I can’t claim to to be particularly well-versed in the magic of economics but I do know one thing: much of what seems difficult is just economists using shorthand and jargon to do nothing more sinister than save time. But when City wideboys do the same thing, it is, of course, sinister: they would rather we didn’t understand what is going on. So, for example, a firm might be described as ‘highly geared’ or ‘highly leveraged’, and that can sound rather impressive, can’t it? In ordinary language, though, the kind you and I might use when bumping into each other in the supermarket, that means simply that the firm is deeply in debt (of ‘deeply in debt’, to give it a modicum of dignity).
That is not necessarily a bad thing, but knowing that the company you work for or, perhaps, in which you own shares, is ‘deeply in debt’ rather than ‘highly geared’ would certainly concentrate your mind a little more.
Something similar, a similar wilful obfuscation, is going on with the eurozone crisis (of rather, as it’s a Sunday morning and I’m feeling a little more charitable ‘eurozone crisis’). To many the ‘crisis in the eurozone’ might sound rather complicated and many might feel happier to leave it all to their leaders and politicians to sort out - they understand that kind of things better than I do, such honest citizens tell themselve.
Actually, there’s nothing whatsoever complicated about the eurozone crisis. And leaving it to our leaders and politicians to sort out is simply making matters worse. There is an even more banal aspect to the whole matter: the crisis is not even essentially economic. The crisis is rooted in the fact that the leaders of the eurozone countries, who would have us believe they are desperately working day and night, seven days a week, to solve the crisis, know full well that there the crisis could be brought to an end rather smartly, that there are two solutions, two very obvious solutions. The real crisis is that they simply haven’t got the guts to resort to either solution. The real crisis is political.
It would be unkind, and dishonest, of me to play down the difficulty facing our leaders and politicans, those esteemed and intelligent lads and lassess who most recently met Wroclaw, Poland, to procrastinate a little but more, and where they told one Timothy Geithner more or less to fuck off when he urged them to stop dithering and get on with it. Geithner, the head of the US Treasury Secretary, had gatecrashed the party because although the US is in the economic shit, a eurozone crash would - well, let’s be honest, will - drop it in even further in the shit. But European politicos, especially French politicos, don’t like being told home truths by what they still regard as Yank upstarts. Hence the advice to Timmy: fuck off, Geithner. I’m absolutely certain no one used those to very useful words, but that’s what they said. And that rather coarse response takes me right back to the essence of the crisis.
The essence of the crisis is exactly what Geithner was complaining about: our leaders are dithering as few leaders have dithered before recent history. They know exactly what they could do: either form a fiscal union of the ten EU members in the eurozone; or kick Greece out of the eurozone. What they should not be doing, because it only makes an extremely serious situation even worse, is prolong the agony. But that is exactly what they are doing. They simply haven’t got the gumption.
I really should repeat that both solutions are difficult and nasty, and the first - to form a fiscal union - is more or less impossible to adopt politically, let alone economically. So they know, and we know, and they know that we know, and we know they know we know, and crucially a very, very worried Timmy Geithner knows that the only way to draw a line under the ‘crisis’ is what is tactfully referred to in the press as a ‘disorderly default’. In the language we use in supermarket chit-chat that is to tell Greece the time is up, get out of the euro, re-adopt the drachma and stop ruining it all for the rest of us. (Naturally, the time has long gone to repeat the wise observation that ‘Greece should never have been let into the eurozone in the first place’, but that hasn’t stopped a great many ‘commentators’ every so wisely repeating that very observation. In it’s futility, it’s rather along the lines as Abraham Lincoln wisely observing: ‘I really shouldn’t have gone to the theatre that night, I really should have had an early night.’)
Once again, I really must be fair: adopting that solution and doing the only sensible thing under the circumstances is also dangerous. A lot of banks would lose a lot of money, and it might spark the kind of paralysis we had in 2008 after the Lehman collapse when the banks had idea whatsoever which of them was solvent and which wasn’t worth a bent ha’penny and simply shut up shop to save their own skins (ironically those not worth a bent ha’penny doing so, as well, so that we never really found out which was which). On the other hand, it might not be as bad as we fear. But crucially, however bad it is, it would most certainly not be half as bad as what is going to happen when events become impatient with the eurozone leaders’ dithering and impose their own solution. The unkonw element in all this is, of course, the voters and citizens of each eurozone state, two of which have been dictatorships 22 years, three within the past 45 years, and two of which were dictatorships within the past 70 years. That is not to say that the voters are all looking for a strong man, but then dictators don’t always consult the voter when they grab power, usually ‘in the interest of the country’.
Actually, I really don’t think anything like that is going to happen. But really rather nasty civil unrest is already taking place in Greece, and there have been demonstrations in Spain. If things get worse, if we do, as some gleeful alarmists warn, get a ‘Thirties-style depression’, I rather think all bets are off as far as the brotherhood of man and universal goodwill saving the day. I rather think it will once again be every man for himself.
. . .
Anyone remember the celebrations and fireworks in January 1999 when existing currencies were dropped and the euro finally became the currency of eurozone members? Great fireworks. Lovely speeches. Marvellous sentiment. Oh, and the music! Lovely, lovely music, though not lovely enough, I’m afraid, to soften the heart of a grizzled old cynic like me. And it was those ceremonies around Europe which, in a way, highlight the corrupt core of the EU. Its leaders and bureaucrats are like an army in peacetime: sparkling bright uniforms, impressive weaponry, such a sense of occasion when they parade up and down the street in glorious sunshine. Oh, those parades! Makes you feel so safe! And don’t our officers look so smart in their heroic uniforms! Bliss was it in that day to be alive, but to be European was very heaven! It made one almost look forward to the next war.
To put it another way, the test of leadership is what leaders do in a crisis. And in this crisis each one has shown him or herself to be as useful as a chocolate teapot. Given what we already know about the EU - the corruption at the heart of the system which turns a blind eye to millions of euros going missing, the fact that I don’t think ever its accounts have been signed off because of irregularities - can anyone really take the notion of ‘a United States of Europe’ seriously any more? I rather think not.