THE EURO ON ITS DEATHBED

It has been a long drawn-out process, with many a missed deadline and many an ignored ultimatum, but finally it looks this weekend as if the Euro cannot avoid collapse. Unless Germany agrees to underwrite the sovereign debt of all the 17 Eurozone countries and takes rapid steps towards fiscal union, the Euro project will fail. Italy has to sell substantial amounts of bonds early next week; a debacle then could trigger off a run on its banks and the seizing-up of credit throughout the Eurozone, the European Union and in other world markets. It may take a little longer for reality to break through. Whatever, hold on to your hat, the ride will be very bumpy.

I am not sufficiently expert to explain precisely why events have taken this turn. The obituarists of the Euro will have time a-plenty to delve and analyse. It has become clear that a currency union needs a much larger contingency bail-out fund than the EFSF on offer. The absence of a lender of last resort, in other words a responsible central bank, has been a fundamental design fault – the ECB’s powers have been constitutionally far too limited. The absence of a defined exit procedure has also proved fatal leading, as Hague said, to a panicking group trapped in a burning house with the doors locked and barred.

More technically 3 policy errors have been highlighted. It was a mistake of France and Germany to threaten Greece with expulsion – bond buyers were spooked into a flight from all dubiously credit-worthy sovereign borrowers. It was unnecessary (if prudent) to force banks to mark their bonds to market, as it made demands on their capital they could ill afford and deterred further bond buying. Worst of all, it was dishonest to claim that any Greek default would be “voluntary” for the private sector. This intentionally nullified contractual credit default swaps, the commonly used market method of hedging against sovereign default. A currency which reneges on its contractual obligations is one to avoid like a plague.

I am not inclined particularly to blame the Germans for this mess. Mrs Merkel vigorously filled a gap left by the incompetence and complacency of the Eurocrats in Brussels and cobbled together various deals. However the Eurozone is not ready for total German domination, which the original EEC was specifically designed to prevent. Merkel herself may favour fiscal union but her coalition and tax-paying electorate do not. It simply cannot be delivered politically at present. I believe sprightly Strauss-Kahn of the IMF would have been much more active in proposing solutions than passive Mme Lagarde, but it is doubtful he could have made a game-changing difference.

But manoeuvres in Brussels would never have been enough. The Eurozone, like the European Union itself, lacks democratic legitimacy. Brussels has a contempt for the wishes of the European people to whom it must ultimately be accountable. Like many a political class, the Eurocrats think they know best and complex matters of economic direction are not matters to be put to popular votes. So when the French and Dutch parliaments and the Irish people by referendum voted against the Lisbon Treaty in 2008, Brussels wangled a change of the French and Dutch resolutions and an insistence on a second referendum in Ireland until the “right” answer could be achieved. In 2011, when Papandreou sought to put the EU-ECB-IMF bail-out to a Greek referendum, Brussels was horror-struck and encouraged the replacement of Papandreou by unelected banker Papademos. With Italy in turmoil and Berlusconi’s support ebbing away, EU president Herman van Rompuy (who? who?) pronounced that elections would have to be postponed and so unelected banker Monti took the helm. The democratic deficit has become a chasm.

Here in Greece, the serial delinquent and arguably the fons et origo of the Eurozone’s catastrophic collapse, the populace is as baffled as ever by the crisis. They hate the austerity measures, but then turkeys do not vote for Christmas. Internally Greece remains anarchic, having just discovered that collecting the new property tax via electricity bills and threatening disconnection is contrary to EU law. There is no evidence that the rich have started paying taxes or that the political class has surrendered any of its outrageous privileges. However the squeeze on cash has been remorseless and anecdotally workless doctors and architects have been joining the soup-kitchen queues managed by the Orthodox churches. Asked if they favour a return to the drachma, most say they want to stay with the Euro, but seem to ignore the logical consequences.

A new and unlikely British hero has been discovered. Nigel Farage, MEP and leader of UKIP, has been a consistent critic of the Euro. Two recent punchy speeches at Strasbourg, one on 18 November castigating the 4 undemocratic “villains”, van Rompuy, Barroso, Junker and Rehn in graphic terms, (http://citywire.co.uk/money/nigel-farage-breathes-fire-at-stunned-eurocrats/a544631) another on 24 November concentrating on van Rompuy, have been repeatedly run on Greek TV. So have earlier speeches, with Farage being suitably rude about the Lisbon Treaty shenanigans and ridiculing ex CND treasurer “Baroness” Ashton, now unelected EU foreign minister. The Greeks are not used to British debating rough and tumble; their own regimented parliament listens to their deputies’ claptrap politely without interruption or cat-call. Now people in shops and tavernas say, thank God someone has had the guts to say what they all think.

Quite possibly the Greeks will be the first to crack. Shorn of his strength by the Delilahs in Brussels, I can see one last heave from the eyeless Greek Samson, pulling down the pillars of the temple upon the heads of the Eurocratic Philistines…. and great will be the fall thereof. Do not despair. In Britain the reputations of Blair, Heseltine and Clarke will be consigned to the dustbin: the stock of Gordon Brown will rise and Maggie Thatcher will see a bright shining light of vindication in her elderly confusion. Europe will rise again, not a centralised bloc but L’Europe des Patries in de Gaulle’s earlier vision, a democratic Europe co-operating closely but fulfilling its destiny as an association of proud nation-states.

SMD

26.11.11

Copyright Sidney Donald 2011

NOT A DRY EYE IN THE HOUSE

I have to confess I am a sucker for a sentimental movie. In the final scenes of the 1956 musical Carousel, Billy Bigelow (Gordon MacRae) has come down from Heaven for one day to comfort his poor widowed girlfriend Julie Jordan (Shirley Jones) and their ostracised daughter Louise (Susan Luckey). It is Louise’s high school graduation ceremony and the country doctor, the secret heavenly friend of Billy, after handing out the diplomas, recites an old verse about “When you walk through a storm” and Billy whispers words of love and encouragement to Julie and Louise, who are greatly heartened; Billy is then summoned back to Heaven to the swelling celestial strains of “Walk on, walk on, with hope in your heart, and you’ll never walk alone”. I blubbed then when I first saw it as a tough 15-year-old, I have blubbed every time I have seen it since – probably at least 20 times – and I am blubbing now as I write this, my keyboard wet with tears. Yes, okay, I am a big girl's blouse!

My mawkish reaction to Carousel may be peculiar but the combination of drama and feelings of pity is an ancient skill. The classical Greeks wanted to achieve catharsis, a purging of the emotions, purifying the soul of the spectator. I do not know if the ancient Greeks burst into tears when they realised that Oedipus had killed his father or married his mother, just as the modern Greeks are weeping today when they are squeezed by the Eurozone with a tragically swingeing property tax. Feelings of pity for the unhappy Greeks are not much in evidence at Brussels or Berlin – we have yet to see wheel-chair bound German Finance Minister Wolfgang Schauble dabbing his eyes with a hankie.

Shakespeare does not much move us to pity (although Lear has several depressing enough moments) – mind you, his attempts at comedy are pretty limp too. The admiration of Sentiment came with the 18^th century Enlightenment, originally meaning that human feelings were often a route to the truth. Fairly quickly the idea degenerated into Sentimentality, the excessively emotional reaction to events. In the 19^th century such sentimentality was popular and met a human need. In Britain, a hard life for the great majority coupled with the buttoned-up tradition of the “stiff upper lip” required a safety-valve. Thus Dickens in 1841 reduced the nation here and across the Atlantic to tears with his heart-rending death-bed scene of Little Nell in The Old Curiosity Shop. The Italians loved their theatrics too, as illustrated by the ethnic domestic melodrama in New York portrayed in The Godfather. At a slightly higher level, they invited us to weep over “On with the motley” with the sob-wracked tenor in Pagliacci.

Back to Britain, the music halls could lay on the sentiment. The Coster’s Laureate, singer Albert Chevalier, tugged the heart-strings with his memorable “My Old Dutch” (not everybody knows, Duchess of Fife / Wife in Cockney rhyming slang). In the 20^th century, Harry Lauder was capable of reducing a packed Scottish theatre to tears with “Keep right on to the end of the Road” which resonated so piercingly after the losses of the Great War. This followed in a Scottish, Welsh and Irish traditional strain of loss and yearning – as in “Will ye no come back again?”, “The Minstrel Boy”, “My ain Folk” or “The Londonderry Air” – all songs to bring a lump to the throat.

Predictably politicians have tried to jump onto this bandwagon. Their problem was that they could not just leave their audience sobbing, there had to be a finale of uplift and inspiration. Mr Gladstone was said to have mastered this art and after horrifying his audience with accounts of the Bulgarian or Armenian atrocities, he sent them home determined to face the Turk or at least say a vehement prayer for God’s intervention at the local chapel. President Woodrow Wilson was, in H.L Mencken’s words, a master “of reducing all the difficulties of the hour to a few sonorous and unintelligible phrases, often with theological overtones… he knew how to arrest and enchant the boobery with words that were simply words, and nothing else. The vulgar like and respect that sort of balderdash….Woodrow knew how to conjure up such words. He knew how to make them glow, and weep. He wasted no time upon the heads of his dupes, but aimed directly at their ears, diaphragms and hearts.” Our contemporary politicians have lost this talent and if they weep themselves they become figures of fun – certainly a sobbing Ed Miliband or David Cameron may not be to many people’s taste.

The great store-house of sentimentality remains Hollywood. The Yiddish word Schmaltz well describes the worst excesses and Hollywood often tilts the level playing field by introducing lovable kids or cute dogs; Shirley Temple crooning “On the Good Ship Lollipop” in 1934’s Bright Eyes or Disney’s adorable 1961 Skye terrier in Greyfriars Bobby are cases in point. Much earlier, in 1921, Chaplin produced an unforgettable image of the Tramp with The Kid (Jacky Coogan) in the silent classic while the 1948 Bicycle Thieves directed by De Sica has a very affecting closing scene of father and son, a classic of Italian cinema. Frank Capra had a strong line in weepies with “It’s a Wonderful World” in 1946 giving James Stewart a chance to receive the heart-warming appreciation of his community. Greer Garson heroically nursed her amnesiac husband in 1942’s Random Harvest. But Greer was most effective in war-time Mrs Miniver, also 1942 – who can forget the sermon in the badly damaged church, after grievous village losses, and the congregation bravely singing “Onward, Christian Soldiers” with the film closing with a V for Victory RAF fly-past over the stricken church.  Ah, what a warming confluence of pity, piety and patriotism!

With these emotional recollections, I will now curl up with Carousel and a large box of tissues.

SMD

23.11.11

Copyright Sidney Donald 2011

THANKING OUR LUCKY STARS

 

As the financial crisis rumbles on and the spectre of a new Great Depression is regularly invoked, people of my generation in Britain – those born during or not long after the war – should give heartfelt thanks that most of our lives, say the 60 years since 1951, have been years of more or less constant peace and prosperity. We have reaped generously where earlier generations have selflessly sown.

We have enjoyed peace. To be sure, there have been numerous conflicts, from Suez to Cyprus, from Malaya to Afghanistan and all military casualties are grievously mourned. Essentially however these conflicts have been on a small scale. In 10 years in Afghanistan Britain has lost 388 service personnel. In the 4 years and 3 months of the Great War, Britain is estimated to have lost killed and missing 1,017,000 people and in the Second World War, the total dead over 5 years and 8 months is put at 452,000 of whom 67,000 were civilians. Our generation has mercifully been saved from slaughter on anything like that scale.

Material living standards have improved out of all recognition. As Britain emerged out of post-war austerity, economic growth has been steady and sometimes spectacular, even if some other countries have performed better. We take for granted household appliances which earlier generations simply did not have, washing machines, dishwashers, central heating which make life so much easier. Communication via television, computer and mobile phone shrinks distances. Car ownership, once an impossible aspiration for many, has become a universal expectation. Foreign travel has become commonplace, even to the most exotic destinations.

It cannot yet be claimed that poverty has been abolished, but absolute poverty has been replaced by relative poverty – income substantially below the average. The Welfare State ushered in by an idealistic Labour government in the difficult post-war period has ensured, through a maze of benefits and allowances, that everyone gets at least some kind of income to live on. Subsidised housing has hugely helped the less affluent and although the system is expensive, it has surely been right to end the haunting financial insecurity of unemployment and family need.

Full employment has been an important target and although there have been some quite sharp recessionary years, generally Britain has provided decent working opportunities for the great majority. The workplace itself has been more relaxed, less hierarchical, more meritocratic and less exploitative. Working hours have been controlled, wage rates negotiated, a minimum wage introduced, casual labour restricted, health and safety measures enforced.

We and our children are much better educated than our parents and grandparents. The school-leaving age has been raised and often cherished small local schools have been closed to make way for larger establishments capable of offering a broad syllabus. The digital revolution has made the world of information easily accessible. The path to university education was eased by generous subsidy (ending economic reasons for leaving school too soon) and the opening of many new places of tertiary education. From the 1950s to the 1980s bright pupils from modest backgrounds could go free to college or university and receive a maintenance grant to live away from home. Maybe this system became unsustainably expensive, but millions benefited and the current prospect of students having to pay deferred fees of up to £9,000 per annum is worryingly retrograde. Although many school leavers have limited educational attainments and there is still a mountain to climb to improve standards, in Britain illiteracy is rare and diminishing, schools no longer dispense corporal punishment and the basic rights of children are recognised and protected.

We are much healthier and eat better than our forefathers. The National Health Service has been an enormous social advance, providing universal free healthcare. The undersized scrawny runts of yesteryear have disappeared and the pendulum has swung to the problems of obesity. The state cares for the populace from the cradle to the grave with no worries about doctors’ bills or the cost of medicine – a huge boon, despite the inevitable imperfections of the system. War-time rationing brought paradoxically improvements in diet and prosperity since has allowed us to eat a huge variety of good food.  How lucky we are!

The progress that really matters is not just the material things but also the change in our minds. Compared with 1951, our society is an open one. Class distinctions have withered for ever, women’s rights are fully recognised, racial discrimination is outlawed and homosexual equality won. Justice is mercifully dispensed, and in spite of populist outcry, the right of criminals after serving their sentence to start again with a clean sheet is recognised. An age of tolerance has been established - we are much the better for it and always need to defend it.

Our generation has thus been extremely fortunate but what legacy will we pass on? It is possible to be doom-laden, to write of unaffordable housing, high personal indebtedness, economic stagnation, tensions within Europe, high crime and excessive immigration. There are certainly daunting problems but every government faces the issues of its time. We can take some quiet pride that we built on the efforts of our predecessors with very large new social investment, making Britain more secure at home and abroad and created a broad consensus binding the people together in a prosperous, happy country with much to contribute to the 21^st century world.

SMD

19.11.11

Copyright Sidney Donald 2011

GREEK SHOCK - HORROR!

After months of tedious negotiations and fraught Brussels summits edging towards a deal to stop Greece leaving the Eurozone and saving the banks, some kind of cobbled-together pact emerged on 27 October. Sighs of relief all round, and the leaders were sent home to tell the good news to their grateful nations. It has lasted 3 days. Yesterday Greek premier George Papandreou exploded a bomb under it all by insisting that, assuming he can survive a parliamentary vote of confidence this Friday, he wants to hold a referendum in January so that the Greek people can approve the deal he has so laboriously brought home. The Eurozone is in uproar at this unexpected turn of events, some trumpet that the original 27 October deal is off and global stock markets have yet another reason frenetically to palpitate and wobble.

Many independent commentators in Europe, UK and USA calculated months ago that Greece had no prospect of paying its debts, that Bailouts Mark 1 and Mark 2 only made matters worse – its debt forgiveness so laden with sweeteners to bond-holders that the net gain for Greece was negligible – and that an orderly default and a euro exit were preferable. Even the German finance minister Wolfgang Schauble favoured this at one stage. The Eurocrats, however, strove to keep Greece in the Eurozone, at almost any price, but saddled her with such harsh deflationary austerity measures that her already weak economy is flat on its back and some other remedy must now be found. No exit mechanism was originally envisaged nor has one now been agreed.

To any Greek government, the prospect of years of austerity and squeeze, micro-supervision from Brussels, high (and payable) taxes, butchered benefits and huge public sector redundancies is decidedly unappealing. No compensatory stimulus is offered even in distant prospect. Greek sovereignty, even a sovereignty so historically misused and corrupted, is as valued by its citizens as in any other country and the bailout deals seem aimed at eliminating Greek political independence. The Eurozone supervisor of Greece, or Gauleiter as he is unflatteringly nick-named, a German bureaucrat called Horst Reichenbach, was supposed to start work today. Calling for a referendum at least addresses the “democratic deficit” so deplored by many Europeans.

Our timbers will soon be shivered by commentators painting a ghastly picture of the consequences of a Greek default, orderly or disorderly. Bust banks in many parts of Europe, a global stock market catastrophe, in Greece riots, pestilence and famine – or at least swingeing capital controls and food and energy rationing – that is the Doomsday vision. It is probably over-egged, though a nasty period may be inevitable. But surely the core of Europe will readily bounce back with its native advantages and even Greece should find her path forward at some suitable level of economic activity. The people of Europe should not be eternally punished to protect the shareholders and depositors of over-cherished banks whose crass lending errors created the crisis in the first place.

In fact it is doubtful that the Greek referendum will ever happen. It is much more likely that the Greek PASOK government will soon lose its parliamentary majority; there are also various political manoeuvres afoot which can force an election. An election would end PASOK rule but probably result in a fractured parliament – with a solid conservative bloc but strong far Left – and a Grand Coalition government. This coalition government would try to negotiate a much better deal with Brussels, but the pull of independence may be too strong and an agreed departure of Greece from the Eurozone may be the ultimate result. But at least the people will have spoken.

The performance of Greek politicians has been lamentable. Premier Papandreou sounds honest enough and may be well-meaning, but never looks as if he has mastered his brief. His referendum call has caught everyone on the hop including his own cabinet and party. It is perhaps the dice throw of a desperate man. His smart but obese Finance Minister Venizelos, worn out by the wrangling in Brussels, has entered hospital with possibly “diplomatic” stomach pains, to avoid the no doubt frequent and furious calls from the IMF, ECB, EU Commission and his unhappy counterparts in France, Germany and all points North. The rest of the government is as trustworthy as a wagonfull of monkeys – Berlusconi would look like a plaster saint in their company.

If the Greeks were liberated from the euro, which they should never have joined in the first place, and were left to finagle and hornswoggle among themselves in their own inimitable way, what of the euro? The North-South imbalances would remain a difficult structural problem and perhaps the Mediterranean states, Spain, Italy and maybe France will launch their own weaker currency and leave the euro to the industrious North, Germany, Benelux, Austria and later Scandinavia. There will always be a periphery of states which do not quite fit. Greece has been a case in point and if it has been the catalyst of an ultimately beneficent reconstruction of the European financial system, it will unwittingly have done Europe a signal service.

SMD

1.11.11

Copyright Sidney Donald 2011