By Philippe Herlin - Researcher in finance / Contributor
to Goldbroker.com
We won’t be cruel by reminding you that François Hollande, recently, and
his predecessor Nicolas Sarkozy, last spring, had declared the Eurozone
crisis « over »... All the different bailout plans are only fragile
undertakings, and the smallest shock can bring them down, as we know and are
witnessing right now.
Greece, again and always, isn’t out of the woods. Last week, it secured
yet another plan, for 84 billion euros (40B for a debt haircut and 44B of
fresh money). Everyone knows this plan won’t be the last, and that a massive
restructuration is needed. And as for Spain, banks received 37 billion euros,
and it’s only the first tranche!
We had almost forgotten Ireland and Portugal, but we shouldn’t have.
Ireland central bank’s governor just announced that « it may need
considerably more time to repay » the 85 billion euros Ireland has received
as part of its bailout plan. In Portugal, the newspapers are writing that the
country will ask for the same conditions that Greece got, meaning debt
haircuts and more money.
But the big scare of the week comes from Italy. Two events are changing
things : Silvio Berlusconi announced his political return, and Mario Monti
resigned. There will be anticipated elections in February or March, and this
will bring some uncertainty for a while. All the patient work Mario Monti has
done with structural reforms might be for naught, and the markets are weary
of Italy.
The euro crisis is far from over. We are only witnessing periods of relief
that are bought with more bailout plans, which only adds to the mountain of
debt and to the instability of the system.
The economic reason has faltered a long time ago; it has been replaced by
the political agenda. As the French elections were nearing, it was paramount
to avoid a grave Eurozone crisis. Now, the horizon is fixed on the general
elections in Germany in September 2013. The institutions of the Eurozone will
do everything in their power to avoid a crisis, including showering all the
above-mentioned countries with billions of euros. The ECB will oil the
machine, and Angela Merkel will be able to say that the euro crisis is over
or, as the prudent German she is, that it’s about to be solved. And we’ll see
after the election!
