Will the Euro fantasy-currency please hurry up and splinter into smithereens? Like many defensive-minded folk, I am sitting on a lot more cash than I usually would, reckoning that Europe’s sadistic monetary arrangement has to unravel at some point. There will be contagion, panic, chaos, plunging markets and Hong Kong Financial Secretary John Tsang telling us we are doomed. And some sort of assets somewhere – I wonder which? – will be absurdly mispriced for a time, presenting the strong-stomached among us with an exceptional buying opportunity.
The data from Athens bring tears to the eyes, or at least make you think ‘yikes…’
Greece’s economy shrank 3.5 percent in 2010 and 6.9 percent in 2011 and is expected to contract 7 percent this year, a decline reminiscent of the Great Depression of the 1930s. Unemployment is at 22.5 percent and expected to rise to 30 percent, while Greece’s main retailers’ association warned on Monday that sales were expected to drop 53 percent this year.
They are being told to take more of this. By comparison, Hong Kong’s only year of negative real growth in the deflationary 1998-2003 period was 1998 (-5.5%), and unemployment peaked at 7.9% in 2003. Still, Greece is just a sideshow; the real nightmare is Spain, and the more excitable commentators foresee Italy and France as dominos lined up behind it. The only ways to avoid some sort of break-up appear unthinkable (for example, the German people volunteer to donate their hard-earned retirement savings to foreigners). That said, I can’t avoid having a sneaking suspicion that European policymakers will, against all the odds, find some way of avoiding the inevitable through yet more summits, mini-bailouts and growth-and-happiness pacts with all the vacuous pomposity the continent’s bureaucrats have refined over decades of constructing their sacred project.
Such perpetual postponement of an ending would befit the limitlessness of man’s capacity for self-delusion. European Central Bank boss Mario Draghi proclaims that the euro is ‘absolutely not in danger’, is ‘irrevocable’, and that ‘imagining an explosion of the euro area underestimates the political capital that our leaders have invested in this union, as well as the support of European citizens’.
Mercifully we still have markets to enforce reality. Bond investors will eat ‘political capital’ for breakfast. And they provide writers with the chance to indulge in some vivid imagery…
…imagine an operating theater inside a betting shop. As surgeons prepare to amputate a gangrened foot to prevent infection spreading to healthier parts of the body, gamblers on the sidelines lay bets on which limb will be next for the chop.
Anyway, get on with it – it’s tiresome, and the cartoonists are running out of clichés.