Elvis has left the building

Posted: May 13, 2012 in Greek news
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European Central Bank

European Central Bank (Photo credit: kumbarov)

The last days we are witnessing a parody without beginning or ending. After the result of the election in Greece last Sunday, which did not result in a strong government, the political parties can’t find a solution to work together for the sake of Greek people.

Coincidence or fate?

The situation for the rest of the Eurozone is not either optimus. Angela Merkel’s conservatives have suffered heavy losses today in the election of Germany’s most populous state. France, Italy and Holland also recently rejected austerity policies. Large protests and minor clashes spurred in Spain, plus a popular opposition is taking shape in Ireland, just weeks before the 31 May referendum on the EU fiscal treaty.

The real world is paying the high priests of austerity an unwelcome visit, as their policies have sucked growth out of the economy, failed to manage debt, dramatically increased unemployment and altered living standards.

Is this leading to the end of euro? According to Paul Krugman yes, as he wrote on his blog before some hours:

«1. Greek euro exit is very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro».

Εurozone finance ministers are to meet within some hours in Brussels, but all eyes are on François Hollande, the new French leader, who will go to Berlin for his first meeting with Angela Merkel.

However, predictions are no longer valid. People have proved that there can be a change. As long as it has durance…

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