A Greek Revolution?

Greek President Karolos Papoulias has faced difficult circumstances and situations in his short period in power in Athens.

Yet, it seems that his short spell as President may end sooner than had been hoped by international officials as last-ditch talks with various party members to secure support appear to have been fruitless.

Attempts to form a coalition and avert a further set of elections are Papoulias’ primary concern: even higher than economic issues. Should the Greek populace be put to the vote again, there is sure to be all manner of civil reactions from apathy to unrest.

Certainly, the Greeks will have lost all belief in the abilities of their leaders to govern and manage the state properly and efficiently. At best, politicians can hope for a resolution between party factions, for any further public disgrace could spell the end of Greek’s current political system.

In the event of an election, whilst a few may look with disinterest on a failing succession of Presidents and parties, the recent demonstrations and violence that have spread across the country suggest the possibility of widespread anarchism and potential revolution.

Of course, extremist positions that promote Greek exit from the Eurozone appear all the more enticing whilst faced with current alternatives. Riddled with debt, a persistently shrinking economy and mounting unemployment, Greece is certainly not the hotbed of industry and business that marked the new millennium.

Last week, a majority of Greeks voted for parties that want to rip up the country's bailout agreement with the European Union and International Monetary Fund (IMF) - including neo-Nazis.

The biggest winner was the leftist anti-bailout coalition, Syriza, whose share of the vote more than tripled and who describe the austerity imposed by the bailout as "barbaric".

Yet, the main problem that any incoming government could face is that there is no official guidance on a country exiting the EU. No, the naïve, bright brains behind the introduction of the EU did not foresee any member country wanting to leave the zone and so did not prepare for such an event.

Therefore, Greece could essentially issue a statement to Brussels stating its intent to leave the EU and then default on its debts. Its second default, that is.

The economic repercussions across both the EU and Greece however could be catastrophic as further member states could decide that restrictive measures on their economies are no longer suitable. As such, contributors such as the UK and Germany lose billions of euros in funds that have been pumped into these nations.

Meanwhile, a new Greek government could not guarantee the stability of any currency that it introduces or predict the volatility of markets towards the new position of the country.

Greece would probably have to impose capital controls to prevent all the money leaving, much as Malaysia did in 1998 after the Asian financial crisis.

So in the best-case scenario, Greece would have no buying power, and everything would be expensive: extremely expensive.

However, the play would be based around the hope that with such a weak currency, the economy would grow rapidly.

Whilst this route would be expensive and painful, it might appease those voters who feel manipulated and controlled by central authorities in Brussels who they believe have no appreciation of their situation. If the hypothetical economic reinvigoration were to pay off, to pardon the pun, it could be the lighting spark for further action in the EU zone and render relations difficult across the EU, ushering in a new era of European co-operation, or lack thereof.

A Greek Tragedy.

Shops looted, buildings blazing, a city in panic, mobs raging.

The scene could be London last August, or any major city with subsurface tensions. This is Athens, where friction has given way to violent protests amidst the latest economic deals from Brussels.

Despite the promise of an election in April, the Greek people are none the more encouraged to retain faith that their money is safe. There has been a rush on banks and cases of citizens sending money to accounts abroad. The economic crisis could make or break underneath the shadow of the acropolis, once a symbol of Greek might and myth.

Now, the dreamy myth is long since dispelled. The latest emergency relief package from the EU and IMF is projected to offer an injection of approximately €130 billion, should they receive proof that Greece is implementing its latest austerity measures.

However, the unrest and winter of discontent only breeds malaise amongst the Greek government. On Saturday night, parliament may have voted in favour of new spending cuts, but with almost 50 deputies rebelling, battle lines had clearly been drawn on an epic scale.

If the deal is not closed however, Greece could default as early as next March.

Therefore, the balance of power rests on the foreign leaders wanting a promise of austerity measures versus the Greek electorate, who resent the interference from the West and are seeing their country’s economy downsizing for the fifth year in a row.

In this second programme of cuts, ministers in Athens have pledged to slashing 15,000 public-sector jobs as part of a longer-term strategy to get rid of 150,000 civil servants. In addition, there have been moves to reduce the minimum wage level by an overwhelming 20%, whilst also altering the labour laws to ensure easier staff dismissal.

None of this is good news for the populous at large. Greek is already one of the poorest EU countries, with a low GDP per capita, and their borrowing has spiralled out of control, despite being burdened with a set of sweeping cuts last year.

If Greece were to heed to calls for the return of its Euro predecessor, the drachma, then there were be further turmoil across Europe, as funds pumped into the economy were annexed and other countries were made to subsidise the lost revenue. In addition, there would be mass movement of Greek Euros abroad, so as the people could capitalise on falling trade values and earn more money.

When concerns first started in 2009, Greece was burdened with debt amounting to 113% of GDP - nearly double the eurozone limit of 60%. Ratings agencies started to downgrade Greek bank and government debt and this has only led to stifled growth and the increase in debt. But how had EU regulations not picked up on the expenditure that saw such huge waste of resources?

The possibility is that Greece could be forced to leave the Eurozone so as there is not a continual stream of lost wealth. But whilst this might only disrupt Europe for a little while, the impact on Greece would ensure that it was hampered by debt well into the latter half of this century, with little consumer trust, economic growth, or trading partners.

The outlook is bleak then. With an uncertainty as to whether the Greek can meet Eurozone demands, public backlash and a potential run on more financial institutions, the recovery is far from certain. There are those who belief that another loan from Europe just kicks the inevitable further down the path and that reductions in deficit by 2020 are unrealistic.

Certainly, the play before the Acropolis today is a Greek tragedy.

Downgraded European Economies is a Punishment for Germany.

As the Eiffel Tower sits overlooking the Seine in the centre of Europe’s capital of love, it appears that Standard and Poor, the international credit rating agency, have fallen out of love with the French capital.  

Downgrading of nine European Union economies last week did not come as a surprise, per se, but remained a bitter blow, especially to the second largest Eurozone economy. Rating changes for nine countries highlights the need for new austerity measures, before introducing growth plans.

Perhaps this is the reason Britain remains unchanged in S&P’s poll: Cameron’s government moved quickly to introduce cuts and the fact that these measures have been undertaken without direction has been rewarded from the worldwide monetary agency.

Without doubt, Britain’s position is far from safe: while the short term consequences see a gain in GBP strength and trade prospects on an international scale, the intrinsically linked economies of Europe are a fragile set of dominos. A single collapse at this stage of the crisis could prove the kindling for an explosive series of economic shortcomings and bailouts.

Indeed, plans introduced to cancel 70% of Greece’s debt last Friday are but moves to buy time for the Euro and all related economies.

Whilst it is believed the move may help Greece to start to implement new means of recovery that will slowly abate the spread of financial interdependence, the wiping of such an astronomical figure from the central funds of Europe is equivalent to pulling the plug on a vast resource of wealth. With fewer countries classified AAA, the missing money could prove to be nigh on impossible to replace, meaning that it would undermine the significant advances made in industry over 2011.

Should such an econopocalyptic event pass, it is likely to trigger debt that cannot be undone within our lifetimes.

France’s image as one half of the economic megaforce upholding the Eurozone has now been shattered. Sarkozy’s right to stand on a podium alongside Merkel has been removed: former foes had been presenting a united front as the 17 countries that use the euro face their biggest crisis since World War II. Now, whilst a blow for the president, concerns should shift from where France went wrong to where Germany now finds itself.

Economically, Germany is on the precipice before the abyss. All of Europe looks to its €211 billion ($267.32 billion) contribution to the Eurozone rescue fund as a source of saviour. Although Luxembourg, Finland and the Netherlands all maintain their AAA rating in addition to Germany, the mother of the Rhineland is able to boast a donation to the Eurofund that is more than treble that of the other three combined.

Germany is once again isolated in the centre of countries that threaten it: no longer the supposed threat of invasion, but the threat of siphoning all the funds possible for ulterior economic issues.

Relative strengths and weaknesses of key economies have been realigned by the changes and Germany becomes more vulnerable to credit crisis the more that its own funds are charged with the duty not only of small periphery nations, such as Greece and Portugal, but large central blocs, as France and Italy.

Any increase in bailout costs comes from German pockets and this appears to be something that the German electorate may not bear with merely a customary grumble too much longer. This could lead to potential referendums on the amount Germany puts into the fund, or even on the Euro itself.

However, the cost of breaking up the Eurozone itself could be catastrophic as billions of Euros are lost in every area from trade to administration and all problems in between. In fact, the relative weakness of the surrounding economies at least makes German products more competitive, which means Berlin earns more capital.

All the same, the opinion of the voter would depend on the projection of their outlook. Germany, likely to reassert itself as the strongest economy before European counterparts could still see benefits from a break in the single unit currency within a decade or two. Markets would always seek the hub of enterprise and exports offered by the central state.

The risks of both cases are, unfortunately, war. Ironically, the Franco-German alliance now enters a turbulent stage wherein the two countries sit on the crux of imposing a disaster on the rest of the economy, continent and world.

Should Germany continue to support its Eurozone counterparts, there may emerge a sentiment of anger and resentment that would see a war break out due to a lack of appeasement. On the other hand, if Germany were to break its ties, it could grow strong amidst a state of turmoil and seek further expansion in order to capitalise on new found economic prospects. And who could say that such a route would be devastating – the application of German stratagems could provide economic balance further than its current boundaries. Or should Germany leave, other European countries may feel abandoned and declare action as a last ditch effort to prove their own flailing might in the face of German capitalist gains.

After all, one of the main contributing factors of the Second World War was the sheer amount of economic wealth that was drained from Germany by other European countries. But then, when have we ever learnt from history?

Sparkling over the night waters of the Seine, the Eiffel Tower appears an oversized, abandoned Christmas decoration, spreading little warmth to the heart of Paris, threatening to be washed away by the tide of debt on which it is founded.

Delors Created A Monster: The Euro Currency.

In economic downturn, any politician’s own trivial punch at the current state of the financial crisis can really knock confidence and cause extra downturn and problems.

But this has not phased Jacques Delors, one of the main architects of the single European currency, the Euro. Perhaps his honesty is the wake up call needed for future generations to never again be so flippant in their approach to international banking and funds. Perhaps it’s just a last jibe: an “I told you so” move that satisfies no one but himself.

However, the politician spoke out last week, stating “The Eurozone was flawed from the beginning”.

These are no doubt so bold and troubling words, at a time when the Eurozone has never looked so increasingly fragile. More countries turn to the Markozy central block for loans and bailout plans in an web of dependency that is surely already too far stretched. With other key members such as Spain and Italy, not thought of as in danger until quite recently, defaulting, there is a huge lack of faith in the value of the Euro, and its shared unit only serves to weaken those central powerhouses further.

Why the sudden backlash from Delors? As head of the European Commission from 1985 to 1995, he played a key role in the process that launched the euro and his comments effectively bring about questions of its true validity.

Delors claims that the single unit is not itself at fault, but “a fault in execution” by those who saw its implementation, who did not consider the economic backgrounds of certain member states. He continued by adding that “the finance ministers did not want to see anything disagreeable” and so instead of focussing on kinks of the single currency, they blindly promoted its benefits regardless.

Perhaps his most poignant move is to admit that those, like the British, who objected to the Euro certainly “had a point.”

In fact, a jump (or at least jump by today’s variable standard) was seen in the pound vs the Euro trading after this admission was made. Trade rendered £1 worth €1.17-€1.18. Not that this necessarily signals a growing strength in the pound, but rather a worse Euro. And Britain should remain wary of this, for its markets are key traders in the Euro currency. Our own economic growth is dependent on the fiscal balance sheets of Europe, even if we like to disagree.

On Friday, German Chancellor Angela Merkel said Europe was working towards setting up a "fiscal union", in an effort to impose budget discipline by members.

Yet, this surely would have been a logical launch issue? In some regards, it seems the lax approach to the Eurozone was deliberate, creating a free for all market, wherein all countries could reap the rewards. Bearing the consequence was never at the forefront of decision making.

And if the Euro should collapse, where will blame rest? With the French and German governments who prop and support and continue to make crucial decisions for the future of their economies? With the lesser countries who added to the imbalance of outgoing money? With the lack of a central union from the beginning?

Delors doesn’t have a definite answer, but sees all the moves of leading parties as “too little, too late”. But then is this the fault of Delors in his initial approach to the Euro itself? The history books will decide.

Occupy London, Occupy Economics.

Amidst growing concerns over the economy, the Eurozone crisis, the shortcomings for predicted growth, the downgrading of American financial systems and a lack of united resolve, there has emerged a global undertaking in a bid to coerce governments to introduce a swifter and more effective solution.

‘Occupy Wall Street’ began as a low key protest in its inception; by the time of its enactment, thousands of Manhattan’s residents and other American flocked to the financial district of world-wide repute in order to protest, and stage one of the most daring sit-ins in modern times.

Fervour so pent up is difficult to restrain for too long a period and in quick succession, similar events have sprung up throughout Western democracies.

In The City, ‘Occupy London’ has well and truly taken hold. Saturday morning saw an estimated 2,500 take to the London financial domain in response to ‘Corporate Greed’ that left many families unable to provide for themselves amidst the growing fiscal crises.

Whilst there has been a mixed response to the staged protest, a larger number are coming to acquiesce that promises made by political leaders are slow to be implemented or otherwise do little to combat deficit and budget issues in reality.

The stagnation has come to be referred to as a ‘permafrost’: now so deeply set, it will take a sustained period before any progress can again be made for growth.

One protester, James Sevitt, spoke to the BBC about his feeling on the circumstances in hand: “This is about getting beyond the 'us versus them'. We all live within the same system… We're really focused on building a community which really demonstrates the innovation, solidarity and just the human-to-human contact and community that we want.” The appeal of the protesters is that their numbers are growing in moral support even if not physically every day.

Saturday and Sunday indeed saw huge turnouts, but the working week saw the corporation greed, so inbred, that people returned to their jobs lest they suffer even greater hardships.

It is somewhat paradoxical that the restriction on demonstration for these activists is their return to the employs they hate, that don’t pay sufficient amounts, that threaten cuts.

Organising group Occupy LSX later posted an initial statement on its website in which it said the "current system" was unsustainable.

It called for:

• Structural change towards "authentic global equality"
• An end to the actions of those causing oppression
• An end to global tax injustice
• Regulators who are "genuinely independent" of the industries they regulated.

In addition, the group called for further support for the strike movements planned for the end of November. Such a united stand against both business and government actions sees a revival of national sentiment not produced on such a widespread scale since the notorious cuts of Margaret Thatcher. Determination and repeated efforts are essential for a cause that will have a gradual effect as the tide on the coast.

This notion appears to be hailed as a modern revolution by some leading innovative politicians: Green Party leader and MP Caroline Lucas said: “The camp that has been set up a stone's throw from London Stock Exchange is an opportunity to explore a different kind of future to the one the mainstream political parties have constructed.”

Of course, this is reflective of the widespread belief that politicians in the current cabinet are shying away from public ideas on key issues: from the student tuition fee debate, to the controversial hike in VAT, and the momentous outpouring of anger in riots, public control has never been so outlandish yet so unnoticed by those in power.

Concerning statistics emerged today that the rate of inflation for the country has jumped to a peak only once before witnessed at the height of the original economic crisis: Consumer Price Index currently sits at 5.2%. Such a staggering change is contributing to rising costs of essential gas and electricity, as well as petrol and food. Whilst this figure is expected to subside come the new year, it is worrying that this figure goes against the grain of political policies regarding debt and attempts at cutting the deficit.

Symbolic of the need to persevere, a crowd now remains resolute on the steps of St Paul’s Cathedral in London. Once the bed place of countless beggars and those in poverty, the establishment has almost reclaimed its position as church of the spiritually rich. Whilst businessmen and women hurry on past to the London Stock Exchange, there passes an intelligible and tangible atmosphere that those sat on the steps will prove a powder-keg to ignite national sympathy and rebuke of city greed.

Demonstrations in Greece, in Italy, in Spain all signal that a new price must be paid in this quest for recovery: the bailout of government politics and introduction of dogmatic public involvement.

No economy is to recovery without the active participation of its citizens. Here, the municipal mood is one of strike, not cooperation.

I Need A Dollar.

Recession has hit many in the country hard and the gap between rich and poor continues to grow into a chasm that will only be closed after several decades of continued effort.

Whilst just 5 years ago, Britons were amongst the better off peoples in the developed world, having more wealth per capita than Americans, the turmoil in economic banking has hit hard. In order to grind the recession to a halt, there need be revolution of the way the monetary systems correspond with each other: how far countries should integrate, banks make deals, loans be offered etc.

The Independent Commission on Banking is due to deliver a full report and recommendations on how to proceed in these turbulent times come September. However, in its Interim release, there was call for a ‘ring-fencing’ of bank operations.

John Vickers, who is leading the commission and is also the former chief economist to the Bank of England, outlined the suggestion in April. It would involve separating the retail operations of banks from the investment quarters. In so doing, it would be hoped that the taxpayer is firstly never again responsible for the blunderings of the multinational corporates, and also ensure a more stable safe haven for money deposits, by interest rates and bank credibility not affecting all customers to the same extent.

However the Government is under no obligation to implement any recommendations from Vickers.

Although the Commission was set up by the current parliament last year, it seems that there is already a shrugging of its findings, with ministers being shy to accept the report. There is no rush to go ahead with splitting up the sectors.

Of course, economic stability is not quite as simple as it was at the beginning of last century. Whilst countries only had interdependence on a few others, the globalisation of markets has led to a wide and often unstable allegiance of various countries. Whether these are markets for imports or exports, goods or employment, there is now a consensus that any changes need be implemented on a global scale never before witnessed.

With the Eurozone failing and a ban on cold selling, there is a certain unease. Across the pond, America’s credit rating has been downgraded. The giants of world revenue are tumbling.

The head of the British Bankers' Association, Angela Knight, has said that there needs to be a focus on the recovery first and the taxpayer second. She said that regulatory change could undermine the recovery, whilst John Cridland, director general of the CBI, added that "Taking action at this moment - this moment of growth peril, which weakens the ability of banks in Britain to provide the finance that businesses need to grow - is just to me barking mad,"

 

The question then is how to tackle the crisis.

Naturally, this has been the forerunner of all major economists over the past three years, but this is all the more relevant because just months ago, forecasters were once more predicting growth that was never yielded. There is no stability or predictability in the market. This in turn makes it even weaker. The circle continues so that faith in markets plummet, stocks fall, value is wiped from companies.

In this way, it is logically to assume the real resolve would be to add back confidence. This involves the banks interlending. This would have to be monitored, but if there was a free flow of money, there would be less economic danger of funds being tied down.

This would open new markets and revenues and allow customers to shop more freely, invest more freely, and trust more freely.

However, regulation is difficult due to the uncharacteristic nature of the markets. Any action could send it toppling or cause a bounce back and these extremities are believed too risky. Slow progression is favoured.

Whilst this may be advisable for now, regulation revolution is required if there is to be consumer confidence in money matters once more. The extent of lost revenue and wealth is overwhelming: there need be change to the structures of money lending. Banks can no longer be the only regulators.

Watch this video for an explanation regarding how the economic crisis could spread. Applicable to many countries in the Eurozone too: