How many last ditches can there be in one crisis? So many have been dug in the prolonged debacle of Greece’s financial meltdown it resembles the complex of trenches on a First World War battlefield. Almost daily we are told it is the final endgame, but still the death agony of Greek Eurozone membership continues.
The oxygen tent is brought to the sickroom at more frequent intervals now: at the end of last week a further €3bn was pumped into the Greek banks for the short-term purpose of keeping them open until the following Monday night. Even that massive injection did not compensate for the €4.2bn of deposit flight from those same banks in the preceding week. This cannot continue, for the simple reason it is unsustainable. This crisis is no longer about “saving” Greece, but about saving Europe and to a realist that means saving Europe not from Greece but from the EU.
Received opinion has altered discernibly in recent weeks, with increasingly more involved parties and commentators not only accepting the inevitability of Grexit, but sometimes even advocating it. The latest poll shows only 28 per cent of Germans now oppose Grexit. An expectation of Greek departure has been created, European public opinion is largely acceptant of it in deference to harsh realities. But EMU has never been based on reality, nor are its fanatical supporters any more disposed to acknowledge the realities of the situation than when they nodded through Greece’s admission to the Eurozone under false credentials in 2001.
Alarm is now spreading regarding the potential damage the Greek crisis may inflict on the rest of the Eurozone, the EU and the global economy. There is a growing body of opinion that Grexit may be the lesser of two evils. Every month, indeed now every day, that Greece continues pumping toxins into the Eurozone economy further subverts the European project. Calculating Eurosceptics believe that the longer Grexit is postponed the more likely is the eventual collapse of the euro currency and, beyond that, the EU.
But, with the blindness that has characterised them all along, the Brussels apparatchiks do not see things that way. That is why we should not hold our breath in expectation of imminent Grexit, despite the predictions of many informed commentators. The most insightful analysis of the crisis came last week from Professor Bernd Lucke, economist and founder of the Eurosceptic AfD party in Germany, addressing a meeting of the Bruges Group in the UK parliament.
Lucke claimed that plans have already been formulated to keep Greece in the euro currency even after it defaults on its debts, to prevent the unravelling of EMU and the consequent implosion of the EU. That thesis is more than plausible. Any illegalities involved in manipulating the retention of a defaulter state within the single currency would not trouble Brussels ideologues who broke their own laws to admit Greece in the first place, as well as subsequently to bail her out, and whose auditors have refused to sign off the EU’s accounts for 20 consecutive years.
Lucke said the forthcoming Five Presidents Report, drawn up by the presidents of the ECB, European Commission, EU Parliament, European Council and Eurogroup, will take the view that the common currency must be preserved come what may and therefore the EU must “move from coordination to actually controlling economic policy”. In other words, following Rahm Emanuel’s doctrine “you never let a serious crisis go to waste”, catastrophic events that have dramatically discredited the federalist currency project will be used to justify much stricter centralisation, fiscal and political.
Beyond a doubt, the ruthless political will exists in Brussels to pursue such a course, but the ability of EU apparatchiks to push water uphill may be becoming exhausted. The markets are likely to take a hand if a defaulting Greece remains in the single currency. Europhile fanatics are proposing, in effect, to keep the plague bacillus within the ailing currency – how clever is that? Contagion would not be confined to the aftermath of Grexit: it would also be a hazard within EMU. The markets could run away with the situation, beyond any capability of the ECB to contain forces released by the blatant refusal to follow the only rational course of action by expelling Greece.
It is now entirely possible that the determination of Brussels to force capitulation on Greece may start the chain of nuclear fission that will detonate the entire European project. What the Brussels apparatchiks and the Troika had not bargained on was the equal intransigence of a hard-left Greek government whose prime minister named his younger son, just three years ago, after Che Guevara. The irresistible force has met the immovable object. It is difficult to say which of the two opposing parties is the more deluded, but it is the creditors, not the debtors, who may blow the European economy apart.
Greece has total indebtedness to the IMF and EU of €323bn, more than 175 per cent of GDP. To service that debt, it is borrowing from its existing creditors. Those creditors talk a good game at televised press conferences; they talk a knowledgeable jargon about “haircuts” and other devices to impress laymen; but their conduct is economically illiterate. Their economic practices are at least as many light years removed from authentic capitalism as was the Soviet system. Ambrose Evans-Pritchard has written an excoriating piece in the Daily Telegraph (“Greek debt crisis is the Iraq War of finance”), presenting a damning indictment of the conduct of the ECB.
The ailing Greek financial institutions are not banks, in any recognisable sense of the term – they are furnaces into which the product of years of European nations’ growth is being shovelled. But there is also an extremely interesting local aspect to this crisis. For years now, the routine response of EU grandees to any suggestion of British departure from the EU has been an affectation of indifference. Yet those same federalists are threatening the whole economic stability of Europe in an infatuated drive to keep Greece in the Eurozone, let alone the European Union.
If Britain, a nuclear power with a seat on the United Nations Security Council and with an economy outperforming the Eurozone, seriously threatened Brexit, the EU would be in blind panic. A genuinely Eurosceptic prime minister could exact any price, including treaty change, from imperialists terrified of losing their prize colony. It is Britain’s tragedy that much of its political class is in hock to the European Union myth, otherwise Brussels’ difficulty would be Britain’s opportunity.