And So It Goes…#594


The thing with the Global Ruling Elites is that they don’t panic unless they are forced to. Ambrose Evans-Pritchard’s timely column of 11 February (  in the Usurer-Capitalist Supporting-Let’s Socially extirpate the Poor-Torygraph ) is worth basking in with unalloyed Schadenfreude and a brighter hope for tomorrow. This is so encouraging !!

” The political centre across southern Europe is disintegrating. Establishment parties of centre-left and centre-right – La Casta, as they say in Spain – have successively immolated themselves enforcing EMU debt-deflation.

Spain’s neo-Bolivarian Podemos party refuses to fade. It has endured crippling internal rifts. It has shrugged off hostile press coverage over financial ties to Venezuela. Nothing sticks.

The insurrectionists who came from nowhere last year – with Trotskyist roots and more radical views than those of Syriza in Greece – are pulling further ahead in the polls. The latest Metroscopia survey gave Podemos 28pc. The ruling conservatives have dropped to 21pc.

The once-great PSOE – Spanish Workers Socialist Party – has fallen to 18pc and risks fading away like the Dutch Labour Party, or the French Socialists, or Greece’s Pasok. You can defend EMU policies, or you can defend your political base, but you cannot do both.

As matters stand, Podemos is on track to win the Spanish elections in November on a platform calling for the cancellation of “unjust debt”, a reversal of labour reforms, public control over energy, the banks, and the commanding heights of the economy, and withdrawal from Nato.

 Greece’s last minute offer to Brussels changes absolutely nothing

Europe’s policy elites can rail angrily at the folly of these plans if they wish, but they must answer why ex-Trotskyists with a plan to dismantle market capitalism are taking a major EMU state by storm. It is what happens 5.46m people lack jobs, when 2m households still have no earned income, when youth unemployment is still running at 51.4pc, and home prices are down 42pc, six years into a depression.

It is pointless protesting that Spain’s economy is turning the corner, a contested claim in any case. There comes a point when a society breaks and stops believing anything its leaders say.

The EU elites themselves have run their currency experiment into the ground by imposing synchronized monetary, fiscal, and banking contraction on the southern half of EMU, in defiance of known economic science and the lessons of the 1930s. It is they who pushed the eurozone into deflation, and thereby pushed the debtor states further into compound-interest traps.

It is they who deployed the EMU policy machinery to uphold the interests of creditors, refusing to acknowledge that the root cause of Europe’s crisis was a flood excess capital flows into vulnerable economies. It is they who prevented a US-style recovery from the financial crisis, and they should not be surprised that such historic errors are coming back to haunt.

The revolt in Italy has different contours but is just as dangerous for Brussels. Italians may not wish to leave the euro but political consent for the project but broken down. All three opposition parties are now anti-euro in one way or another. Beppe Grillo’s Five Star movement – with 108 seats in parliament – is openly calling for a return to the lira.

Mr Grillo proclaims that Syriza is carrying the torch for all the long-suffering peoples of southern Europe, as it is in a sense.

“What’s happening to Greece today, will be happening to Italy tomorrow. Sooner or later, default is coming,” he said.

Premier Matteo Renzi staked everthing on a recovery that has yet to happen. He is running out of political time. Deflationary dymanics are overwhelming the fiscal gains from austerity. Italy’s public debt has jumped from 116pc to 133pc of GDP in three years. The youth jobless rate is 44pc and still rising. Italian GDP has fallen almost 10pc in six years, and by 15pc in the Mezzogiorno. Italy’s industrial production has dropped back to the levels of 1980.

The leaders of Spain and Italy know that their own populists at home will seize on any concessions to Syriza over austerity or debt relief as proof that Brussels yields only to defiance. They have a very strong incentive to make Greece suffer, even if it means a cataclysmic rupture and a Greek ejection from the euro.

Yet to act on this political impulse risks destroying the European Project. Europe’s Left would nurture a black legend for a hundred years if the first radical socialist government of modern times was crushed and forced into bankruptcy by Frankfurt bankers – acting at the legal boundaries of their authority, or beyond – choosing to switch off liquidity support for the Greek financial system.

It would throw the Balkans into turmoil and probably shatter the security structure of the Eastern Mediterranean. It is easy to imagine a chain of events where an embittered Greece pulled out of Nato and turned to Russia, paralysing EU foreign policy in a self-feeding cycle of animosity that would ultimately force Greece out of the union altogether.

The charisma of the EU – using the Greek meaning – would drain away if such traumatic events were allowed to unfold, and all because a country of 11m people wanted to cut its primary budget surplus to 1.5pc from 4.5pc of GDP, and shake a discredited Troika off its back, for that is what it comes down to.

One is tempted to cite Jacques Delors’ famous comment that “Europe is like a riding bicycle: you stop pedalling and you fall off” but that hardly captures the drama of what amounts to civil war in a union built on a self-conscious ideology of solidarity.

“The euro is fragile. It is like a house of cards. If you pull away the Greek card, they all come down,” warned Greece’s finance minister Yanis Varoufakis.

“Do we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal?” he said

George Osborne clearly agrees. The worries have been serious enough to prompt a one-hour Cobra security meeting. “The risks of a miscalculation or a misstep leading to a very bad outcome are growing,” said the Chancellor.

Currency guru Barry Eichengreen – the world’s leading expert on the collapse of the Gold Standard in 1931 – thinks Grexit might be impossible to control. “It would be Lehman Brothers squared,” he said. “

Goodnight and good Luck !!

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