Today's Coming Crisis Movie

Monday, November 28, 2011

Germany plays poker with the euro zone’s future - 28th Nov 2011

The old Chinese curse, “May you live in interesting times”, needs an addition: “May you live in interesting times, but be too terrified to notice”.

These are extraordinary times in Europe, with the post-1945 European integration settlement on the verge of collapse. It’s hard to overstate the stakes, other than to say that while the traditional European method of problem resolution (a million tons of steel hurtling across your border at speed) is not on the table, everything else is.

The collapse and breakup of the euro is now a serious possibility. If it happens, it will almost certainly be followed by explosive currency devaluations in most of the euro zone, followed by huge pressure on governments to introduce protective tariffs and the effective end of the single European market, one of the greatest achievements of post-war Europe.

In short, this is the poker table for serious players.

Then you look at German Chancellor Angela Merkel, who either has icewater in her veins or just doesn’t get it. The problem of the euro crisis has been that, all alone, the markets have kept seeing the euro zone’s stake, and raising it.

Less than a month ago, the latest attempt to restore confidence in the currency bloc, a (nominally) well-capitalised European Financial Stability Facility, supposedly able to bail out almost any EU country having difficulty paying its way, was announced.

The markets pondered it, and then the Greek prime minister, George Papandreou, committed an act of political hara-kiri (for him, anyway) by throwing the wild card of a referendum onto the table. This incensed the French and German leaders, now known to the average Jacques on the European street as “Merkozy”, who basically demanded that if the Greek people were to vote on anything, it would be on whether they were going to stay in the euro or not. Athens backed down and Papandreou resigned to be replaced by a non-political “technocrat.” Read More