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Greece Riots, Brussels Fiddles, Germany Seethes, Europe Burns

The latest news from Europe is, as usual, not good. The weekend’s riots in Athens were significantly worse than expected, suggesting that the Greek political system is closer to a break point than many understood. Yet on examining the fine print of the latest Greek budget cuts, and taking note of a statement by the New Democracy leader Antonis Samaras that casts doubt on his commitment to the reform package, European leaders now seem to be saying that the deal isn’t done and Europe is not yet ready to commit the money for the second Greek bailout.

For readers trying to decode signals from Europe, keep this in mind: for weeks now the EU leadership has been repeatedly telling the whole world that the Greek business was settled and resolved.  Plainly, they’ve been either deceiving themselves or lying to the world — most probably it is a sad mix of both. But investors will protect themselves best in the future simply by discounting all confidence building statements from the EU.

The [subscription required] Financial Times has consistently offered the best commentary of the European tale of woe; Gideon Rachman’s piece today [Germany Faces A Machine From Hell] reminded me of why I pony up the subscription price to keep this newspaper in my busy life.  Writes Rachman:

The result is that the euro is in a dangerous and unstable position. The actions that are being urged on Germany are unreasonable. But Germany’s own solution – structural reform now, political union later – is unworkable.

And the close:

Behind the scenes, however, some of the brightest minds in the German government have a sense of deep foreboding. Twice in the past year I have found myself sitting next to different senior German officials at a dinner who have proceeded to tell me that the whole single currency was a terrible mistake. Speaking of the euro, one of my companions said: “It seems to me that we have invented a machine from hell that we cannot turn off.” The image was so bleak and Strangelovian that I laughed. But, I am afraid, it’s not really very funny.

Don’t be fooled. The European crisis isn’t over. The provision of essentially unlimited liquidity by the ECB, with backing from other central banks and especially our own Fed, means that we no longer worry on a day to day basis that the global financial system will explode. That is a good thing so far as it goes and temporarily at least it is worth about 3000 points on the Dow. But nothing has been solved; things are not getting better. The Europeans still have no clue what to do next, France and Germany are still divided, and the dysfunctional European governance system is still incapable of acting decisively even if the Europeans knew what to do.


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  • George

    Don’t forget the liquidization of our monetary supply via the Fed’s sero interest rate policy. Its downright frightening when one realizes that we will pay $500 billion in interest on our debt in 2015 with CURRENT interest rates. If one does the math and assumes interest rates reverting back to norm, that interest amount absolutely skyrockets. Which means the fed has absolutely no other option but to keep the ZIRP as far as we can see.

  • Jim.

    The implication is clear:

    The political classes of the world are not wise enough to be trusted with any more power than they have over the rest of us.

    They’re not even wise enough to be trusted with the power (and budgets) that they have.

    Now more than ever, we need better sources of information, better heuristics, than Leftist political theory can offer.

    We need Free Markets, and the price point information those provide. We need traditional approaches to economics (skepticism about taking on debt, values of hard work and independence, strong families and churches as the primary means of taking care of the old and infirm) rather than trusting out-of-control government to take care of everything.

    They can’t take care of everything. They fail when they try.

    As George (comment 1) pointed out, even in places where it looks like things are going comparatively well, if (when!) interest rates go to their traditional levels, the US is going into hard default or “soft” default (inflating away our debts).

    This is not to say there is no hope for the future. On the contrary; I have great confidence in individual responsibility and traditional values.

    We just have to get Leftism out of the way.

  • Eurydice

    Yes, indeed. And the Greek GDP numbers announced today are also much worse than expected, which might shed some light on those who are still puzzled by the public’s unhappiness.

    I hope Germany’s best and brightest don’t think they’re actually keeping a secret by expressing their foreboding behind the scenes. At this point, I don’t think anybody believes the Euro was a good idea.

    The Europeans may not know what to do next, but they know what has to happen overall for the Euro to work – they have to give up all notions of sovereignty and create a true European government. So far, they don’t want to do that, but eventually the world will demand that they make a decision.

  • Edward Grey, 1st Viscount Grey of Fallodon

    The lamps are going out all over Europe. We shall not see them lit again in our time.

  • Kenny

    “Twice in the past year I have found myself sitting next to different senior German officials at a dinner who have proceeded to tell me that the whole single currency was a terrible mistake.”

    Well, duh. These ‘best minds’ are like the village idiot who runs to the town square one day and announces that he’s discovered that the sun rises in the east.

    Well, yes the sun does rise in the east. So what can you do but pat the poor fool on the head and smile.

  • Hal (GT)

    The implosion of Greece is just the start. They are faced with the same problems that the rest of Europe is faced with, it’s just that their economy couldn’t hold the ever growing wave at bay.

    The same thing will happen in the rest of the European countries as the dams of their economies are overcome by the debt they’ve created. And it will eventually come to America as well. The problem then will be, I fear, that the wave will be so big that what is left will not look anything like what was.

  • anon.

    Meanwhile, all I can do is think of what tune to play next on my fiddle while Rome burns.

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