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by Arnold Bock with Lorimer Wilson
Underlying much of what we see and
don't see regarding the modern-day tragedy that is Greece, is all about
preserving the dream of a pan European nation state, a United States of
Europe if you will. Only secondarily is it about the solvency of the Greek nation
and about bailing out the foreign bank holders of Greek sovereign debt. Let
me explain my perspective.
When I first wrote about the Greek
debt issue (Greece:
a Greek Tragedy or a Greek Comedy (of Fiscal Mismanagement)?) I said it
wasn't about bailing out an insolvent Greece, rather
it was about preventing the bankruptcies of foreign banks which held Greek
debt. All the talk in the mainstream media at that time focused on the
solvency of Greece itself. Now the crisis has mutated into preserving the
ongoing European political project of one united European nation, although
the mainstream media for the most part still does not understand this reality.
Interest rates on Euro sovereign debt
in every member nation were always very low because there was always a
misplaced belief in the soundness of the EU and the Euro. In addition,
everyone seemed to believe that there was also an implicit guarantee that the
Euro currency and Euro sovereign debt would ultimately be backstopped by the
European Central Bank, the EU and, if necessary, the IMF and the US Federal
Reserve Bank.
More recent actions show that:
- the
prevailing belief in the soundness of the EU and the Euro is misplaced,
- the
European Central Bank, the EU, IMF and the US Fed will go to seemingly
any length to protect the foreign banks which hold Euro sovereign debt,
and that
- the collective dream of
establishing a single political entity, a pan European nation state, is
slowly slipping away.
Indeed, perhaps it is their attempt
to salvage the pan European nation state goal which explains so many of the
somewhat 'senseless' measures that have been taken, or not taken, to preserve
Greece. To let Greece out, or to force Greece out, of the Euro zone, would
create a precedent for the other weak links such as Portugal, Spain and Italy
to follow suit. The domino effect of any measure applied to other ailing Euro
member nations would effectively kill any chances of the formation of a
United States of Europe. Most policy makers in Europe are not ready to think
seriously about discarding that fading dream - yet.
In the meantime, the measures being
taken are simply designed to maintain the status quo:
- don't
let Greece out, don't force Greece out, of the Euro zone,
- don't
let Greece become insolvent,
- don't
let Greece become a negative precedent to apply to the other sick Euro
nations,
- don't allow the banks which hold Euro
sovereign debt be seen to be bankrupt, even though most are if
accounting shenanigans and vast infusions of new digital Euros had not
become their current salvation.
Conclusion
By bailing out Greece and the foreign
bank holders of European sovereign debt, the pan European political dream
remains intact...for now. Current and future actions, therefore, are designed
to simply buy more time to preserve the political dream of a future United
States of Europe.
Arnold Bock
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