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Tag: Euro

Renzi, Machiavelli and the public platform

Monday, 5 December, 2016 0 Comments

Niccolò Machiavelli: “The demands of a free populace, too, are very seldom harmful to liberty, for they are due either to the populace being oppressed or to the suspicious that it is going to be oppressed and, should these impressions be false, a remedy is provided in the public platform on which some man of standing can get up, appeal to the crowd, and show that it is mistaken. And though, as Tully remarks, the populace may be ignorant, it is capable of grasping the truth and readily yields when a man, worthy of confidence, lays the truth before it.” Discourses on Livy (1517), Book 1, Ch. 4 (as translated by LJ Walker and B Crick)

Whither now, Italy, after Matteo Renzi, a man of standing, appealed to the crowd, only to see his proposed reforms rejected by the public platform? The most pressing matter is the country’s banks, which have bad debts of €286 billion on their books. The third largest institution, Banca Monte dei Paschi di Siena, needs a €5 billion recapitalisation, urgently. Although the situation is alarming, the can is kicked further down the road. The reason is that if the debts were written off, junior bondholders would take a massive hit, and many of these are ordinary Italians who bought useless bank debt.

Thanks to Renzi’s referendum, borrowing costs are increasing, making it very expensive to get capital for Italy’s zombie banks, and now there’s a government without a mandate. The fear is that the instability of Italy may spread from Rome to Brussels and beyond. Quoting Cicero, Machiavelli noted that the populace may be ignorant, but it is capable of grasping the truth.


#Brexit: History is in the making

Thursday, 23 June, 2016 0 Comments

History will be made today in Great Britain. Regardless of result of the referendum, we will witness the slow-motion crumbling of two Unions: the UK and the EU. If the British vote to leave, the EU will begin to crumble because the audacious act of departure will mortally wound the “project” and will encourage others to hold similar referendums. If the British vote to remain and England’s desire for independence is defeated by an alliance of multicultural Londoners and Irish, Scottish and Welsh nationalists, the Union will be gravely damaged.

UK_EU A European Union without Great Britain would be forced to confront its founding fallacy of Germany pretending to be weak and France pretending to be strong. Neither Paris nor Berlin wants to face this embarrassing reality, but the absence of London as a diversion will lead to sobriety. Then, there’s the fragility of the eurozone. It may be possible to keep Greece on life support indefinitely, but not so Italy. Its debts are alarming, the unemployment rate is frightening and there’s no growth. As well, Italy straddles that other great EU fault line: immigration. Italy is the country of choice for African migrants and their numbers will keep on growing for the rest of this century.

“History, Stephen said, is a nightmare from which I am trying to awake.” So says a character in that great Anglo-Irish-European novel Ulysses, by James Joyce, and the nightmare of history will return with a vengeance if the “Leave” side wins. Ireland’s borders, internally and externally, will take on new significance and the country may have to rethink its political relationships. The same goes for the Scots, whose nationalists would demand another referendum that might take them out of a non-European Britain. And the Welsh? They play Northern Ireland in Parc des Princes in Paris on Saturday, with a quarter-final place in Euro 2016 at stake.

History is in the making.

The only other option is breakup

Friday, 31 July, 2015 0 Comments

Germany is running the show and writing the rules says Philippe Legrain. Why, then, he wonders, is France proposing even deeper integration? “The Last Thing the Eurozone Needs Is an Ever Closer Union” argues Legrain in Foreign Policy. Snippet:

“The conceit in Paris is that a eurozone government would be shaped by France. But why would it be? Berlin rules the roost in the eurozone, so it is scarcely going to subordinate itself to a Franco-European institution in Brussels. When German officials talk about fiscal union, what they have in mind is not the Keynesian eurozone treasury that France would like, but a supranational fiscal enforcer that could rewrite national budgets at will. That would entail an extension of German power, not a reclaiming of French influence.”

Legrain’s conclusion is worth pondering: “A flexible eurozone would be good economics and sound politics. Trying to impose a single, rigid, and deeply flawed Germanic model on the eurozone is not. A French-style eurozone government is a pipe dream. The only other option, of course, is breakup.”

I said, pretend you’ve got no money

Monday, 6 July, 2015 0 Comments

“I said, pretend you’ve got no money,
She just laughed and said, Oh you’re so funny.”

Common People, Pulp

In May, the Greek newspaper Athens Voice suggested that the woman who inspired the Pulp song is Danae Stratou, wife of Yanis Varoufakis, the former Greek minister of Finance. Ms Stratou studied at Saint Martins College of Art and Design in London between 1983 and 1988 and is the eldest daughter of a wealthy Greek businessman.

That celebrated Paris Match spread in March raised eyebrows and generated questions about the contrast between Syriza reality and rhetoric. Yanis Varoufakis was a player. He remains a puzzle. “I wear the creditors’ loathing with pride,” said Minister No More.

Common People

Give me the money or I’ll shoot!

Friday, 3 July, 2015 0 Comments

Intra-European affairs are fraught these days, given the dissent about Brexit, migrants and Putin. The Greco-German relationship is going through an especially rough patch right now thanks to lending/borrowing “issues” and the cover of today’s Handelsblatt, the daily financial paper published in Düsseldorf, sums up the fear and loathing.


Meanwhile, “Greek politics is short-term. The long term is for Germans,” notes David Patrikarakos in Politico. Problem is, Germans and Greeks are united by the euro. Still.

By the way, those taken aback by the Handelsblatt cover, should take a look at the depictions of German leaders in Greece. They’re not very subtle. Here is a referendum poster in Athens that shows the face of German Finance Minister Wolfgang Schäuble and states: “He has been drinking your blood for five years, now tell him No.”


The art of currency: Stefanos, Banksy, Warhol

Wednesday, 1 July, 2015 0 Comments

“On the front of both series of euro banknotes, windows and doorways are shown,” states the European Central Bank. “They symbolise the European spirit of openness and cooperation. The bridges on the back symbolise communication between the people of Europe and between Europe and the rest of the world.”

That’s the view from Frankfurt. The Greek artist Stefanos says that the currency does not reflect the reality of our era and he’s hacking it to make his point.

In the spirit of the British street artist Banksy, who uses public spaces and property to showcase his messages, Stefanos is using money to make a statement about the dire situation in Greece. His altered euro banknotes depict mass hysteria, despair, violence and social collapse. To create his works, Stefanos draws human figures on the notes using a black ink ball-pen, scans the results, posts the images on his website and returns the notes into circulation. Their subversive message is then spread around the modern agoras by consumers.

As we move towards a cashless world, banknotes are on their way to becoming valuable collectables. Before they’re banished, however, there’s the pressing matter of a Grexit, which could make the euros of Stefanos worth even more than their defaced value. Andy Warhol would have approved.

Artistic note

Margaret Thatcher predicted Yanis Varoufakis

Tuesday, 30 June, 2015 0 Comments

It is fashionable for liberal/leftist elites, including feminists, to hate Margaret Thatcher. She was all that they are not and because she refused to play the glass-ceiling game, they despised her. The most obvious recent example of their rage is The Assassination Of Margaret Thatcher by Hilary Mantel, which was published to much acclaim last year. Gleefully, the BBC adapted it for radio.

What they cannot deny, however, is that Margaret Thatcher understood the nightmare potential of the euro and she saved Great Britain from getting entangled in its snares by voicing her concerns. This led to the “five tests” devised, allegedly in the back of a taxi, by Gordon Brown and Ed Balls in 1997 that kept the UK out of the euro for good. In The Path To Power (1995), Mrs Thatcher revealed that she had been under constant pressure since 1990 to accept the proposed EMU (Economic and Monetary Union). She wanted no part of it; she foresaw the inflation and competitiveness dangers, she knew her history and she understood human nature. Referring to EMU, she said:

“Under this, Germany and France would end up paying all the regional subventions which the poorer countries would insist upon if they were going to lose their ability to compete on the basis of a currency that reflected their economic performance. I also thought that the Germans’ anxiety about the weakening of their anti-inflation policies, entailed by moves towards a single currency and away from the Deutschmark, could be exploited in negotiations.”

Sure enough, Germany will not accept greater inflation, poorer countries are insisting on bailouts and Yanis Varoufakis knows a thing or two about exploiting his counterparts in negotiations. Those dealing with the mess now might benefit from studying this snippet from a lecture Margaret Thatcher gave at Hillsdale College in 1994:

“Sir Edward Gibbon (1737-1794), author of The Decline and Fall of the Roman Empire, wrote tellingly of the collapse of Athens, which was the birthplace of democracy. He judged that, in the end, more than they wanted freedom, the Athenians wanted security. Yet they lost everything — security, comfort, and freedom. This was because they wanted not to give to society, but for society to give to them. The freedom they were seeking was freedom from responsibility. It is no wonder, then, that they ceased to be free.”

Margaret Thatcher

The French lose the currency battle of Waterloo

Wednesday, 10 June, 2015 0 Comments

The great question of 19th century Europe was as follows: Would the continent become a union of states ruled by French laws and language, or would it be an association of states existing in a sphere of security guaranteed by the naval and economic power of Britain? The Battle of Waterloo provided the answer and the 19th century became the British Century. Not surprisingly, the French have not forgotten.

In March, France stopped Belgium from issuing a €2 coin to commemorate the battle. “The circulation of these coins carrying a negative symbol for a section of the European population seems detrimental at a time when eurozone governments are trying to build unity and co-operation under the single currency,” the French government stated in a letter that attempted to disguise chauvinism as concern for market stability. The Belgians retreated then, but they’re back and their Royal Mint has outflanked Paris with a €2.50 brass coin that commemorates the bicentenary of Waterloo. The canny Belgians have made 100,000 and plan to flog them for €6 each. Even better is their trove of 10,000 commemorative €10 silver coins, which can be had for €42 each. To entice French collectors, it has a silhouette of Napoleon on one side, and for British and German investors the other side features a key Waterloo moment: Lieutenant Colonel John Freemantle of the Coldstream Guards telling the Duke of Wellington that the Prussians had arrived on the battlefield.

Waterloo pound Talking of Prussians and Brits, the Royal Mint is issuing a commemorative £5 coin featuring the famous post-battle handshake between Wellington and Field Marshall Blücher, the Prussian commander.

Notes the Mint: “Your purchase is supplied with an absorbing booklet that explores the battle, its great leaders, its legacy on the world — and its impact on Britain’s coinage.” This remains the pound, not the euro, as the French, “trying to build unity and co-operation under the single currency,” have noted, to their chagrin.

Greece as Zimbabwe or Argentina

Friday, 20 February, 2015 1 Comment

What will happen if Greece exits the eurozone? For starters, the banking sector will collapse as everyone tries to move their euros to German banks. Although word on the street is that most have done so already. Athens might consider reintroducing the drachma, but no one would want it, so people would just keep using the euro. This option is not without precedent. Back in 2009, Zimbabwe gave up the pretense of monetary sovereignty and the United States dollar is now the official currency for all government transactions. Just as Robert Mugabe has no influence over the Fed, Greece would no longer have a seat at the ECB but life goes on and there are reports that nightlife in Harare is picking up again.

Instead of going the way of Zimbabwe, Greece might become another Argentina and things won’t be as bad as the pessimists say. Given that what the Argentines call “viveza criolla” is very much at home in Greece, a tango-sirtaki morph may be on the cards. That being the case, here are some useful viveza criolla phrases:

Total, si no robo yo, robará otro.” (In the end, if I do not steal, another will steal.)
Hecha la ley, hecha la trampa.” (Made the law, made a loophole.)
El vivo vive del zonzo y el zonzo de su trabajo.” (The smart guy lives off the fool, and the fool lives off his job.)

Back on the 11th of this month, STRATFOR looked at the two countries in Greece and Argentina, Similar But Not the Same. Conclusion:

Even though Syriza used Argentina’s case as an example during the electoral campaign, and many Greeks are aware of the country’s history, Athens has considerably less room for action than Buenos Aires did. Many of Buenos Aires’ moves since 2001 have been ill conceived and poorly executed, but unlike Greece, Argentina was a fully sovereign country when it made them. Greeks elected Syriza to fix the country’s debt problem without leaving the eurozone and the European Union. Greece’s main problem is that it will be extremely hard for Athens to achieve both goals simultaneously.

The genius of Grexit

Tuesday, 17 February, 2015 0 Comments

The word “Grexit” combines Greek’ and ‘exit’ and it refers to the possibility of Greece leaving the eurozone. The term was coined by Citi economists Willem Buiter and Ebrahim Rahbari in a February 2012 note and it has spread rapidly since then. One sign of its genius is that it no longer needs translating.

German: Grexit-Wahrscheinlichkeit steigt auf 50 Prozent

Italian: Grexit, l’Italia rischia 61,2 miliardi

Spanish: Ni Grexit ni Grecovery

Dutch: ‘Grexit is niet te vermijden’

French: La fantasme du “Grexit”

Estonian: Repliik: Geuro ja euro või grexit

Portuguese: Grexit: como seria a saída da Grécia do euro

Swedish: Grexit dåligt alternativ för EU:s skattebetalare

Strong tobacco from Stark

Thursday, 12 February, 2015 0 Comments

“The truth is that, in contrast to many eurozone countries, Germany has reliably pursued a prudent economic policy. While others were living beyond their means, Germany avoided excess. These are deep cultural differences and the currency union brings them to light once again.” So writes Jürgen Stark, a former board member of the European Central Bank, in today’s Financial Times. “The historical and cultural differences that divide Europe’s union” is the title of the piece and it reveals all one needs to know about the division and disunion at the heart of the euro experiment.

In some ways, the comments are more revealing than the article.

This man needs to read Michael Pettis.The self satisfaction is nauseating.While the “bailout” of the German banks was going on, Siemens was flogging submarines and other much needed rubbish through a vast system of bribery and corruption. senior muppet

For the Greeks it was wonderful for many years to be able to run a political system of patrimonial privilege funded by transfers from outside the country, but that is a self-exciting system in need of a negative feedback loop – which it finally got. The upshot is that now the Greeks are being compelled to consider a choice between maintaining their old social contract or continuing to receive transfers from outside, but not both. In such cases one would normally expect a society to make the most strenuous efforts to avoid the choice. But in their anger at the unfairness of it all, the Greeks now look capable of actually, voluntarily making that choice. Amazing! This moment will not last, but in this moment all kinds of potential surprises now lurk. Whatever

Nice piece of Teutonic my-opism. German non-keynesian economics work as long as there are other countries willing to generate excess demand through borrowing and you can export to (US, China, Souther Europe). It is recipe for disaster for continental size economies. This is not a theoretical debate, the results are painfully obvious. True Finance

Sorry the disasters of the early twentieth century were German disasters. No other country was so bad. You simply cannot read across from a completely awful Germany to anywhere else. Nicki

If Mr Stark is right about the “deep cultural differences” between Eurozone countries, then why on earth did they create a common currency in the first place? This article is basically a list of all the reasons that the Euro should never have come into existence. If the Euro is to succeed, Eurozone countries must work more closely to coordinate their economic policies. It is obvious now that they cannot do so. I have always hoped that the UK would eventually join the Eurozone, but Mr Stark has finally removed the scales from my eyes. Gordon Brown was right after all. Little Briton

Meanwhile, in Spain, six years into its depression, 5.46 million people don’t have jobs, two million households have no earned income, youth unemployment is at 51.4 percent and home prices are down 42 percent. No surprise, then, that the neo-Bolivarian Podemos party is pulling ahead in the polls. The latest Metroscopia survey gave it 28 percent. The ruling conservatives have dropped to 21 percent and the once-mighty PSOE, the Spanish Workers Socialist Party, has fallen to 18 percent. The message to Jürgen Stark is clear: The elites can defend the euro, but they will lose their political base.