Monday, May 7, 2012

European FUBAR

Chris Trotter at Bowalley Rd quoted Ron Suskind on  the new reality of political ethics.

 “The aide said that guys like me were ‘in what we call the reality-based community,’ which he defined as people who ‘believe that solutions emerge from your judicious study of discernible reality.’ I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ‘That’s not the way the world really works anymore,’ he continued. ‘We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality – judiciously, as you will – we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors  . . . and you, all of you, will be left to just study what we do’.”

It is an instructive insight into the Bush Presidency and effective when applied to national security threats of the Al Qaeda variety, you can launch a war against terror commit atrocities and walk away from all consequences. As Trotter suggests this is the new ethical reality political leaders espouse. The problem is that real threats to national security ( I am not belittling 9/11 ) can't be solved by creating a new reality as the Europeans are now discovering.

The Guardian reports,

" For two years, Europe has been force-fed a diet of unrelenting austerity. The crisis began in the private sector – in over-leveraged banks and wild financial speculation – but such was its impact on consumer spending, investment and trade that governments have seen their public finances dive deep into the red. Spending cuts have been imposed, pensions have been made less generous, and taxes have gone up. The policy has been an economic disaster. Growth has collapsed, unemployment has soared and – unsurprisingly – budget deficits have been much bigger than forecast. Election results from France and Greece show that it has also been a political disaster: voters have decisively rejected Euro-sadism and made it clear they want their politicians to chart a different course. Democracy has trumped austerity."

So much for a new reality. History's actors are caught, voters in France and Greece have rejected the right wing inspired austerity solution.

" Europe is heading deeper into a double-dip recession, the banks are on life support, and there is nothing resembling a Plan B as opposition to austerity stiffens. As Tristan Cooper, sovereign debt analyst at Fidelity Worldwide Investments, noted: "The irresistible force of German austerity has clashed with the immovable object of Greek popular resistance." There is now a stark choice. Unless the terms of Greece's bailout are made less onerous, it is heading for the euro exit door. The warning signs for the commission, the ECB and the IMF are there: sow the wind and you will reap the whirlwind."

For Greece I can see no other option but to walk away from the euro and that brings in the possible domino effect with Portugal, Spain and Ireland. What have they got to lose ?

" Iceland experienced one of the most severe recessions in the world when the markets crashed in 2008. Economic output fell by about 12 per cent over two years. But the latest report on Iceland by the International Monetary Fund shows that growth is resuming. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011. The Icelandic public finances are on a sustainable path too with government debt projected to fall to 80 per cent of GDP in 2016."

I would expect that the implications are not lost on the nations of Southern Europe.

" Depreciation has helped too. The value of the krona fell by 50 per cent against the euro from peak to trough. This has delivered a boost to Iceland's two main exports, aluminium and fish."

Leaving the euro would return economic sovereignty to Greece

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