Last week, EUS Euro shifted slightly its course, three degrees to North by Northwest, right in course of collision with the icebergs.
A development that has gone almost lost in the noise of the week will exert a powerful drag on investor sentiment.
The Greek referendum was arguably one of the best tactical movements of the crisis, and possibly will be remembered as the last serious attempt to save Greece. Had this initiative counted with some support from Europe, it would have called the bluff of Greek opposition, forcing them to chose: either to drop their populist nihilism and support the agreement or assume power, together with the consequences of their irresponsible behaviour. Should the referendum have been held, both parties would have had to pinch together and a real unity would have been achieved. I believe the risk to the system would have been much lower. For Greece, it was also a clever way to try and force some extra generosity on the part of Europeans, if only to sweeten the deal a bit to the suffering populace.
It was not to be. As we all know, the illustration above interprets freely what really happened.
Creditor countries banded together and came out swinging in full force to quash the referendum and, in the process, they showed their willingness to break every rule of the game to have their way.
Let’s be clear about it: for a country that seems to have written law as a form of religion, the history of Germany shows an unbelievable disrespect for the law, which they have broken at every occasion they felt it to hinder their goals. Without the need to reach to older and bleaker times, of all known, only since the inception of the Euro they promoted the Stability and Growth Pact only to break it in agreement with France, imposed their view on European enlargement against the rules set for EU accession, etc.
The last breach is a momentous one. Members of the government and Parliaments of Germany, France, Netherlands (and probably many more I didn’t hear of) together with the ineffable J.C. Juncker, asserted that Greece would be expelled from the Euro and the EU should there be a referendum. Mr. Juncker went as far as to say in an interview that they had plans for the expulsion at the ready (it figures that medieval kings liked to have a buffoon)
Well, it’s been repeated until nausea that the pillars on which the Euro was built were the Maastricht criteria for economic and fiscal convergence, free flow of capital and the no bail-out clause. In fact, these pillars rested on an even more important foundation: the absence of a legal way for a country to leave the Euro (much less the EU), either by its will or by that of its partners. This was intended as an iron-clad assurance for investors that the Euro would not be a temporary arrangement of shifting membership, but rather an irreversible development.
If anyone took this guarantee at face value, they deserved to be fooled. This is the way legal guarantees go in international law. But in any case, the fact that the very institutions supposed to be protecting the integrity of the treaties should threaten to demolish the whole Euro building the moment a plan they don’t like is put forward, will be less than assuring to prospective investors in, say, Italian debt.
And we are talking about Greece here. If the prospect of a few hundred billions added to Greece’s bill created such a panicky reaction in the countries footing it, what can be expected when the bill from Silvio’s table arrives, even if the crisis has forced him to delay the launch party for his last melodic songs disc? Which is easier: to rescue Italy or to kick it out of the EU?
Meanwhile, creditors and their allies are getting dragged deeper into the woods of national politics, each day more and more involved in economic policy decisions, which, without a mandate, will naturally grant them the hate of the populations put on protectorate. Already, the comminatory letter of an Economic and Financial Affairs Commissioner to Italy, demanding peremptorily explanations about the way structural adjustments will be implemented, is incredibly arrogant, coming from somebody with absolutely no authority for this initiative and directed to a country which is not on receivership.
The reason why France should join this movement is beyond my grasp, especially when it may well find itself at the receiving end soon.
Everybody keeps on guessing that, same as in old westerns, the Euro will be saved in the last minute by the cavalry, considering the great stakes at risk, etc. If one looks intently at the horizon, the outline of the cavalry is already discernible: they have joined the Indians and come charging full speed, against their comrades…