One man’s poison….
There was more Domesday scariness from the National Bank of Greece on Tuesday. If Greece exits the euro, its latest report suggested, the events would lead to a devaluation of the new currency by 65%, a GDP nosediving by 22%, 34% unemployment, and income per capita nearly halving to 55%.
But you ain’t heard the half of it: Sovereign finance will be impossible to find, initial inflation will therefore (?) be at 30% – and keep rising until any and all advantages of the drachma’s reinstatement have been wiped out.
But on the other hand, here’s some news about what’s likely to happen while there is even a risk of Greece leaving the eurozone: this morning, two of the world’s biggest trade credit insurers stopped providing cover for exporters to Greece “on concern that the country might leave the eurozone.” Brokers said the decisions by Euler Hermes and Coface were the only instances they could recall of trade credit insurers pulling out altogether from a European country. As none of them are 168 years old, I’d imagine that’s true.
But one is left wondering how, if that’s the case, things could be any worse without the euro….which isn’t going to exist in a year’s time anyway.
Greece doesn’t want to leave the euro, and Berlin-am-Brussels doesn’t want the country to go. I keep on saying this, and it seems to make remarkably little impression. This does not, of course, mean that a departure won’t take place, as the entire eurozone and its EU parent are based on the madness of bad science anyway.
But think on this as well: ClubMeds staying in the euro and dragging down its value can be good for business…especially German business.
…is another man’s meat.
Currency devaluation can be fun. After EURUSD and German CDS had been tightly coupled for months, said Zero Hedge yesterday in another eurocalypse episode, the CDS market changed exchange-rates markedly between the euro and the Buck – as in, a 6% devaluation of the former.
In Berlin – some in Frankfurt think – a cold calculation is going on in Schäuble’s Finance Ministry about the cost of megabailout versus the long-term business gains to be had from a weak exporting currency. The Frankfurters however – and they are dead right – see the calculation as not so much cold, more braindead: it would simply lead to aggressive devaluations elsewhere, and start a full-scale currency war. But a few of the more radical FinMin Berliners say that inflation is what the financial MoUs want anyway – as part and parcel of the monetisation of paper madness – so when rape is inevitable, try to enjoy it.
It strikes me on the whole as unlikely, but now he is slated for the TopFinMin job in the EU, Wolfgang Schäuble’s delusions of grandeur may be overriding his incipient paranoia about inflation. Certainly, he is very much on the case of his new job task – discipline, discipline, and more discipline. The following draft is a leak (and an intentional one) from the Berlin Finance Ministry scoping out how life in the Fiskal Union will work. And as we all know, work makes free:
The portion of a FU nation’s debt exceeding 60% of GDP will be transferred into a new European Redemption Fund. (Very Merkelian, that one: sinners will be redeemed)
The 17 countries will be liable for their own portion of the debt transferred to the ERF. But they will face a maximum term of 20-25 years to pay it off. But here comes the double-think:
In a legal ‘redeemable pref shares’ sense (as per standard takeover contracts in business) all 17 nations will be jointly liable for the debt placed in the fund. This locks everyone in forever: you can run, but you can’t hide. As the more observant among you will have spotted, the original eurozone lock-in caused most of the problems the ezone faces today. Good to see that Berlin learns from its mistakes, nicht?
But it also means that nobody (for example – pulling a name out at random – Germany) can ever get lumbered with the entire debt mountain: because the word ‘severally’ is missing from the definition used (‘jointly’), creditors can’t come after one debt guarantor like they could in business.
Deutschland über alles – naturlich. And – to be fair here – Brussels off the hook yet again…it not being a sovereign nation an’ all. “Don’t let’s be beastly to the Germans, or in any way horrid to the Hun” as Noel Coward sang in 1939.
One final thing of course – because Berlin never misses anything in the detail: if countries fall behind in their repayment of debt in the European Redemption Fund, some of their national tax revenue would be earmarked for repayments. They would also have to commit to fixing national finances to free up money for debt service.
Und all ziss vill be offaseen by little Volfy in dem Veelchair. You haff been varned.
Before any new readers write me off as an anti-German headcase, let me just reiterate what I’ve written a hundred times before: these problems are chiefly CDU-Merkelian, not German. The SPD would be opposed to these tactics, if not the overall goal, of eurostability. And, like UKIP’s Nigel Average, being married into a German family, I’m hardly likely to be a Germaphobic Mossad agent, now am I?
What I am doing here is dramatising and sharpening the focus on some facts to wake people up. Wolfgang Schäuble is a ruthless and slippery man found suspicious by most German politicians. Angela Merkel is a former Osti Stalinist who insists on taking a hard line in support of whatever she is promoting….usually herself. The Brussels eurocrats are all unelected functionaries who have shown themselves to be autocratic and pathetically unimaginative. Schäuble is already approved as the man who will be running the finances of the Fiscal Union. His idea of Germany is clearly going to dominate it. This is only ever going to end in tears.