Not since the closing scene of The Italian Job, with Michael Caine’s bus laden with stolen gold swaying like a seesaw on the edge of a cliff, have we witnessed brinkmanship on this scale. The negotiations between Greece and its creditors have become dizzying to watch. Day by day – or, increasingly, hour by hour – Greek finance minister Yanis Varoufakis and his colleagues erratically change their tune to lead their creditors a merry dance.
On Tuesday morning the mood was foot-stamping intransigence and plug-pulling on the negotiations; by the evening that stance was rumoured to have softened to “considering requesting a six-month extension of the loan agreement [but on the basis that] it is clearly distinguished from the programme set out in the memorandum of understanding. We are not going to ask for an extension of the programme or memorandum.” In other words: “Give us access to funding as if we had agreed to continue with austerity, but let us off the hook and call it a loan, not a bail-out.”
This olive branch might be tendered today, with a view to influencing the ECB’s deliberations on whether to continue to supply Emergency Liquidity Assistance (ELA) to Greece’s endangered banks. But already politicians in Greece are preparing to round on Syriza for reneging on its pledges of inflexible resistance to the austerity programme. Those on the other side of the poker table in Brussels, especially the Germans, are equally susceptible to electoral pressure.
Nobody knows what is going to happen. There is a danger, too, that all the players in this farce could be overtaken by events, e.g. a run by depositors on Greek banks, already haemorrhaging €2bn a week, so that the situation spins out of control. The Eurozone is the sick man of Europe – not because of recent infection but because it has a congenital defect.
EMU should never have happened. You need not have a scintilla of sympathy for Syriza and the economic dyslexia its programme represents to recognise that dinosaur Greek Marxists did not cause this crisis. It was caused by European integrationist politicians fabricating a pseudo-state and pursuing this infatuation beyond the bounds not only of reality but of sanity.
After de Gaulle excluded Britain from the embryonic European Common Market, the field was clear for France and Germany to mould the new supranational entity in conformity to their national interests. A new and synthetic Euro-identity gradually emerged, confined to the élite, not dissimilar to the community of identity enjoyed by 18th-century nobles, across frontiers, prior to the French Revolution.
By 1992 the integrationist cause was poised for the Great Leap Forward embodied in the Maastricht Treaty, from which the euro currency derived in 1999. That was when the Eurocrats made their fatal mistake. There was still sufficient resistance to integration among European electorates to inhibit the imposition of further overtly integrationist political institutions. So, it was decided to use the back door of a common currency.
That is the congenital flaw in the euro: from the first, it was an expression of political will, not of economic reality. This was most extravagantly illustrated by the squeezing of Greece into the same currency as Germany, while the inclusion of Portugal, Spain, Ireland and Italy was only marginally less incongruous. Remember the wise, siren voices that exhorted Britain to join the Eurozone: Peter Mandelson, Adair Turner et al. On 15 May, 2002 Tony Blair informed Jeremy Paxman on the BBC’s Newsnight programme he would be happy to be remembered as the man who told the British people they should join the single currency and that a political rejection of the euro would be “crazy”.
The two architects of the Eurozone, Germany and France, both behave with monumental hypocrisy. Germany poses as the much-put-upon rich patron, a hard-working economic powerhouse expiating its Nazi past by distributing largesse to improvident southern Europeans. In reality the Eurozone is a dripping roast for Germany. Consultants McKinsey estimate Germany owes approximately one-third of its economic growth since 1999 to the euro. Otherwise, the D-Mark would probably have been 20 per cent stronger than the euro, strangling its surging exports.
The Eurozone periphery has provided Germany with captive markets initially fuelled by inflationary capital flows to those countries, while Berlin piled up current account surpluses. So persuasive has the propaganda of the German political élite proved that its own population has become concerned, with increasing percentages in opinion polls favouring withdrawal from the euro. That populist perception may not be entirely misguided: so serious is the Eurozone crisis becoming and so large is Germany’s exposure to bailout commitments that the “martyr” image could become a reality.
France was the primary architect of the project that is destroying Europe. It was President Mitterrand who made French support for German unification conditional on Chancellor Kohl’s agreement to monetary union. France, too, was a huge beneficiary in the pre-recession years, not far behind Germany in powering ahead economically on the back of this audacious Ponzi scheme.
Today, however, France’s imploding competitiveness has reduced it to such basket-case status that some analysts regard it as a bigger long-term threat to the Eurozone than Greece. Over the lifetime of the euro, France has declined from selling 7 per cent of the world’s exports to 3 per cent. Its trade gap has become institutionalised by its failure to capture emerging markets: Germany exports seven times as much to China as does France.
The French economy is crippled by labour costs: when the Hollande government came to power 86 per cent of wage earners were on permanent protected contracts and there is little reason to believe the socialist administration has significantly reformed that problem. The country ranks 144 out of 148 in the World Economic Forum’s index of facility in hiring and firing people. Social charges account for 42 euros of every 100 euros in total expenses in France. Not every freeloader in Europe is called Stavros.
The European élite has lost contact with reality. Arguably it has done so since the 18th century when it marinated itself in the Utopian social-engineering fatuities of Rousseau. The solemn figures at European summits exude an air of authority when in reality they are fantasist buffoons. The intractability of the Eurozone nightmare results from the fact that the people with responsibility for defusing the crisis are the same people who created it.
