100,000 peaceful anti-austerity protesters in front of the parliament of Greece on 29 June 2011. (Photo credit: Wikipedia)
Without question, things are getting a whole lot worse in the Eurozone and in Greece and Spain in particular.
I’ve done a good deal of Germany and ECB bashing, all of it I believe well deserved. The German solution to everything has been crushing austerity for everyone except the banks while forgetting that their own prosperity is derived from a fixed game where everyone else has to buy their stuff while simultaneously being unable to devalue because it’s impossible to devalue a foreign currency. I think it is now pretty much settled that the ECB, by concentrating almost exclusively on inflation, has ignored fundamental economic equality and growth factors needed in Europe. It is also pretty much settled everywhere outside of Berlin that austerity does not produce growth and without growth you get massive unemployment, poverty and social upheaval all of which might lead to the end of the European Experiment.
Angela Merkel is on the way down unless her party changes course. There are hints of that after the recent drubbing of her party in regional elections. Even Germans are unhappy. I would assume that someone has a contingency plan for Greek default, unwinding of the Euro in Greece (and perhaps elsewhere) and the cracking of the current economic structure. After all, even the US has a contingency plan for war with the UK. But don’t count on it because it is very difficult to convince a buyer that he has bought a fake painting despite evidence to the contrary.
The meetings in Greece over the weekend in the desperate attempt to form a government and avoid another round of expensive elections have not gone as planned. Curiously, what may result in a new election is the support for the moderates, as opposed to the radical left party, because Greeks actually seem to want to stay in the Eurozone. This is strikingly similar to the former Greek government announcing that a referendum on the agreed upon austerity program would be held to approve or reject it which, at the time, came as a shock to both Sarkozy and Merkel. That idea was shot down very quickly and publicly leading to the instant collapse of the Greek government. Now, we are back to the same position, except Germany can hardly object to elections as opposed to an unscheduled referendum.
The austerity plans so far have resulted in extraordinary economic suffering for people who had little to do with the banking crises but who now are expected to pay for it. The no-growth austerity policy is virtually impossible to implement and if a policy remains that unachievable (and it was from day one) then it is just a Panglossian academic exercise that is better suited for someone’s doctorate thesis rather than the real world. So, as in war and sports – everyone has a plan until they’ve been hit. The Eurozone has been hit. The getting-up is up to them.