Thursday, May 17, 2012

Conflict unresolved

Nothing concentrates the mind as wonderfully as panic. According to this report even Mervyn King now admits that the Eurozone problem is not merely the fault of indigent and corrupt Mediterranean types, but is systemic. 
"What is so depressing about it is that this is a rerun of the debates in 2007/08 – these are not liquidity problems, they are solvency problems," King said. "Imbalances between countries in the euro area have created creditors and debtors and at some point the credit losses will need to be recognised and absorbed and shared around," he said.
"Until that is done, there will not be a resolution. That is why just kicking the can down the road is not an answer ..."
 Meanwhile, in Timothy Garton Ash's words, "Germany's finance minister Wolfgang Schäuble still preaches the gospel of Ordoliberalism as if it were revealed truth".  Berlin is still in denial.

The drama continues, but at the expense of people's lives and livelihoods. Whilst the Greek elections seem to offer a democratic challenge, real power lies elsewhere and could be used to punish Greece for its choice. And offering a stark choice, based on either rational self-interest or blackmail depending on where you stand, may be counter productive. As Keep Talking Greece comments:
If the EU keeps on putting in front of Greeks the dilemma ”Euro or Drachma” I am afraid at the end Greeks will vote for “Dignity”….
And then what?

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