The political dam has broken in Europe. German Chancellor Angela Merkel no longer has enough allies in the club of EU prime ministers to impose her hairshirt agenda. Her methodical plans are disintegrating on every front.
For Germany it is a moment of truth. Berlin has put off hard choices since the crisis began
By Ambrose Evans-Pritchard
The Telegraph, UK
8:57PM BST 08 May 2012
The immediate fate of Greece – and the euro – is in the hands of a boyish motorcycle Marxist. Syriza leader deal Alexis Tsipras has vowed to tear up the hated Memorandum, as the EU-IMF “troika” loan package is known.
He showed no sign of backing off as he met his country’s president and began talks on the formation of an implausible Left front. “The popular verdict clearly renders the bailout null and void,” he said.
To those who warn that such defiance means an unstoppable lurch towards full default, a banking crash and EMU expulsion, he retorts that Greece has the “ultimate weapon”. It can bring down the whole European system if EU leaders refuse to soften the terms.
This bluff may be called. “Patience among the creditor countries is running out,” said Blanka Kolenikova from IHS Global Insight. Germany’s media says finance minister Wolfgang Schauble is itching to force Greece out of the euro as a salutary example, sure that Europe is strong enough to withstand the shock. This, in turn, is an illusion waiting to be punctured.
Arnaud Mares from Morgan Stanley said a Greek exit would set off “massive deposit flight” from all the vulnerable EMU states. “It could unravel the single currency altogether.”
It is an dangerous moment for Europe and global markets. Greece has no functioning goverment. It must decide on a series of bond repayments, starting this week. Tough choices will not wait until fresh elections in June, should they occur.
The new bonds issued after private investors suffered a 75pc haircut in March are already trading at levels of extreme distress, with 21pc yields on 10-year debt. The EU deal to end all deals has collapsed after just two months.
The disastrous chain of events has essentially discredited the entire crisis policy imposed on Europe by Germany. Combined fiscal and moneary contraction has pushed much of southern Europe into a deflation “death spiral”, pulling the rest of Europe down with a delay. Even The Netherlands is now in deep recessoin.
Revolt was inevitable. It has finally occured. The European Commission on Tuesday called for an immediate investment blitz to stop the downward slide. This follows hard on the heels of a call by European Central Bank chief Mario Draghi for a “growth compact”. The EU insistutions are slipping out of Germany’s control.
The election of François Hollande in France has radically altered Europe’s balance of power, and popular fury has done the rest across a string of democracies.
- ‘Greece out of euro’ calls multiply in Germany (thelocal.de)
- Is the EU the new Greek Parthenon, ready to crumble and fall? (EndtheLie.com)
- The Greek crisis will fast expose Hollande (todayonline.com)
- What next? Austerity now dirty word in Europe (news.yahoo.com)