For weeks, policy makers and financial markets have awaited the outcome of the Greek elections with a great deal of anticipation, and have prepared for a crisis scenario. Is it not revealing that the situation in this small, and for the Eurozone economically insignificant country, suffices to fill us with trepidation and to trigger speculations regarding the end of Europe’s single currency? What will the response look like if the situation in Spain or Italy comes to a head?
You do not need the gift of prophecy to recognise that things will get out of control in that case, and that the euro in its present form will become defunct.
Are the politicians stricken with blindness, because they seem to be oblivious to the threat? Why did they fail to foresee the development in Greece with any degree of accuracy? Here is what I think: It is out of ideological-political delusion that they prefer to ignore the development because, according to their logic, things that are not supposed to happen will not happen.
Everything that has happened since the onset of the Greek crisis and the initial announcement of a bailout action was perfectly predictable – even if policymakers will vehemently deny the fact. Unambiguous proof is the following commentary that I published on 15 February 2010, that is, exactly two years and four months ago, in the IMMOBILIEN NEWS weekly, which shall be reprinted here.
In this commentary, I criticised the supposedly unavoidable bailout action for Greece, concluding with this prediction:
- Radically leftist and nationalist elements in Greece will see their position massively bolstered by putting the blame for the dilemma on Germany. (At the time I wrote this, political parties at the extreme left and right ends of the spectrum were but insignificant splinter groups in Greece. At yesterday’s elections, the extreme left, the Stalinist and the Fascist parties combined around 40 percent of the ballots!)
- Other bailout actions for Portugal, Spain and Italy will follow. (This is exactly what has now come to pass for Portugal and Spain.)
- The euro will continue to depreciate, especially on the basis of its price in gold, which is more meaningful than its exchange rate against the dollar. (At the time I wrote this, gold was selling at a price of 800 euros/ounce, whereas the going rate now is 1300 euro/ounce, meaning that the euro has massively lost in value against gold!)
- Instead of promoting the unification of Europe, the euro will create tensions and inner conflicts in the Eurozone along with massive resentment. (Sad to say, this prediction has come true as well, because nationalist resentment in Europe is stronger than it has been at any time during the past 50 years. We will probably get a taste of it in the coming days, ahead of the European Cup match between Germany and Greece coming up this Friday.)
And here is another verbatim quote from a commentary I published on 15 February 2010:
“Once again, the support measure for Greece is supposedly ‘without alternative’… What is the price for the supposedly ‘inevitable’ bailout action?
- Faith in the euro will continue to erode. No one is taking the Maastricht Treaty serious anymore. In the medium term, the euro will continue to depreciate. If the United States was not hard hit by its enormous debt and the financial crisis, the fact would be more conspicuously reflected in the euro/dollar exchange rate. The best standard by which to gauge the weakness of the euro is not its exchange rate against the US dollar, but the gold price. Last week, the price for bullion has hit an all-time high of 800 euro/ounce.
- Other countries are not encouraged to make more than a token effort to restructure their budgets, because they can rest assured that Europe – especially Germany – will come to their rescue.
- The anyway strained budgets of Germany and other countries are burdened further by the bailout action for Greece and other bailout actions for Portugal, Spain and Italy we might see in the future. The long-term perspective is a choice between currency reform and inflation.
- Since the bailout will be associated with painful stipulations for Greece, it is easy to see how the Greek people will respond: Nationalist and socialist resentments against Europe and particularly against Germany will be fuelled. The blame for the necessary austerity measures will be put on others – although Greece has long lived above its means, and cheated its way into the Eurozone – meaning that other European countries, specifically Germany, will get the blame. We are likely to see a wave of violent civil unrest fomented by extreme leftist and nationalist forces in Greece.
- While the euro was actually meant to expedite the political unification of Europe, the path currently pursued will result in the division of Europe and in massive domestic strife in the Eurozone.
So the bailout of Greece is just another one of these ‘unavoidable’ measures that contains the germ of future crises and calamities in it.”
Again, this being an excerpt from a commentary I published in the IMMOBILIEN NEWS weekly on 15 February 2010
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