The moralisers and instant historians have been out in force over the weekend to comment on the unfolding Greek economic crisis. The IMF, the EU and of course the Greek government have all come in for stick. In reality there is blame a-plenty to go round on all sides. I can’t help singling out this comment from an unnamed EU official, quoted in The Times today. “The deal on the table is so technical to explain that a normal citizen, not people like us, would find it hard to form a view”. Nothing could better sum up the arrogance of the EU elite and its chronic desire to deny EU citizens a vote on the development of their grand projet. “Just leave it to us and we will fix it all behind closed doors” – it is has been the leitmotiv of the EU’s stance throughout, one that has done nothing but lead it deeper and deeper into the mire.
No sane person can deny that it was the reckless decision to expand the Eurozone for political purposes before either the necessary institutions or pubic support were in place that first sowed the seeds of the current mess. That in turn led to the need to keep deferring a solution to the Greek problem in the hope that it could be better sorted out later, despite everyone knowing at the time of the original bailout that the primary objective was not to help Greece but to keep the Eurozone intact. Successive Greek governments have of course hardly covered themselves in glory since, even if the Syriza regime has taken the incompetence and petulance to a higher level with its bizarre game-playing.
Needless to say, this being the EU, the game is far from over. It is too early still to say that Greece will leave the euro, given the multiple permutations that lie ahead, or that Europe will be rid of its troublesome southern member. Whatever happens, in the end there will have to be a write-off of Greece’s debts and money to help it ease its way into whatever messy future lies ahead for the country. I have thought for a while that the best solution would be an agreed, negotiated departure from the euro for Greece, but it is hard to see how that can easily occur as long as the current protagonists remain in place – not least because the IMF by its own behaviour has forfeited any chance of playing the role of honest broker in the game.
Is this the start of a wider financial market crisis? I still rather doubt it. The financial markets will probably weather the storm, although if we do get turbulence, it may have the unfortuante effect of prompting the Federal Reserve to defer its September interest rate rise, just as hopes of normalisation were starting to rise. We had better hope there isn’t more turbulence, for as the Bank for International Settlements pointed out again over the weekend in its annual report, central banks have shot most of their weaponry with their attempts to stave off the after-effects of the 2008 crisis. That is hardly news however. My latest FT column ponders the difficulty of foreseeing how bull markets end.