13 february 2010, bravo (again) merkel

Saturday 13th February 2010

With merkel standing firm against any “bail out” – longstanding german policy - the greek question rumbles on. That’s what it is though, a greek not a euro crisis, let alone an existential one. The greeks – fuming - returned empty handed from brussels. As they should have. They know more than last week that only more greek belt-tightening, the price of greek profligacy, can turn the situation. The pressure point is exactly where it should be. Sure, the euro has been beaten down by the markets on the basis of what will happen if the greek economy really crashes – as it well might. But haven’t european leaders been complaining for years about the strong euro, and knocking the ecb for not acting to weaken it. Damned if you do, and damned if you don’t. I suspect that the sustained pressure on the euro is now as much due to weak growth figures (a paltry 0.1% in the last quarter, nothing at all in germany) as to greece, and that too is a genuine reflection on the prospects for the euro area, and a problem more worthy of market and brussel’s attention than a small corner of its economy that is reaping what it sowed in the buffeting winds of a fierce global downturn. The next months will see many ups and downs, but the euro’s long-term trends remains utterly unaffected by all this, not least as the presses aren't printing money, like the sterling and dollars flooding the systems, which just puts off the day of reckoning. In the long term, that’s one of the euro’s many big strengths. If you look at the markets’ long term forecasts and futures, they clearly recognise that - even if the mass media don’t.