The Greek crisis and challenge to the Euro: Why is Europe not rushing to the rescue?

Two days ago, speculators expected the European government summit in Brussels to announce with suitable fireworks the salvaging of Greece from its horrible debt...Then nothing happened. No fireworks. Only a very cool response to the effect that if something really, really went wrong, then Europe might do something - something meaning presumably that it might provide whatever funds would be necessary to stem speculation and restore confidence in the Greek Government's capacity to manage its debt.

Moreover, as Angela Merkel coldly observed, Greece hadn't asked for help. So why should anyone have ever expected it to be forthcoming? Moreover,the European Commission had indicated that it was perfectly happy with the Greek Government's reform programme. People in Greece were a lot less happy, as clearly shown by their street protests and strikes this week. They were not going to accept reforms without a good fight, now, were they? But that's par for the course. No reform is ever liked by those who have to go through them. It's in the nature of things.

It's also in the nature of things to grumble. Grumble about the fact that the Greek only deserved what they got, after having gotten into the Euro zone on false pretences, faking their public accounts and pretending the debt was around 4 percent of GNP when it was four times as high. Grumble about the fact that speculative attacks on sovereign debt were a new, profoundly disturbing facet of our never-ending crisis, and mutter about what country might be hit next: Spain (very likely), Portugal (idem), Ireland (idem), Italy (less so but not out of the woods) etc etc Grumble about the fact that Europe once more was not able to put its act together: here was a crisis among Euro members, the Euro was threatened, no European government wanted the International Monetary Fund to come to the rescue, but neither did they lift a finger to do anything constructive.

We're back to the usual dismal display of European weakness and incompetence on the international scene.

But are we?

I believe there are two good reasons why we have witnessed this bizarre, ho-hum outcome in Brussels. Last night, I was watching Stiglietz on TV (in an interview on France 24) and I half expected him to come up with these very reasons. After all, he is a famous Nobel Prize Columbia U. Professor, probably the top economist of his generation if not of our times, the man who single-handedly managed to slice off the head of the Washington Consensus dragon (remember the Washington Consensus? It was that catastrophic ideology whereby unleashing free Market Forces was the answer to all our ills - just ask the Asians how they felt in the 1990s crisis when the IMF raised interests and tightened belts, thus ensuring the crisis would last twice as long as necessary...) In short, I consider him a very big man and he's just come out with a book on the current crisis with a very apt title: Freefall. A book I've put on top of my list of books to read...He's also an advisor to the Greek Government, so I truly expected him to come out with the goods, and tell us what really happened in Brussels and why Germany and France didn't rush to rescue Greece.

Well, he didn't.

And I think I know why. Curiously - so far - the media has also kept mum on the subject. I don't know why they are so reticent and I suspect that soon what I'm saying here is going to occur to somebody else. Of course, I'm only "nougatizing" and I could be wrong. You tell me after you've heard my reasons.

So here they are. One is broadly political, the other is strictly economic.

The political first.It's very simple: if governments in Brussels had come out announcing a rescue with all the fanfare needed to discourage speculation, that would have cut any chance for the Greek Government to successfully carry out its planned reforms. It would have encouraged protesters in their protests, strikers in their strikes, and made any reform impossible from the start.

The economic next. This is a more touchy issue. And harder to prove. But it is so likely to be true that it is difficult to believe it isn't. This Greek crisis in the Euro zone is exactly what the doctor would recommend to lower the Euro. And a weakened Euro is precisely what the doctor recommends to encourage European Euro-zone exports, particularly the German ones that happen to occupy top-end, high quality and/or luxury niches in the international market. The kind of products you can easily sell more of the very minute prices go down. So any point loss in the Euro is a God-sent for Germans. And for the French too. And the Italians. Ok, I won't go on, you get the picture. But naturally nobody in Brussels could come out and say so, even if they all secretly rejoiced at the weakening of the Euro.

How does all this strike you? Let me know...
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