waiting for it to happen. Tony Blair was a little like this: he would say something like ‘we shall eliminate child poverty’, hand over the big picture to technocrats who, too scared of telling him it can’t realistically be done, chug along, nudging themselves in the right sort of direction until he has forgotten about it. But at least Blair never pursued something he knew to be impossible – you see, he was a pragmatist and never really believed in anything.
If you couple this dirigiste dreaming with religious fanaticism, however, you have problems. And religious fanaticism is what the euro is all about. Never mind that anyone who understood these things told them it wouldn’t work, a single currency was desirable, we would have it, it was part of The Project. Even now, when it is crashing round their ears, they can’t listen. Tony Blair would have dropped it a while back with a deft speech on how it was a jolly good idea, but one for the future. The people who run Europe can’t seem to do that.
To believe that Greece could have the same currency as Germany you have to be a fanatic, an idiot, or someone who has never left his own small town. The Germans strive to get ahead, they invest for the future, sacrificing present gratification, their system is, largely, incorrupt. It is quite the opposite state of affairs in Greece. This is obvious, but I am saying it now because it is particularly relevant.
Suppose a household has some sudden one-off expenditure but is fundamentally sound. It borrows, against its other wealth, say the unmortgaged portion of the house, and pays those borrowings off in time. That is solving a liquidity problem and borrowing is a very good thing for it.
Greece does not have a liquidity problem, it has a solvency problem. It is as if the members of the household had become unemployable: increasing the debts isn’t the answer. Greece needs to get working: it needs to cut expenditure, let the private sector flourish, collect its taxes.
And yet our euro-masters persist in presenting debt as the solution, because they can’t bring themselves to believe that Greece is different to Germany – they’re both Europeans, aren’t they? So Greece will get worse every year: as it lags further and further behind the others, bogged down by its sclerotic inefficiency. Already it has been unable to meet the targets of the last bailout.
Mr Barroso has stated that the solution to Europe’s problems is further integration. The Commission has proposed eurobonds as a solution, even though a decision of the German Constitutional Court only last week has said they would be unconstitutional.
French banks, immersed in the crisis of 2008, were told they had to hold more liquidity. Very good. What constituted liquidity for these muttonheads? Why, euro sovereign bonds. They chose Greek ones because Greek ones paid the best (they didn’t ask why – surely the bonds of all European countries are the same, aren’t they? I mean, they’re all European). When Greece started to get into trouble the French and European regulators told them to write down 20%. It should have been at least 45% then, and it should be at least 80% now. So this morning the French banks are downgraded.
Everybody knows Greece is going to default except the people who matter. These people need to be taken outside and repeatedly slapped until they come to terms with reality. Now they have left it so late it is not just Greece.
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