Tuesday, November 16, 2010

Ireland on the brink, but would the Germans be welcome? The euro: with your eyes shut, it's still attractive. And two cheers for the cynics

Usual routine tonight for when I am in London: bugger of from work at 10pm, radio on and listen to The World Tonight as I walk the short distance from High Street Kensington to Earl’s Court. Headlining tonight’s edition was the news that Ireland is, perhaps, on the brink of going cap in hand to the EU for a ‘sovereign bailout’. That probably isn’t the phrase, although I’m sure the words ‘sovereign’ and ‘bailout’ are in there somewhere. Not so, says the Irish government (as you would expect them to, a tactic known by me and, possibly one or two older – British – readers as the Mandy Rice-Davies response. But don’t worry, I shan’t toddle off on a tangent explaining who she was. If you are interested and want to know how her response originated, you can find out here and here. And I have included a picture of the good lady herself to show why she turned a few heads. I'm sure she
would have turned mine, although at the time of the Profumo affair, I was just 14.) To demonstrate how bad this latest euro crisis is, even if the Irish government isn’t forced to resort to this sovereignity thingummy, bravely whistling in the dark, it is claiming that what it might do is approach the European Central Bank with a view to borrowing a bob or two, you know, to tide them over. The trouble is that the government pledged just, over two years ago, to underwrite Ireland’s banks, which are up to their necks in debt, if they showed any sign of going belly up. The theory was that that kind of resounding support would reassure those with the money (ironically, largely the West’s former colonies) from whom the banks might borrow that the Irish weren't yet a basketcase (it’s a strange world is banking) and that they would not yet be inclined to turn off the taps. Ireland also instituted a series of swingeing cuts to make sure it had enough money to lend to its banks to keep them solvent. But that, it seems, is not enough. One point made on the programme is that government’s pledge to the banks which was intended to head off the danger of the banks becoming insolvent and the danger that the government itself would run out of money is seen by the ‘money markets’ as one and the same danger. That means that as far as the ‘money markets’ are concerned it doesn’t matter a one way or the other whether the ECB stomps up that cash or whether the EU is forced to bail out Ireland: both are just the two sides of the same coin.
At the time of writing, I have no idea what will happen. I think it is likely that Ireland will, like Greece, have to be bailed out by the EU. And ominously Portugal is also hinting that it, too, will soon have to follow suit.
This might seem rather arcane stuff to the casual reader, but its ramifications are enormous. Several of Britain's banks have lent the Irish counterparts an awful lot of money so they would be deep in the shit if their debtors went to the wall. And David Cameron was claiming today that Britain’s exports to Ireland are greater than all its exports to China, Brazil and somewhere else put together. But if Ireland hasn’t got the money to buy Britain’s exports, things will begin to look rather bad for Britain. Then there is the – ahem – touchy prospect (for some) of having the Germans, who are have coughed up most of the dosh which went to Greece and who will probably cough up most of the dosh which will go to Ireland and Portugal (and, if things go really badly, to Spain) going through the books and laying down how, when and where Ireland can spend its - Germany’s – money. The Irish didn’t take kindly to their country being run by the English for several centuries (although part of the problem was that the English treated the Irish like cattle for most of that time), so they might not relish the outside interference of the Germans. Naturally, you can’t blame the Germans from wanting a say in how their money is spent, although everyone knows that it is in everyone’s interests that Greece, Ireland and Portugal don’t go to the wall, so Germany knows full well that in many ways it doesn’t have any choice. Britain is also in the game to the tune of £6 billion for the same reason. But handing over the money will not go down to well when the full effects of the Tory/Lib Dem Coalition’s spending cuts are felt. It all reminds me of that Chinese curse: May you live in interesting times.

. . .

For me the whole business is something of a vindication. I don’t want to see the Irish, the Greeks or the Portuguese suffer – especially as it is always those towards the bottom of the pile who suffer most – but I can’t help but conclude that all those tawdry cynics – yes, my hand is up, too, admitting to the tawdry cynicism – who wondered just how long the party would last when the euro was launched as the currency to end all currencies (or something like that) were right on the nail. As a rule of thumb, the more rousing the speeches and the grander the claims, the more likely an project floated on a cloud of utopian idealism will crash to
the ground. It was all so dishonest: the public was won over by trivial claims that ‘you won’t have to fumble in your pocket looking for the right money when you are buying your capuccino on holiday – it’ll all be euros! Just think of the convenience!’ The serious economists on both sides, those who supported the euro and those who were sceptical, were both well aware of the dangers. The only difference was that the supporters decided their best strategy was to keep their fingers crossed and hope for the best. The sceptics stayed well clear, although knowing as they did that they would not remain unaffected when the inevitable crash happened was not at all reassuring. Of course, the crash hasn’t yet happened and might, perhaps, not happen. But I wouldn’t bet on it.

. . .

I mentioned cynics. Well, I’m sure there are all kinds of cynics and that men and women become cynical for all kinds of different reasons. But I can’t help but feel that many cynics began life as idealists and just couldn’t handle the inevitable disillusion. Some can, some can’t. Those who can trim their sails a little, make slightly less grand plans and carry on regardless, quite often more likely to taste success in what they essay because of their more realistic frame of mind. Those who can’t handle the inevitable disillusion react with less maturity and retreat into cynicism. There is a rather tired old saw that ‘if you're not a liberal at twenty you have no heart, if you're not a conservative at forty you have no brain.’ (It’s been repeated so often that it veers on being insufferably trite, but I’ll risk it just this last time.) Well, instead of ‘liberal’ read ‘idealist’ and it still holds true. There is, however, no reason to retreat quite as far as cynicism. I am generally regarded as a cynic, and, looking into my heart and knowing what I know about myself, I must admit that my cynicism is more or less a lack of bravery. Or to put it another way, a cowardice. But having said that, I would add that idealism must have both its feet on the ground to be worthwhile. And the idealism which underpinned the launch of the euro – and which still underpins the increasingly farcical European Union – lacked that essential realism. It’s all very well to trot out the hopes and dreams of the ‘founding fathers’, it is not at all impossible that if the shit really hit the fan, this brotherhood of Europe crap
would soon be out of the window. Our governments might behave honourably, but would our people? If you are unemployed and hungry and without hope, just how much will you feel in common with the Pole or Spaniard or Bulgarian or Brit or Greek sitting on your doorstep and apparently not doing half as badly as you? Look how far and fast ‘civilisation’ degenerated in the Balkans when Yugoslavia collapsed. So perhaps it is worth being a little cynical sometimes, however that cynicism came about. (NB I spent a good minute and a half hunting the web looking for a picture of a cynic, but this is all I could find.)

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