Dear passengers, welcome aboard the Eurozone Express. We’re now in Brussels for a summit of European leaders, but beyond this stop, nobody on board - not the driver, not the station master, not the army of ‘Eurocrats’ who claim to be in control of this 17-carriage Euro-locomotive - has the faintest idea of where we are headed.
However, by a process of elimination, and by a study of our route map thus far, we can deduce where we’re most likely going. We’ve missed several wayside stops along the way – such as Orderly Greek Default and Bankers’ Haircut – and we’ve taken a prolonged detour into Core Contagion.
And now, it appears that our final destination will be Eurozone Armageddon. A colossal crash-bang, the likes of which the world hasn’t seen, awaits us.But, dear passengers, don’t panic just yet. Although we’re nominally an express train, we are making every effort to delay our arrival at journey’s end. We’ve done it so far by the simple expedient of postponing the inevitable – by kicking the can down the railway line with bailout after bailout of peripheral countries that were well and truly bankrupt. And since we’ve become quite adept at this can-kicking business, we reckon we can keep on doing it for a little longer – until we reach Eurogeddon, the end of the line.
God knows it’s been a wild ride – for us as much as it has been for you. And we know the effect we’ve had on your nerves and on the equanimity of investors all around the world who were following our rollercoaster-like lurching for many months now. But do enjoy the rest of the journey, and the spectacular views of the European countryside. And do avail of the hospitality at our Last Chance Saloon, where we’re offering free drinks – as befits the welfare state we wanted to build in a foolish burst of socialist-minded romanticism without providing funds for any of it.
After all, where else in the world do workers get by on 35-hour workweeks, as they do in France?
And where else but in Greece can people retire at age 53 and enjoy welfare excesses - and pensions long after they are dead! And where the government resorts to the extraordinary device of using Google Earth satellite pictures to track down thousands of private swimming pools, which tax dodgers hadn’t disclosed in their tax returns.
Overnight, as passengers on board the Eurozone Express – or as investors elsewhere whose fortunes hinge on the fate of our train – you must have found it deeply distressing to overhear the very public squabble between two of our stalwart engineers on board – Germany and France – on where we should proceed next.
Evidently the two leaders – Angela Merkel and Nicholas Sarkozy – couldn’t agree on the precise nature of the “bazooka” needed – in the form of strengthening the European bailout fund – to avert the train wreck that many believe is inevitable. They sounded an awful lot like two engines pulling the compartments in opposite directions.
The mood at the meeting of European Ministers overnight, according to media accounts, was “grim – the worst mood I have ever seen, a complete mess."
The worry now is that even if the bailout fund is enhanced – that is, Eurozone states throw good money after bad – the entire 440 billion euro bailout fund would go towards keeping the Greek compartment from derailing into the abyss of insolvency and dragging other member-state railway compartments with it.
It doesn’t also help that Germany, which is Europe’s most competitive economy which has benefited enormously from the artificial European monetary union (at the cost of peripheral European Union economies), isn’t willing to do as much as it uniquely can to end the crisis. That, of course, must begin with Germany acknowledging its role, economically and politically, in the genesis of the Eurozone crisis, where even to this day peripheral economies are subsidising Germany’s export-driven economic growth.
The policy inertia across Europe was summed up bluntly by Luxembourg Prime Minister Jean-Claude Juncker, who said: “We all know what to do but we don’t know how to get re-elected once we have done it.”
So much so that economic commentators who refused to contemplate a break-up of the Eurozone are increasingly acknowledging the inevitability of a default by peripheral states. And although it’s Greece that draws much of the negative news, it is now more widely accepted that the problem runs much deeper.
With enforced austerity measures cramping growth in the peripheral European economies, and escalating their debt burden, the incentive for countries that are in colossal debt to default is increasing by the day.
And since it appears, from everything that’s transpired over recent months, right up to the overnight squabble, that credits and debtor nations cannot agree on how the burden of the economic shock should be shared, Eurogeddon appears inevitable.
The train will be in Brussels for four days – until Wednesday, when the top European leaders meet again. It’s quite literally our last chance to chart out a map for the way ahead. There are some suggestions that EU engineers are shunting and hooting about a plan to set up a single “Treasury” to oversee tax and spending across the entire Eurozone.
Nobody believes it will work. And even those who believe it will cannot lay out the route map ahead with any certainty. That's the grim reality that confronts us today.
The only saving grace, dear passengers, is that either way, we’re fairly close to the end of the line. Enjoy the rest of the ride, but do brace for some rough stuff when we reach Eurogeddon.
Over and out…