The Other I

May 16, 2012

Last thoughts on the euro?

Filed under: Uncategorized — theotheri @ 9:33 pm

The euro may already be lost.  The Greeks are currently withdrawing their money from their banks at the rate of 700 million euros a day.  That’s close to a billion dollars.  Even the best capitalized banks cannot stand this kind of run for long.

Germany is standing firm that austerity is the only route open to the Greeks. I think they and the IMF are wrong.  Greece is already anorexic, and cannot return to health on a stricter diet.  The IMF has made this mistake before in Latin America and SE Asia.  Admittedly, the picture is more mixed this time.  The Greeks are out on the streets to protect, among other things, their right to retire at 55, and they have a reputation as first-class tax dodgers.  Besides that, Greece deliberately doctored the books to make their national debt look smaller than they knew it was in order to get into the euro zone in the first place, and the Greek government continued to spend beyond its income in order to create government jobs to secure their votes.

One has some sympathy with the Germans who don’t retire until they are 65, and who went through a hard time after the reunification of east and west Germany after the fall of the Berlin Wall.

But Germany has benefited from the euro, possibly more than any other euro country.

In any case, the only way for the euro to survive is to federalize the euro zone so that money can move from economically successful areas to areas that are stressed, the way the American federal government is able  to do in the United States.

There is no evidence that I can see that the euro zone governments are willing to bite the bullet and do this.  They have certainly not done so since this crisis began two years ago.

If Greece exits the euro, willingly or otherwise, Spain, Portugal, Italy, and possibly Ireland, Belgium, the Netherlands, even France could tumble.

I just don’t see the euro surviving.

Though I hope it will, because this is a global economy now.  The crash of the euro will have profound effect on the economies of America and China, and so on the whole world.

Could we be looking at war?  One Greek political leader said yesterday that this will not ultimately be a political battle in Greece.  The side that has the most guns, he says, is the side that’s going to win.

Historically this feels to me like the 1930’s.

Except that today our weapons are much more advanced.  If “advanced” is quite the right word for such deadly machines of killing.


  1. I listen to Bloomberg Radio, the station owned by the billionaire mayor of New York. I do so because, despite its obvious business biases, I feel I’m more in touch with reality there (the “reality” of high finance, fiscal policy, etc. which is, after all, what supports the house of cards that we call our economy), listening to economists, CEOs, Federal Reserve alumni, economics professors, than when I tune in to either my local public radio station or the socialist Pacifica Network affiliate.

    I’ve heard much the same observations there that you make, Terry, with the exception of the bit about war (though, since I don’t listen 24 hours a day, I might well have missed that). Having also just finished AJP Taylor’s The Origins of the Second World War, your comments combined with these put the situation into a new light. I think Taylor would say the economic crash of the 1930s was an excuse rather than a cause for the war, but you’re raising that specter is daunting, especially this early in my day.


    Comment by pianomusicman — May 17, 2012 @ 4:03 pm | Reply

    • Your perspective from America is interesting. I’ve had the sense that many Americans think it doesn’t have anything to do with them.

      I do think this is the 11th hour for the euro, but not yet midnight. The European Central Bank might lend more money to the banks, which could buy some time though not provide a final solution. And a poll out today suggests that the Greeks could vote in June to go along with austerity and stay in the euro. Some analysts also think the US could change its mind and contribute to a global rescue fund, along with countries like China and Japan in order to avoid a contagion that could bring down the global banking system.

      On the other hand, a quiet run on the euro seems to have started in Spain now, as well as in Greece. We could end up with a fait accompli while the politicians continue to strike their poses.

      It’s interesting times, if nothing else, isn’t it? Could it end in war? undoubtedly. But in truth I do think we’re some way away from that. It is ironic, though, isn’t it, that the euro was first mooted by France as a way of containing Germany so that it would never become so disproportionately strong again in relation to the rest of Europe. But look at what we’ve got.

      I think I’ll go back to worrying about nuclear power stations. Although come to think of it, analysts say that’s uncharted territory as well, don’t they?

      Okay, I’ll worry about what to have for dinner. I think I can handle that.



      Comment by Terry Sissons — May 17, 2012 @ 8:27 pm | Reply

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